The cost of healthcare expenses is rising, and keeping them as planned isn’t easy. The article from Capline Dental Services helps prepare financially for the upcoming LPFSA limit.
A Limited Purpose FSA (LPFSA) is versatile when it comes to paying dental and vision expenses. Using the pre-tax dollars and saving on out-of-pocket expenses by withholding HSA funds. This is why the LPFSA limit can enable employees to establish a specialized healthcare savings account.
The contribution for the LPFSA limit in 2026 is $3,400, as stated by the IRS, and is subject to change. For final figures, verify on the IRS website. Enrollees have to enroll through their employers.
According to Mercer 2025, 89 percent of employees had access to LPFSA if it was offered. A set amount of money is deducted from employees' pre-tax paychecks.
Unlike traditional FSA, LPFSA supplements a Health Savings Account (HSA) and a High-Deductible Health Plan (HDHP) until the patient reaches the deductible. A high-deductible health plan is lower in premiums and has higher deductibles that control the spending. HDHP makes an individual eligible to contribute to an HSA.
Firstly, the LPFSA can be paired with an HSA, whereas a traditional FSA cannot. For an employee to start participating in the FSA, they pause contributions to their HSA in order to participate in the FSA. They can use previous contributions to an HSA. On the contrary, LPFSA offers leverage and remains actively involved in its HSA.
Regular expenses are paid by the healthcare FSA, whereas qualified dental and vision expenses are paid by LPFSA.
A common approach would be to utilize LPFSA for dental and vision expenses and keep HSA dollars to grow in the upcoming year and spend the funds elsewhere.
Let's say the individual has $4,000 as HSA funds and $2,000 in an LPFSA account. The dental and vision expenses cost $1,000. What is worth mentioning is that if HSA funds are used for these expenses, it is like misspending without utilizing LPFSA funds.
There is no expiration for an HSA. There is a rollover, and HSA stays with you even if an individual leaves an employer. Carefully managing LPFSA contributions by the end of the plan year is crucial. To make informed choices so that the reimbursement is valid. LPFSA and HSA don’t pay the same eligible expenses and are not legally acceptable.
When LPFSA and HSA funds are used to reimburse the same eligible expense, it is considered double-dipping. Double-dipping is impermissible. When approving claims, plan administrators prioritize LPFSA funds until the balance is used. Later, the HSA is utilized. Reimbursed expenses are tax-free and do not constitute income.
The IRS states that eligible expenses are calculated when the service is rendered. That way, when it is billed or paid, it is irrelevant. For example, in December 2022, cavity treatment was performed. Whereas billing and payment were received in January 2023. It is thereby included in the 2022 expense.
Some tips for utilizing the LPFSA limit and making the best use of it
LPFSA allows consumers to pay for their eligible dental and vision expenses through a taxadvantaged savings account, which can result in a 30% savings on medical expenses in a year.
LPFSA also covers expenses for eligible dependents, individuals, and spouses.
LPFSA paired with an HSA helps cover a variety of costs with tax savings, up to the maximum amount in both accounts.
LPFSA requires enrollment in an HDHP and an HSA plan for better coverage. According to the ECFB Benefits Report 2025, 62 percent of employers with an HSA also offer LPFSA. The adoption has risen to 55 percent in a couple of years. This employer-sponsored plan is not eligible for self-employed or retired individuals. However, they can have an individual HSA with an eligible HDHP.
Just like a regular FSA, participants elect to contribute the money from each paycheck tax-free to deposit into the LPFSA. However, the contribution amount is subjective and depends on the individual's need and affordability.
Any unused LPFSA funds are lost at the end of the year. However, there is a grace period of 2.5 months or an extended unused funds arrangement up to a set amount, which is checked through the employer. The maximum rollover amount that is carried forward to the next plan year is $680.
The qualified dental expenses include dental fillings, dental cleanings, checkups, crowns, X-rays, and nightguards for teeth grinding.
As is known, HSAs and FSAs cannot work together. IRS rules say that traditional FSA and HSA do not apply; however, in order to have LPFSA, you actually need an HSA. As LPFSA is limited to dental and vision expenses. Using both can save money each year. However, using one account per transaction can help to grow HSA funds for future needs.
Do patients feel that LPFSA is the right choice or not? The employer-sponsored program is an excellent option to reduce expenses on dental and vision care. This benefit strategy is a tax-free savings account that covers costs and is best for spouses and dependents.
Want to get a better understanding of LPFSA? Check the Capline Dental Services website.
