Flexible Spending Accounts let employees set aside pre-tax dollars for eligible healthcare or dependent care costs. Health FSAs are generally use-it-or-lose-it, though a plan may allow a limited carryover or a short grace period. The IRS sets the annual contribution limit each year.
A limited-purpose FSA only reimburses dental and vision expenses (and sometimes preventive care). Because it doesn’t cover general medical costs, you can pair it with an HSA without losing HSA eligibility.
Usually no. A spouse’s general-purpose FSA can cover your expenses, which counts as disqualifying coverage and makes you ineligible to contribute to an HSA, even if you’re not enrolled in the FSA yourself.
A cafeteria plan, also called a Section 125 plan, is the tax-advantaged structure; an FSA is a benefit that can be offered within that structure; and a POP is a limited type of Section 125 plan that only allows pre-tax insurance premium deductions.
Usually not. Only C-corporation owners treated as W-2 employees can participate in an FSA; sole proprietors, partners, and more-than-2% S-corporation shareholders cannot.
HRAs are employer-owned and funded, while HSAs and FSAs involve employee elections. Each account has different rules for ownership, contributions, portability, and how funds are accessed.
Yes. Most FSA expenses require documentation, although some purchases are automatically substantiated at the point of sale. If documentation is requested and not provided, your FSA card may be suspended.
Yes. Many over-the-counter items (such as pain relievers, allergy medications, and first aid supplies) are FSA-eligible without a prescription under current federal law.
No. A change in expenses alone does not allow a mid-year FSA change; you must experience a qualifying life event and your employer’s plan must permit the change.
You usually lose access to unused FSA funds when you leave your job, unless you elect COBRA for a healthcare FSA. Dependent care FSAs cannot be continued through COBRA.
Yes. Healthcare FSA funds may be used for eligible expenses for your spouse or dependents even if they are not enrolled in your health plan, as long as they meet IRS eligibility rules.
A healthcare FSA pays for medical expenses and makes the full annual election available at the start of the year, while a dependent care FSA pays for work-related child or elder care and is only available as funds are contributed.
Under the Uniform Coverage Rule, the full annual election for a healthcare FSA must be available at the start of the plan year, even though contributions are made through payroll deductions over time.
Under IRS rules, FSA elections generally cannot be changed during the plan year unless a permitted qualifying event occurs and the employer’s plan allows a mid-year change.
An employer may contribute to an employee’s healthcare FSA, but the total benefit is generally limited to the greater of $500 or a dollar-for-dollar match of the employee’s contribution, subject to IRS Section 125 rules and plan design.
For 2026, employees may contribute up to $3,400 to a healthcare Flexible Spending Account (FSA), regardless of coverage level.
No. An employee does not have to enroll in the employer’s group health plan to participate in a health care FSA, but the employer must offer a group health plan in order to offer an FSA.
Usually no. A general-purpose FSA makes you ineligible to contribute to an HSA, but a limited-purpose FSA that covers only dental and vision expenses is allowed.
FSA funds are generally “use it or lose it,” but employers may offer either a grace period or allow up to 20% of the annual contribution limit (up to $680 for 2026) to carry over into the next plan year.
FSA funds can be used for eligible out-of-pocket medical expenses such as copays, prescriptions, dental and vision care, and certain over-the-counter items, subject to IRS rules and the terms of your plan.
A Flexible Spending Account (FSA) allows employees to set aside pre-tax dollars to pay for eligible medical or dependent care expenses, reducing taxable income, but unused funds are generally forfeited.