What is a limited purpose FSA?

The most common Limited Purpose FSA (LPFSA) allows an individual to set money aside on a pre-tax basis (via payroll deduction) to pay for out-of-pocket dental and vision expenses. An employee could use their HSA to pay for dental and vision expenses, but by fully funding the HSA and funding the LPFSA to pay for this year's dental and vision expenses, the employee will maximize their tax savings while preserving the HSA balance for the future.