Flexible Spending Accounts (FSAs) allow you to pay for eligible expenses using tax-free dollars. Important: There is a “use it or lose it” rule imposed by the IRS. If you do not spend all the money in your FSA by March 31 of the following year for expenses incurred from January 1 – December 31, unused dollars will be forfeited per IRS regulations for pretax contributions.
HealthCare FSA
Contribute up to $3,300 per year, pretax, to pay for copays, prescription expenses, lab exams and tests, contact lenses and eyeglasses.
Limited Purpose FSA
Those enrolled in the HDHP can contribute up to $3,300 per year, pretax, to pay for eligible vision and dental expenses.
use it or lose it
There is a “use it or lose it” rule imposed by the IRS. If you do not spend all the money in your Health Care or Limited Purpose FSA by March 31 of the following year for expenses incurred from January 1 – December 31, unused dollars will be forfeited per IRS regulations for pretax contributions.
how much could you save?
Here’s an example. Let’s say Tom decides to set aside $2,000 in an FSA for the year. Normally, on that money, he’d pay $560 in federal income tax, $100 in state income tax, and $153 in FICA tax. So, by contributing that $2,000 to his FSA, he’ll get an $813 tax savings for the year.
Without the FSA, Tom would pay:
- 28% in federal income tax: $560 savings
- 5% in state income tax: $100 savings
- 7.65% in Federal Insurance Contributions Act (FICA) tax: $153 savings
His total tax savings for the year with an FSA: $813
Flexible spending accounts vs. Health savings accounts
| FLEXIBLE SPENDING ACCOUNTS | HEALTH SAVINGS ACCOUNTS |
|---|---|
OWNERSHIP |
|
Your employer owns your FSA. If you leave your employer, you lose access to the account unless you have a COBRA right. | You own your HSA. It is a savings account in your name, and you always have access to the funds, even if you change jobs. |
ELIGIBILITY & ENROLLMENT |
|
You can elect a Healthcare FSA even if you waive other coverage. You cannot make changes to your contribution during the Plan Year without a Qualifying Life Event. You cannot be enrolled in both a Healthcare FSA and an HSA. | You must be enrolled in a Qualified HDHP to contribute money to your HSA. You cannot be covered by a spouse’s non-High Deductible plan or a spouse’s FSA or enrolled in Medicare or TRICARE. You can change your contribution at any time during the Plan Year. |
TAXATION |
|
FSA contributions are tax-free via payroll deduction. Funds are spent tax-free when used for qualified expenses. | HSA contributions are tax-free; the account grows tax-free; and funds are spent tax-free on qualified expenses. |
CONTRIBUTIONS |
|
You can contribute up to $3,300 in 2025 to an FSA. This amount may be increased annually. | Both you and your employer can contribute up to $4,300 in 2025 (up to $8,550 for families). Ages 55+ can make an annual $1,000 “catch-up” HSA contribution. |
PAYMENT |
|
Some plans include an FSA debit card to pay for eligible expenses. If not, you pay up front and submit receipts for reimbursement. | Many HSAs include a debit card to pay for qualified expenses directly. Alternatively, you can save funds for future expenses or retirement. |
ROLLOVER OR GRACE PERIOD |
|
Any unclaimed funds at the end of the year are forfeited. Exceptions might include an additional 2.5-month grace period for expenses to be incurred and reimbursed. | HSA funds roll over from year to year. The account is portable and may be used for future qualified expenses — even in retirement years. |
QUALIFIED EXPENSES |
|
Physician services, hospital services, prescriptions, menstrual products, PPE, over-the-counter medications, dental care, and vision care. A full list is available at www.irs.gov. | Physician services, hospital services, prescriptions, menstrual products, PPE, over-the-counter medications, dental care, vision care, Medicare Part D plans, COBRA premiums, and long-term care premiums. A full list is available at www.irs.gov. |
OTHER TYPES |
|
Dependent Care FSA (pre-tax dollars can be used for elder or child dependent care) and Limited Use FSA (used to pay for eligible dental and vision expenses). | N/A |
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flexible spending account documents
flexible spending account contact information
Carrier: WEX
Phone: 866-451-3399
Website: www.wexinc.com
