Accounts
Health Care FSA
A pre-tax employer account for qualified medical, dental, and vision expenses
Key takeaways
- Funded by pre-tax salary reductions, lowering federal income and payroll tax.
- The full annual election is available on day one of the plan year, before it has been fully contributed.
- Largely ‘use it or lose it’ — unused funds are forfeited unless the plan offers a carryover or grace period.
What it is
A pre-tax employer account for qualified medical, dental, and vision expenses. The account is a structure; the investments it holds are separate and carry their own risks.
How it works
- Elect an annual amount during open enrollment; it is deducted evenly from each paycheck.
- Pay qualified expenses with the benefits card or submit for reimbursement.
- Spend the balance by the plan-year deadline, subject to any carryover or grace period.
Eligibility
Offered through an employer plan. Enrolling in a general-purpose Health Care FSA makes you ineligible to contribute to an HSA.
Contributions and funding
For 2026, the salary-reduction limit is $3,400. Plans may permit a carryover of up to $680 of unused funds into the next plan year.
What it can hold
Cash balances used to reimburse qualified expenses under IRC § 213(d).
Taxes and reporting
Contributions are excluded from gross income; qualified reimbursements are tax-free.
Withdrawals and distributions
Paid out as reimbursement for qualified expenses. Unused amounts are forfeited at plan-year end, subject to carryover or grace period.
Risks and limitations
- Forfeiture of unused funds
- Election is generally irrevocable mid-year absent a qualifying life event
- Blocks HSA eligibility unless it is a limited-purpose FSA
Frequently asked questions
Can I have this and an HSA?
Not a general-purpose Health Care FSA. A limited-purpose FSA is the compatible option.
Do I get the full election up front?
Yes — the entire annual election is available at the start of the plan year.
What happens if I leave mid-year?
Access generally ends on your termination date, though COBRA continuation may be available.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.