Flexible spending account (FSA) basics

We all like to save money on essentials. And health care products and services are as about as essential as they come. Fortunately, if your employer offers one, a flexible spending account (FSA) can help you set aside tax-free money to take care of these expenses, creating savings over time.

Different types of FSAs can help you save money for things like medical expenses, vision and dental care. Other reimbursement accounts can be used for day care, elder care, transportation and parking. We’ll go over what each of these are, how to enroll and what to budget each year. We’ll also show you how you can use these funds to reimburse yourself for what you spend.

Flexible spending accounts are special savings accounts sponsored by your employer. With this benefit, you can direct pretax money from each paycheck into your account to use for a variety of eligible expenses.

Depending on the type of FSA you open, you can use your funds for:

Health care
Vision and dental care

You may also be able to open other reimbursement accounts to pay for:

Child and elder care while you’re working
Work-related transportation and parking expenses

You can have multiple types of FSAs and reimbursement accounts for different uses, depending on what your employer offers. These accounts can save you money by increasing your take-home pay, since the money you deposit into your account isn’t taxed. However, you must use all the money you deposit into your account for eligible expenses by the end of the year, or else you may have to give up your remaining balance.

Flexible spending accounts are similar to a few other three-letter accounts you may have heard of:

Like an FSA, a health savings account (HSA) is also an account that’s funded with pretax money from your paycheck to use specifically for health care costs. However, you can only contribute to an HSA if you’re enrolled in a high-deductible health plan (HDHP). And unlike an FSA, an HSA is an interest-bearing bank account where the funds never expire, rolling over year to year and staying with you if you leave your job.
A health reimbursement arrangement (HRA), also known as a health reimbursement account, also contains pretax money to pay for health care costs, and the funds are typically “use it or lose it” by the end of the year. But an HRA is funded entirely by your employer – you don’t deposit any money into an HRA yourself. Your employer decides how much money goes into the account and what health care expenses are eligible.
Finally, a lifestyle savings account (LSA) contains money set aside by your employer for you to use on improving your physical, mental and financial well-being. While other accounts help cover health care expenses, an LSA complements your insurance coverage by offering funds for things that contribute to your well-being but aren’t health care. LSAs are funded entirely by your employer, and they decide what expenses are eligible.

The different types of FSAs

There are two types of flexible savings accounts – health care FSAs and limited-use FSAs.

Health care FSAs

This is what people think of most when they hear the term FSA. A health care FSA covers exactly what the title implies – health care expenses like doctor visits, prescriptions, insurance copays and coinsurance. Even better, dental care and vision care that aren’t covered by your health plan are also considered eligible expenses. Dentist visits, braces, eye exams and eyeglasses: All can be paid for by money in your FSA.

Limited-use FSAs (vision and dental)

If you also contribute to a health savings account (HSA), you can pair it with a limited-use FSA (also known as a limited-purpose FSA) exclusively for dental and vision costs. This allows you to reserve more of your health care HSA funds to use exclusively for health care while making it possible to save more pretax money for dental and vision care.

Other reimbursement account types

There are two additional types of reimbursement accounts that you can use for work-related expenses: dependent care accounts, and transportation and parking accounts.

Dependent care account (DCA)

A DCA is a type of reimbursement account that can be used to pay for dependent care your family needs while you work. This includes in-home child care, licensed day care and preschool, before or after school programs, and elder care.

Transportation and parking account

This account is specifically for your job commute expenses. Bus and light rail fares, train and subway tickets, parking ramps, lots, meters – if they’re a part of your regular travel to and from work, these are all eligible expenses you can pay for with the pretax money you save in this type of account.

When you enroll in one of these accounts through your employer, you’ll choose how much pretax money you want to send to it from each paycheck.

Once your account is opened, you’ll have access to those funds either through a debit card or reimbursement.

Setting up your FSA or reimbursement account

If your employer offers FSAs or reimbursement accounts, you’ll be asked if you want to open one when you start your job and during each year’s benefits enrollment period. During this time, you can also decide how much you want to contribute for the year. Once you decide, you’re locked in for the rest of the benefit year unless you have a change in employment or family status. The amount you choose to contribute will be divided by how many times you’re paid during the year, with an equal amount taken out of each paycheck.

Maximum FSA contribution limits for 2025

The IRS sets a limit on how much you can contribute to your FSA and other reimbursement accounts during the year. In 2025, those limits are:

Health care or limited-use FSA: $3,300 per year
Dependent care accounts (DCAs): $5,000 per year for a single person or married filing jointly, $2,500 per year for married filing separately
Transportation and parking accounts: $325 per month

How much should I contribute to my FSA and reimbursement accounts?

It depends on how much you spend on eligible expenses each year. Take some time to look back over the past twelve months to see how much money you’ve spent on health care, vision and dental, dependent care, or transportation. This can help guide you to what you’ll need in the coming year.

Also, it can help to look forward at what’s ahead. For example, if you know you have a major surgery coming up or you’re expecting a baby, events like these (and how much they’ll cost) can also factor in to what you might want to save in your accounts.

Generally, FSAs and other reimbursement accounts are “use it or lose it.” This means you’ll lose any money you have left over in your account at the end of the year. However, some employers allow you to roll over a certain amount of leftover FSA or transportation and parking account funds to the following year (you can’t roll over DCA funds). Check with your employer to see if you can roll over funds and, if so, how much.

Are FSAs and reimbursement accounts pretax?

