Limited Purpose FSA (LPFSA): How It Works With Your HSA

A limited purpose FSA lets you set aside pre-tax money for dental and vision expenses without losing your ability to contribute to a health savings account. Here is how the account works, who can have one, and what it covers in 2026.

Quick overview: what a limited purpose FSA is (and why it matters if you have an HSA)

A limited purpose flexible spending account is an employer-sponsored health FSA that covers only dental and vision expenses, plus certain preventive care. A regular FSA, by contrast, can reimburse a wide range of medical expenses. That broader scope is exactly what creates a problem for HSA holders: a general-purpose health FSA makes you ineligible to contribute to a health savings account (HSA). An LPFSA solves this by restricting its scope so it does not count as disqualifying coverage under IRS Publication 969.

Because an LPFSA is limited purpose, employees enrolled in a qualifying high deductible health plan (HDHP) can use both an HSA and an LPFSA in the same year. Pre-tax contributions are deducted from each paycheck through a salary reduction agreement and can reimburse eligible expenses for the employee, spouse, and dependents, subject to the employer's plan rules. You generally make a new election each year during open enrollment.

The 2026 contribution limit for a limited purpose FSA is $3,400 per employee, the same cap that applies to all health FSAs. Unused FSA funds follow "use-it-or-lose-it" rules: depending on the employer's plan, it may offer a carryover of up to $680 from 2026 into 2027, or a grace period of up to 2.5 months, but not both.

How a limited purpose FSA works compared with other FSAs and HSAs

Three tax-advantaged accounts overlap in this space. A general-purpose flexible spending account reimburses broad medical, dental, and vision costs but disqualifies you from contributing to an HSA. A limited purpose FSA restricts reimbursement to dental, vision, and preventive care, preserving HSA eligibility. A health savings account holds funds you own; balances roll over year to year and follow you if you change jobs. For a deeper comparison, see HSA vs FSA: Key Differences.

LPFSA funds are available for use at the start of the plan year. If you elect $2,400 for 2026, the full amount is available for eligible expenses during the coverage period, even though contributions are deducted from your paycheck across all pay periods. This differs from an HSA, where only money already deposited is available to spend.

The limited purpose FSA funds left at the end of the plan year are handled by the employer's plan design. If the plan includes a carryover provision, up to $680 of unused 2026 money can carry into 2027. If it instead offers a grace period, you have up to 2.5 months after year-end to incur eligible dental and vision care expenses using leftover funds. IRS Notice 2013-71 prohibits offering both options for the same plan. Unlike an HSA, LPFSA balances do not belong to you long term; unused funds above the carryover amount, or left after a grace period, are forfeited.

A post-deductible FSA is a related arrangement. It reimburses nothing until the HDHP minimum annual deductible is met, then can cover broader medical expenses. Both designs are intended to preserve HSA contribution eligibility.

Eligibility rules: who can have a limited purpose FSA and when

Eligibility for an LPFSA depends on your employer offering one as part of its cafeteria plan. Self-employed people can't participate in a health FSA under IRS rules; only employees of the sponsoring employer qualify.

Enrollment typically happens during an annual open enrollment period. If you experience a qualifying life event (marriage, birth or adoption of a child, change in employment status), the plan may allow a mid-year change. Many employers offer an LPFSA alongside their HSA-qualified HDHP, but plan documents vary, so check your specific benefits materials.

Three checks matter most: (1) your employer offers an LPFSA and you're eligible under its plan, (2) you're covered by an HDHP if you want to keep contributing to an HSA, and (3) you're not also covered by a general-purpose health FSA, or its carryover, that would pay other medical expenses before the HDHP deductible. LPFSA coverage extends to the employee, spouse, and tax dependents for eligible expenses incurred during the coverage period.

Contribution limits, carryovers, and deadlines for LPFSA funds

The contribution limit for an LPFSA is $3,400 in 2026, set by IRS Rev. Proc. 2025-32. The annual election is divided across your paychecks as pre-tax dollars deducted before taxes are calculated.

If the plan adopts a carryover provision, up to $680 of unused 2026 LPFSA money can carry into 2027 for eligible dental and vision expenses. Alternatively, the plan may offer a grace period of up to 2.5 months (through about March 15, 2027, for a calendar-year plan). IRS Notice 2013-71 allows one or the other, not both.

Consider this example: an employee contributes $2,000 to an LPFSA for 2026 and ends the year with $500 unused. Under a carryover plan, all $500 rolls into 2027 (within the $680 cap). Under a grace period plan, the employee has through mid-March 2027 to incur eligible expenses; any money left after that is forfeited. Key dates to track: the first day eligible expenses can be incurred (January 1 for calendar-year plans), the last day of the plan year, any grace period end date, and the claim submission deadline your plan sets.

What counts as an eligible LPFSA expense (and what does not)

A limited purpose FSA reimburses a narrower set of FSA eligible expenses than a general-purpose FSA. The plan document governs the final list, and IRS Publication 969 sets the boundaries: dental and vision expenses, plus qualifying preventive care.

Dental and vision costs that are qualified medical expenses under IRS Publication 502 include things like dental cleanings, X-rays, fillings, extractions, and braces, along with eye exams, prescription eyeglasses, and prescription contact lenses. Some plans also reimburse preventive care permitted under HSA rules, such as certain routine screenings and immunizations. For more on dental costs, see our HSA and FSA dental guide.

Restrictions apply: office visits for general medical care, prescription medications, and over-the-counter drugs are not reimbursable under a limited purpose FSA. Those broader medical expenses can be paid from your HSA or out of pocket. A post-deductible FSA may expand coverage after the HDHP minimum deductible is met, but that is a separate plan design. Expenses must be incurred during the coverage period, and most plans require itemized receipts. Check your employer's plan documents for its exact list of eligible dental and vision care expenses.

Using a limited purpose FSA with a health savings account (HSA)

The main reason to pair the two accounts is flexibility. Employees enrolled in an HDHP can contribute pre-tax dollars to both an HSA and an LPFSA in the same year, use LPFSA funds for eligible dental and vision costs, and leave their HSA balance for other qualified medical expenses now or later. Because HSA balances roll over and FSA balances generally don't, many people use the FSA money within the plan year first.

In practice, coordination means tracking which account pays for what. Never claim the same expense from both accounts. Keep itemized receipts for every reimbursement. If your employer offers a post-deductible FSA instead, that arrangement also keeps you eligible to contribute to an HSA, and the FSA can cover a broader set of services once the deductible threshold is met.

Contribution decisions for HSAs and FSAs depend on your individual tax and healthcare situation. Before open enrollment, review how much you expect to spend on dental and vision care, what your out-of-pocket costs look like under your health plan, and whether your employer offers a carryover or grace period for unused funds. For specific guidance, consult a tax professional or review IRS Publication 969 for current rules.