In this video we explain how Limited Purpose FSAs (LPFSA) work in comparison to regular FSAs. Key takeaways below:

• LPFSAs allow pre-tax contributions for dental and vision expenses, providing tax-free inflow and outflow of funds.

• These accounts are employer-owned, with employees having the privilege to utilize them for eligible expenses. Employees do NOT own the LPFSA.

• Funds in an LPFSA are not transferable between employers, emphasizing the importance of strategic planning regarding contributions.

• Contributions are decided once annually, necessitating careful planning to avoid over or underestimating needs.

• The "use it or lose it" rule applies, meaning funds must be used by the end of the plan year or they may be forfeited, though some employers may offer a grace period or allow a limited rollover to the following year.