Limited Purpose FSA: How It Works
A limited purpose FSA, or LPFSA, is a tax-advantaged account paired with an HSA. It covers only dental and vision expenses, leaving your HSA free for other medical costs.
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Short answer
A limited purpose FSA is a type of flexible spending account that covers only dental and vision expenses. It is paired with an HSA and an HDHP, and it lets you set aside a separate tax-free amount for teeth and eye care while your HSA covers everything else.
Limited purpose FSAs follow the same funding and spending rules as standard FSAs but restrict eligible purchases to dental and vision items only. The plan document governs contribution limits, carryover options and year-end rules, and your employer and plan administrator run them.
What a limited purpose FSA is and who can have one
A limited purpose FSA is a pre-tax account for dental and vision expenses, paired with an HSA. This combination lets you maximize the tax benefits of both accounts. To be eligible for a limited purpose FSA, your employer must offer one, and you must be enrolled in an HSA paired with an HDHP (high deductible health plan). You cannot use a limited purpose FSA if you don't have an HSA.
Limited purpose FSAs are designed to solve a common problem. The IRS is direct about the conflict: an employee covered by an HDHP and a health FSA that pays or reimburses qualified medical expenses "can't generally make contributions to an HSA". A limited purpose FSA removes that conflict by handling only dental and vision, leaving your HSA free to cover medical, prescription and other healthcare expenses.
How money goes in
You contribute to a limited purpose FSA through payroll deductions during your employer's open enrollment period, usually once a year. Your contributions are taken from your gross pay before income taxes and FICA taxes, so you save on taxes at your marginal rate.
Contribution limits are set by the IRS and adjust for inflation each year. For 2026, the IRS confirmed the health FSA salary-reduction limit "increases to $3,400", up from $3,300 in 2025, though your own plan document sets the actual cap it offers, and that can be lower. Unlike an HSA, FSA contribution limits are separate from HSA limits, so you can contribute the maximum to each account in the same year.
If your employer offers it, some limited purpose FSAs have a grace period or carryover feature that lets you use funds beyond the plan year. Healthcare.gov describes the grace-period option as giving you "2.5 more months to spend the left over money", which lines up with the IRS deadline of March 15. Carryover works differently: it lets you carry forward a set amount, adjusted by the IRS each year, into the next plan year instead. Your plan document determines which option, if any, applies to you.
How money comes out: card and reimbursement
You access your limited purpose FSA funds in two ways. Most plans issue an FSA debit card that you swipe at dental and vision providers, pharmacies and retailers. The card draws directly from your account and works like a regular payment method.
If your provider doesn't accept the FSA card, or if you pay out of pocket, the expense can still be reimbursed. An itemized receipt or invoice showing the date, amount and type of expense goes to the plan administrator for review, and the administrator pays the money to you directly by check or direct deposit.
When a letter of medical necessity is involved
Most dental and vision purchases need no extra paperwork beyond the receipt. For the smaller set of items that require proof of medical necessity, Burst writes the letter and files the reimbursement claim with the plan administrator on the member's behalf. For everyday over-the-counter dental and vision items, like contact lens solution, many retailers accept the FSA card directly at checkout.
Year end and job changes
At the end of the plan year, unspent FSA funds typically follow the use-it-or-lose-it rule: any balance you don't spend is forfeited. An HSA works differently. It has no such rule, and the balance stays with you and carries forward year over year with no deadline to spend it. Some employers offer a grace period through March 15, or a limited carryover instead. For 2026, the IRS set "the maximum carryover amount" at $680, up from $660 in 2025, though the plan document governs whether your employer offers carryover at all.
If you change jobs, your FSA balance does not follow you. You lose access to those funds unless COBRA continuation coverage is available through your former employer. Most people exhaust their FSA before leaving a job, or they miss the deadline to file claims.
When you move to a new employer, you can enroll in its limited purpose FSA during the next open enrollment period. If you have a qualifying life event (marriage, divorce, birth of a child, loss of coverage), you may be eligible to enroll outside of open enrollment.
Limited purpose FSA vs. standard FSA vs. HSA
A limited purpose FSA, a standard FSA and an HSA differ in what they cover, whether they can be paired together, and what happens to unused money.
Feature | Limited Purpose FSA | Standard FSA | HSA |
|---|---|---|---|
What it covers | Dental and vision only | All qualified medical expenses | All qualified medical expenses |
Paired with HSA | Yes, required | No, mutually exclusive | Often paired with HDHP |
Contributions | Pre-tax payroll deductions | Pre-tax payroll deductions | Pre-tax or deductible contributions |
Use-it-or-lose-it | Yes, unless grace period or carryover applies | Yes, unless grace period or carryover applies | No, money never expires |
Eligible for withdrawal | At any time for eligible expenses | At any time for eligible expenses | At any age, no deadline |
Plan administrator | Your employer's FSA plan | Your employer's FSA plan | The HSA custodian or trustee |
Where Burst fits
Some purchases are only reimbursable with a letter of medical necessity: gym memberships, massage, fitness equipment, sleep and recovery products, and similar. Burst writes the letter and files the claim for $35, refunded if no letter is issued or the claim is denied. See how a letter works.
Frequently asked questions
What does LPFSA stand for?
LPFSA is short for limited purpose flexible spending account. It's a pre-tax account for dental and vision expenses that's designed to be paired with an HSA, unlike a standard FSA.
What's the difference between a limited purpose FSA and a regular FSA?
A limited purpose FSA covers only dental and vision expenses, while a standard FSA covers all qualified medical, dental and vision expenses. The main reason to choose a limited purpose FSA is to use both an FSA and an HSA in the same year. A standard FSA and HSA cannot be used together due to tax restrictions.
Can I use a limited purpose FSA and an HSA at the same time?
Yes, that's the purpose of a limited purpose FSA. You can contribute to both in the same year. The limited purpose FSA covers dental and vision, and the HSA covers all other qualified medical expenses. This maximizes your tax-advantaged savings.
What dental and vision expenses are covered?
Dental expenses include exams, cleanings, fillings, root canals, braces and dentures. Vision expenses include eye exams, glasses, contact lenses and LASIK surgery. Coverage rules depend on your specific plan, so check your plan document or contact your benefits administrator for details on what qualifies.
What happens to my limited purpose FSA balance at the end of the year?
Unspent balances are forfeited under the use-it-or-lose-it rule, unless your employer offers a grace period or carryover option. A grace period lets you spend through March 15 of the next year on expenses from the previous year. Carryover lets you carry a limited amount forward. Your plan document shows which applies.
Can I get a letter of medical necessity for dental or vision expenses?
Some dental and vision items are already pre-approved as eligible expenses. Others may require a letter of medical necessity to be reimbursed. For example, a dental procedure or vision correction may qualify with a clinician's statement of medical necessity. The plan administrator makes the final decision.
Can I get reimbursed for a dental or vision expense I paid out of pocket?
Yes. An itemized receipt or invoice showing the date, amount and type of expense goes to the plan administrator for review, and the administrator pays you by check or direct deposit if the expense qualifies.
Keep reading: What's an FSA?, What's an HSA?, HSA vs. FSA: Key Differences, HDHP and HSA: A Complete Strategy Guide, and all guides on this topic.
Sources
IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (Limited purpose FSA definition, why a general-purpose FSA blocks HSA contributions, pairing with HSA and HDHP requirements)
HealthCare.gov Glossary: Flexible Spending Account (FSA) (FSA definition and the grace-period option at year end)
IRS Newsroom, Tax Inflation Adjustments for Tax Year 2026 (2026 health FSA salary-reduction limit ($3,400) and maximum carryover ($680))
