An LPFSA, or a limited-purpose flexible spending account, is a type of healthcare benefit account, exclusive to the USA. It is a part of the employer-sponsored benefits package and is designed to help employees. An LPFSA helps employees when it comes to financially managing their healthcare expenses. It is part of a larger assortment of FSAs, or flexible spending accounts. FSAs, typically, is a tax-advantaged spending account which is employer-sponsored. An FSA comes in two types:
A limited-purpose flexible spending account is a type of healthcare flexible spending account. Together, they complement an HSA (health savings account), and an HDHP (high deductible health plan). Both of these plans attempt to aid employees with medical problems and reduce the burden of healthcare as well.
LPFSAs cover a lot of eligible expenses. They cover qualified expenses, like dental and vision costs, deductibles, copayments, and medication. These eligible expenses all include expenses which are not already covered by HSAs, and HDHPs. This means that all 3 plans together aim to cover all aspects of healthcare for an employee. This eases an employee’s burden. Dental and vision costs are two factors not included in an existing healthcare plan in an organization. These two costs are excluded, and often not included in HSAs, and HDHPs. This is why the LPFSA covers them. These costs are paid for through the tax-advantaged spending account. An LPFSA account will have a certain amount of money set aside which can cover dental and vision costs. Deductibles are a certain amount of money an individual has to pay out of their pocket. A deductible is always paid before an employee’s healthcare plan begins to cover their medical expenses. An LPFSA removes and includes deductibles in its spending account. A copayment is a smaller amount deductible, paid on-site, as compared to in advance, like deductibles. Medical assistance, which is also through the form of medical prescription medications, and medical supplies also exists in an LPFSA.
As mentioned before, An LPFSA is a tax-advantaged account. This means that there are multiple tax benefits, and tax advantages associated with an LPFSA. One of these tax advantages is the usage of pre-taxed dollars. In an LPFSA, pre-taxed dollars can be used for eligible expenses. These eligible expenses are as aforementioned. Being able to use pre-taxed dollars for eligible expenses is extremely useful. It means that an employee can use money that would be taxed, towards their medical and healthcare-related expenses. It also, in turn, reduces the taxable income that an employee earns, which leads to tax savings. These tax savings exist because the money is exempt from social services tax, medical tax, and federal income tax.
With the focused healthcare benefits of an LPFSA, only certain parts of an individual’s healthcare plan are targeted. This focus on benefits is important for employers to address certain, and specific healthcare needs of employees. In addition to this, the spending account can also be coupled with two plans, as mentioned before. These plans are HSAs and HDHPs, which are complements of an LPFSA. All three plans together make an extremely comprehensive healthcare plan for any employee. The combination is also all-encompassing, covering every aspect of medical aid for an employee.
A limited-purpose flexible spending account, or LPFSA is a type of healthcare benefit account (in the US).
An LPFSA can be complemented with HSAs and HDHPs. It is also advantageous because of its tax benefits, and focused healthcare.
Dental and vision costs, deductibles, copayments, prescription medicines, and certain medical supplies.
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