Yes! The income you set aside for your FSA and other reimbursement accounts isn’t subject to taxes. That makes these accounts both special and useful.

Without these accounts, you’d use after-tax money to pay for health care, day care and transportation expenses. Instead, FSAs and reimbursement accounts hold money before taxes are taken out, reducing your total taxable income and leading to sizable savings as time goes on.

Do FSAs have balance fees?

Most don’t – HealthPartners FSAs don’t have balance fees, charge you for debit card use or have a replacement fee if your card is lost or stolen. However, other fees may apply. Double check with your employer to make sure you know about all potential fees.

When do my funds become available?

If you have a health care or limited-use FSA, the full amount you plan to contribute over the year is available to you in full at the beginning of the year. For example, if you elect to contribute $100 per month, you’ll have $1,200 available in your FSA on day one.

For DCA and transportation and parking accounts, money is added to your account as it’s taken out of your paycheck. So if you’ve committed to contribute $100 per month, that amount will become available each month.

Do my FSA and reimbursement accounts earn interest?

No. These accounts aren’t interest-bearing bank accounts – you can neither earn interest on the balance nor invest it. You also won’t be able to contribute additional post-tax money to these accounts.

You can use your health care FSA for medical expenses like doctor visits, lab fees, chiropractor fees, prescriptions, home medical equipment and more. You can use your health care FSA for deductibles, coinsurance and copays, too. Dental and vision care are also eligible, including dentist office visits, braces, eye exams and LASIK surgery.

We have a list of qualifying medical expenses (PDF) that will give you a good idea of what you can (and can’t) use your health care FSA funds for. HealthPartners members also have access to Health Shopper, an easy way to look up eligible expenses as well as find and purchase eligible products.

For limited-use FSAs, you’re restricted to just vision and dental care expenses since you can use your HSA for more general health care expenses.

If you’re a HealthPartners member, you can get details about eligible expenses for both health care and limited-use FSAs by signing in to your online account.

Eligible expenses for other reimbursement accounts

When it comes to other reimbursement accounts, eligible expenses are limited by category:

Dependent care accounts (DCAs) – While the accountholder is working, DCAs can be used for: in-home child care, licensed day care and preschool, before- or after-school programs, and elder care
Transportation and parking accounts – Work-related bus and light rail fares; train and subway tickets; and parking ramps, lots and meters

Using an FSA or reimbursement account debit card

When you open your account, you might receive a debit card to use with it. This is the easiest way to use your FSA or reimbursement account – just present the debit card when paying for services or use it to pay for eligible items at a store or online. The card takes the money directly from the account. Just save the receipt in case you’re asked to verify the transaction was for eligible items or services.

Submitting FSA and reimbursement account claims

For health care FSAs, some employers have an automatic submission process when you use your employer-sponsored insurance at a network doctor or pharmacy. If that’s the case, claims are processed automatically with no action needed from you – you’ll automatically be reimbursed for your out-of-pocket expenses so long as there’s money available in your FSA.

For FSAs without automatic claims submission, FSA-qualifying expenses where insurance wasn’t used, and other reimbursement accounts, you can submit your claims manually. Usually, you can do this online or through an app – just fill out a form with details about your expenses and submit it along with a copy of your receipts. HealthPartners members can submit claims through their online account or with the HealthPartners mobile app for Android and iOS.

Reimbursement funds are sent directly to your bank account if you’ve signed up for direct deposit, or by check. Some FSAs may charge fees for check reimbursements.

If you forget to submit an FSA claim right away, don’t worry. Many companies allow you to submit claims up to 90 days after the first day of the following year. Make sure you know exactly when you need to submit claims by – after a certain point, you may not be able to submit a claim, and you may not be able to be reimbursed.

Keeping track of your accounts

Most insurance companies give access to your FSA and other reimbursement accounts through either an online account or mobile app. This way, you can keep track of withdrawals in real time and see where your money is going. HealthPartners members with FSAs and reimbursement accounts can manage them by signing in or using the HealthPartners mobile app for Android and iOS.

Your FSA and reimbursement account balances, at year-end and beyond

After you spend your entire account balances, you’ll need to pay for any additional eligible expenses from your own funds until the new year. If you still have money left over in your accounts at year’s end, a few different things could happen.

Unused reimbursement account funds usually (but not always) expire every year

You usually can’t roll over leftover account funds to the next year. This is the reason why the phrase “use it or lose it” is connected to FSAs and other reimbursement accounts.

However, depending on the type of account you have and your employer’s rules, you might have a bit more flexibility:

For health care FSAs and limited-use FSAs, you may be able to roll over a certain amount to next year’s FSA. Check with your employer for details.
Transportation and parking accounts also have the potential for a limited amount of rollover from year to year. (With a DCA, however, you can’t roll over any funds.)
Your employer might also give you a grace period of several months into the new year to use your previous year’s funds – the length of the grace period depends on what kind of account you have.

It’s best to know what your employer’s rollover and grace period rules are when you sign up for an account. You can use the information to figure out how much you want to contribute each pay period.

Can I take my FSA and reimbursement account funds with me when I leave my employer?

If you leave your job, you’ll need to use up your health care or limited-use FSA funds before the last day you’re employed. But if you decide to continue your employer-sponsored coverage through COBRA, you’ll still be able to use funds from both of these FSAs until your COBRA coverage ends.

DCA and transportation and parking accounts can’t be continued through COBRA, so funds that aren’t tied to eligible expenses made before you left your job will be lost. Check in with your employer to double check their rules on these types of accounts.