2025 Benefits Guide- updated 10-20 - Flipbook - Page 19
Flexible Spending Account
What is a Flexible Spending Account (FSA)?
FSAs are benefit plans that allow you to contribute a certain amount of your gross income to a
designated account or accounts before taxes are calculated, thereby reducing the amount you pay in
Federal, Social Security, and, in many locations, State, taxes. Depending on your tax bracket you
may save between 25% and 40% of every dollar you contribute to an FSA. Funds contributed to
FSAs are then used to pay for qualifying expenses. Three types of FSAs are available: Standard
Health Care, Limited Purpose Health Care, and Dependent Care.
Standard Healthcare Flexible Spending Account (HCFSA)
A Standard Healthcare FSA is for employees who are not enrolled in any high deductible health
plan (not in VELCO’s plan or another HDP). Funds in the HCFSA can be used for medical, dental,
or vision expenses not paid for by an insurance plan.
Limited-Purpose Flexible Spending Account (LPFSA)
A Limited Purpose Flexible Spending Account (LPFSA) is available only for employees who are
enrolled in a high deductible health plan, such as VELCO’s HDP. LPFSAs may only be used for
dental and vision expenses. Generally speaking, if you elect the HDP and you want to save on a
pre-tax basis for healthcare expenses (medical, dental or vision) you should maximize your
contribution to the HSA rather than contributing to an LPFSA. That said, there are a couple of
situations where you may want to consider having an LPFSA with your HPD. If you know you are
going to have a high-dollar dental or vision expense at the beginning of the year you could use the
LPFSA as a cash flow tool since the full annual election in an FSA is available on January 1, as
opposed to an HSA in which funding is only available as contributions are made. Also, if you
know that you will have high dollar expenses that will exceed the HSA contribution cap and some
of those expenses will be dental or vision, it may be advantageous to have both an HSA and an
LPFSA.
HCFSA and LPFSA Rollover Feature
You can carry over a limited amount of unused money in your HCFSA or LPFSA. For 2024, the
carryover limit is $640. Any amounts over $640 at the end of the plan year will be forfeited, per
IRS regulations.
Dependent Care Flexible Spending Account
Dependent Care FSAs allow you to contribute pre-tax dollars to pay for qualified dependent care
expenses. This account can be used to pay for daycare for your children who are under the age of
13 or for the care of an older child, a spouse, or relative who is physically or mentally incapable of
self-care and lives in your home. The care must be to allow you to work, that is - care for your
dependents while you are working. There is no rollover option for the Dependent Care FSA – per
IRS regulations funds that are not used prior to the end of the year will be forfeited.
Where will my FSA be administered?
VELCO has contracted with EBPA as the administrator or our FSA plans.
