The LPFSA is one of several, pre-tax health benefits an employer may sign up for through their employer. It may not be the one that many are familiar with, like the health FSA, but it is worth having in place!
The Limited Purpose Flexible Spending Account (LPFSA) is an employer-sponsored account used to pay for eligible dental and vision care expenses not covered by a traditional health insurance plan. This additional tax-advantaged account is available to those enrolled in a qualified high-deductible health plan (HDHP) and a Health Savings Account (HSA).
The BASE® Limited Purpose FSA provides employees the opportunity to set aside money, on a pre-tax basis, to pay for their dental and vision expenses with an HSA in place.
How does it work?
--- An employer elects to offer the LPFSA.
When an employer has a high deductible health plan (HDHP) and a Health Savings Account (HSA) in place, it qualifies them to also offer the Limited Purpose FSA to their employees as well.
--- The employee enrolls in the LPFSA and decides how much to contribute.
The employee elects to contribute, on a pre-tax basis, up to the annual contribution limit. Those funds are withdrawn automatically from each paycheck and deposited into the LPFSA.
--- Eligible expenses are incurred.
When an eligible dental or vision expense has occurred, the employee will pay for the service and be reimbursed.
Not only can pairing the LPFSA with the HSA help to increase an employee’s take-home pay by electing to have the funds taken out of their paycheck on a pre-tax basis, but by eliminating the need to use the HSA funds for those eligible dental and vision expenses allowing more money to be saved in the HSA. All the pre-elected LPFSA funds are available to the employee on day one of the plan year, helping the employee to pay for those expenses upfront, instead of waiting until the funds in the HSA to grow to cover the bill. The HSA can grow, helping the employee pay for those health care expenses that are high down the road. Over time, using the money in the LPFSA instead of the HSA can maximize the savings, creating a nest egg for retirement.
For more information on BASE® Limited Purpose FSA, contact BASE® at 888.386.9680 or visit www.BASEonline.com.