What is a Limited Purpose FSA?

A Limited Purpose FSA is a flexible spending account that only reimburses IRS Code Section 213(d) qualified dental and vision expenses.  Some Limited Purpose FSAs also include reimbursement for preventive care and post-deductible, out of pocket expenses.  This type of FSA plays an important role in the world of qualified high deductible health plan/Health Savings Account combinations because it allows participants to set aside tax-free funds for qualified expenses without losing HSA eligibility.

What is the annual maximum benefit available under a Limited Purpose FSA?

The annual maximum benefit mirrors the statutory maximum of a general purpose FSA. For 2019, this amount is $2,700.  An employer may choose a lower annual maximum.

Can a debit card be used with a Limited Purpose FSA?

Yes.  In this case, the card network is limited to dental and vision providers only.

Do the same IRS change in status rules that apply to general purpose FSAs apply to Limited Purpose FSAs?

Yes. Limited Purpose FSAs are part of an employer’s Flexible Benefit Plan just like a general purpose FSA.  Therefore, all of the same rules under IRS Code Section 125 apply.