An HSA-Compatible FSA is a Flexible Spending Account (FSA) that is compatible with a Health Savings Account (HSA). If you’re enrolled in a qualified high-deductible health plan and have an HSA, you can maximize your savings by pairing your HSA with an HSA-Compatible Flexible Spending Account (FSA). This pre-tax benefit account lets you take advantage of the savings power of an HSA and a Healthcare FSA simultaneously. An HSA-Compatible FSA is sometimes referred to as a “limited purpose” FSA because it is used to pay for eligible dental and vision care expenses only.
You decide how much to contribute to your HSA-Compatible FSA each year, and funds are withdrawn automatically from each paycheck for deposit into your account before taxes are deducted. The total amount you elect to contribute is available on the first day of your plan year. Generally, you need to spend the funds in your HSA-Compatible FSA within the plan year. However, your employer may allow you a grace period of 2½ months after the end of the plan year to spend funds left in your account. Or your employer may allow you to carry over up to $500 left in your account into the next plan year.