Why would I enroll in a Limited Purpose FSA, on top of an HSA?
This pre-tax benefit account lets you take advantage of the savings power of an HSA and a Healthcare FSA simultaneously. A Limited Purpose FSA is referred as this because it is used to pay for eligible dental and vision care expenses only.
Can you have HSA and Limited Purpose FSA?
By limiting FSA reimbursements to dental and vision care expenses, you (or your spouse) remain eligible to participate in both a limited-purpose FSA and an HSA. Participating in both plans allows you to maximize your savings and tax benefits.
Why would I want a limited purpose FSA?
A limited-purpose FSA may be a good consideration for those who want an additional tax-advantaged account to pay for high dental or vision expenses. Your employer may also allow you to use your LPFSA to pay for additional medical expenses after you’ve reached your insurance deductible.
What is the difference between HSA and Limited Purpose FSA?
If you sign up for an HSA, the IRS requires that any Health FSA be restricted in the types of expenses that are eligible for reimbursement. Expenses reimbursed through a Limited Purpose Health FSA are restricted to dental, vision and preventative medical expenses that are not covered under your health plan.
Is a limited purpose FSA worth it?
If you know your medical expenses are going to meet or exceed the annual contribution limit for your HSA and you plan on incurring dental and vision expenses as well, using your limited FSA is a great way to maximize your tax savings.
Do I need an FSA if I have an HSA?
To be eligible for an HSA, there are only a few requirements, with two of the big ones being that you must be covered by a high-deductible health plan (HDHP), and you can’t participate in both an HSA and a medical flexible spending account (medical FSA).
Why do companies choose FSA over HSA?
Key Tax Benefits
Contributions made to an FSA are tax-free, therefore amounts are not subject to payroll or income taxes. Distributions made for qualified medical expenses are not subject to taxes. Contributions made to an HSA are tax-free or tax-deductible.
What happens to FSA when you switch to HSA?
If your Medical FSA coverage ends before your HSA-compatible health plan coverage begins, you are HSA eligible on the first date of your health insurance plan coverage. If Medical FSA coverage continues after your HSA-compatible health plan coverage begins, you need to further evaluate when you become eligible.