What Can I Use My Limited FSA For?

A Limited Purpose Flexible Spending Account (LPFSA) is a specialized savings tool that allows individuals to allocate pre-tax income for specific healthcare expenditures. Contributions are deducted from your paycheck before taxes, offering a significant tax advantage. LPFSAs are designed to help manage out-of-pocket costs for certain medical, dental, and vision services.

Understanding Limited Purpose Flexible Spending Accounts

An LPFSA is distinct from a general healthcare Flexible Spending Account (FSA) due to its narrower scope of eligible expenses, primarily restricting them to vision and dental. This design makes the LPFSA particularly suitable for individuals enrolled in a High-Deductible Health Plan (HDHP) who also contribute to a Health Savings Account (HSA).

The Internal Revenue Service (IRS) permits individuals to have both an LPFSA and an HSA simultaneously, unlike a general FSA which typically disqualifies one from contributing to an HSA. This pairing allows individuals to use their LPFSA for immediate dental and vision needs, preserving their HSA funds for future medical expenses or long-term savings. Contributions to an LPFSA are made through payroll deductions, and the full annual election amount is generally available on the first day of the plan year. For 2025, the contribution limit for an LPFSA is $3,300.

Eligible Medical and Dental Expenses

The primary benefit of an LPFSA lies in its coverage for qualified dental and vision expenses. For vision care, eligible expenses commonly include eye exams, prescription eyeglasses, prescription sunglasses, contact lenses and solutions, and vision correction surgeries such as LASIK. Diagnostic services, eye drops, and eye patch therapy are also typically covered.

Dental expenses eligible for LPFSA reimbursement are comprehensive, encompassing routine care like cleanings, exams, and fluoride treatments. More extensive procedures such as fillings, crowns, bridges, dentures, and dental implants are also generally covered. Orthodontia, including braces and aligners, along with related diagnostic services and X-rays, are common eligible expenses. Certain over-the-counter products for oral pain or teething may also qualify.

Cosmetic procedures, such as teeth whitening or non-prescription sunglasses, are generally not eligible. While an LPFSA initially limits expenses to dental and vision, some plans allow for a transition to cover general medical expenses once the associated HSA deductible has been met. At that point, a broader range of medical costs, similar to those covered by a general-purpose FSA, may become eligible.

Submitting Reimbursement Claims

To receive reimbursement from your LPFSA, a structured claims process must be followed, involving detailed documentation. Most plans require participants to submit itemized receipts or an Explanation of Benefits (EOB) from the service provider. These documents must clearly state specific information, including the date of service, the name of the service provider, a description of the service or item purchased, the patient’s name, and the total amount paid or owed.

Credit card receipts or canceled checks are usually not sufficient as they often lack the necessary detail regarding the service or item. Claims can be submitted through various methods, such as an online portal, a mobile application, or by mail. After submission, the claim undergoes a review process to verify eligibility. Once approved, reimbursement is issued via direct deposit to a linked bank account or by check, often within a few business days.

Limited FSA Account Provisions

Funds within an LPFSA are subject to specific IRS regulations, notably the “use-it-or-lose-it” rule. This means any money remaining in the account at the end of the plan year may be forfeited. To mitigate this, employers often offer one of two provisions: a grace period or a carryover option.

A grace period allows participants an additional 2.5 months after the plan year ends to incur and use remaining funds. Alternatively, some plans offer a carryover option, permitting a specific amount of unused funds to be rolled over into the next plan year. For 2025, the maximum carryover amount is $660. Employers offer either a grace period or a carryover, not both. The specific provisions and their terms can vary significantly between plans, so reviewing your employer’s plan details is advisable.