In this video Luke explains how Limited Purpose FSA’s (LPFSA) work in comparison to regular FSA’s. You can see the 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.
- 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.
