Dear Gina – I am enrolled in an HSA-qualified High Deductible Health Plan and I contribute to my HSA plan. My employer is also offering me the ability to contribute to a Limited Purpose Health Flexible Spending Account (LPHFSA). Why would I do that when I already contribute to my HSA and exactly what expenses can I run through LPHFSA?
Great question! In general, an LPHFSA is another way to pay for eligible medical expenses on a pre-tax basis. It dovetails nicely with your HSA because you can keep your HSA Bank account growing (with interest I hope!) while paying for current plan year expenses through the LPHFSA and… wait for it… get first dollar reimbursement for expenses incurred on day one of the plan year!!
There are more stringent restrictions on expenses that qualify for reimbursement from an LPHFSA. For example, the IRS says you must first meet an indexed minimum deductible amount ($1,350/individual, $2,700 for families in 2018).
But, once you have paid that amount, even if your deductible is greater than $1350/$2700, you can submit any medical deductible or coinsurance expense to your LPHFSA plan for reimbursement. In addition, all of your dental and vision expenses can be run through the LPHFSA.
Here’s another great example of how using an LPHFSA can benefit you. Say you need a dental crown that will cost $1,000, but you only have $300 in your HSA bank account. You can elect to contribute $1,000 in the LPHFSA and make your dental appointment just after the new FSA plan year begins. Then submit the dental claim to the LPHFSA and get reimbursed the whole amount even before you’ve had your first pre-tax payroll deduction!
A combination of an HSA and a LPHFSA is a great way to meet current expenses through the LPHFSA while growing your HSA bank account for future expenses and/or retirement. Plus, you get the added benefit of contributing to both plans on a pre-tax basis! Win-win!
– Gina