It May Be Called a Limited Purpose FSA, But the Benefits are Unlimited!
The Limited Purpose FSA works like a regular FSA but is limited to the number of eligible expenses it can be used for. But just because the name starts with the word, “limited,” it doesn’t mean it is limited in the potential tax savings and benefits to both employer and employees.
The BASE® Limited Purpose Flexible Spending Account (LPFSA) is a special type of flexible spending account (FSA) that is available to employees, enrolled in a Health Savings Account (HSA), to put aside money, on a pre-tax basis, to pay for eligible dental and vision expenses.
With the LPFSA, the employer can take advantage of its benefits. The employer can find additional ways to maximize savings and tax benefits for the business and employees. It may seem that by limiting the reimbursements to only dental and vision care, that it isn’t much, but with the employee electing to make pre-tax contributions, it reduces the employer’s share of FICA and FUTA taxes and enhances the employer’s benefits package.
The LPFSA benefits are not limited to only the employer, but to the employees as well. The employees can see an increase in take-home pay due to funds being transferred on a pre-tax basis, saving on Federal, State, Social Security, and Medicare. The Limited Purpose FSA allows for the employee to pay for the dental and vision expenses, while saving their HSA funds for future medical expenses, building HSA funds, or investment opportunities.
By using the LPFSA first, participants have the opportunity to build contribution amounts in their HSA while still receiving a pre-tax benefit for eligible dental and vision expenses. For more information about the BASE® LPFSA or the BASE® HSA call 888.386.9680 or visit www.BASEonline.com.