What Are the Benefits of a Flexible Savings Account?

A “flexible savings account” refers to a Flexible Spending Account (FSA), a health spending account offered by an employer. The biggest benefits of FSAs are pre-tax savings, predictable budgeting, convenient access to funds for eligible expenses, and full-year access. However, account holders must plan around use-it-or-lose-it rules, rollover or grace-period rules, and employer policy details.

Flexible Spending Accounts (FSAs) are tax-advantaged accounts offered through an employer and are used to pay for qualified out-of-pocket health expenses. Medical costs can quickly add up, but many FSA users can save an average of 30% using pre-tax dollars.*

When an employee enrolls in an FSA program, they set an annual contribution amount during the enrollment period. These contributions come out of each paycheck before taxes are deducted but are immediately available once the plan starts. The funds can be used for medical expenses and to purchase FSA-eligible items throughout the plan year. FSA funds typically expire at the end of the plan year, but some employers may have a carryover or grace period.

There are generally three types of FSAs. The first is a healthcare FSA (HCFSA), which covers qualified medical expenses, including out-of-pocket medical, dental, and vision expenses, copays, deductibles, prescriptions, and other potentially eligible items. The second is also a Limited Expense Health Care FSA (LEX HCFSA), which covers dental and vision expenses. The third is called a Dependent Care FSA, which helps pay for qualified expenses for a dependent child or other qualifying adult, such as daycare or care for seniors or adults with disabilities.

Employers may offer different FSAs, and plan details will vary by employer and administrator.

An FSA is different from an HSA, a health savings account, in a few ways. An FSA is employer-owned, and funds typically expire annually. An HSA is owned by the individual using it, and the funds roll over year to year.

*HSA/FSA tax savings vary. Learn more at truemed.com/disclosures.

An FSA can help save money, but there are also a few other key conveniences:

• Tax savings on eligible healthcare spending and taxable income
• Lower cost burden for routine healthcare-related expenses
• Easier budgeting for expected medical costs
• A wide range of potentially eligible expenses
• Automatic deductions from payroll
• Possible options for extended coverage for dependents
• Convenient payment and reimbursement options
• Potential immediate access to the full annual election early in the year

There are many ways an FSA works to maximize health-related benefits, while relieving the financial burden of everyday healthcare costs.

An FSA can cover copayments, deductibles, coinsurance, and qualified prescription costs. Many medical supplies and devices may also be FSA-eligible. FSAs can also benefit families hoping to plan ahead for predictable health spending, recurring eligible purchases, and preventive and follow-up care expenses.

An FSA can cover a wide range of eligible products and services. It typically covers basic medical expenses, including doctor visits, physicals, preventive care, qualified prescription medications, medical devices and supplies, and insurance-related expenses, like deductibles, copayments, and coinsurance.

Depending on your plan and eligibility terms, an FSA can also cover some over-the-counter items and health products. With medical justification and supporting documents, such as a Letter of Medical Necessity (LMN), items like supplements, wearable health tech, mattresses, sleep support products, gym memberships, saunas, cold plunges, and more could be eligible.

Before purchase, verify with your plan administrator whether a product or service is FSA-eligible, and be sure to save the supporting documents (i.e., receipts, LMNs) in case administrators request them.

FSAs are an employee benefit that some companies offer. To enroll in an FSA, you must do so within your employer’s specific enrollment timeframes. Then, you can decide how much you want to contribute that year. The IRS sets a maximum annual contribution limit. The 2026 HCFSA contribution limit is $3,400.

The means, funds from your salary are deducted (tax-free) to fund the FSA balance to the contribution limit you have set. Your FSA funds can be used for qualified, eligible expenses allowed by the plan.

Many FSAs have a use-it-or-lose-it rule, meaning if you don’t spend the money contributed within that calendar year, you forfeit the remaining amount, and it is returned to your employer. Some FSAs have a carryover or a grace period, allowing claims to be submitted retroactively. This gives you a few months into the new calendar year to reconcile bills and expenses purchased in the prior plan year. Also, some plans include a 2.5 month grace period, allowing purchases made from January to March 15 to be charged against the FSA balance of the prior year. Each plan is different and plan rules may change each year, based on IRS, employer, and plan rules.

FSAs and HSAs may be used on similar qualifying medical expenses. But the difference between an FSA and an HSA is that FSAs are strictly offered through an employer, and balances and terms do not transfer to a new employer. Also, FSA funds have to be used within a certain period of time, or the balance will be forfeited; HSAs are employee-owned, so they are not employment-dependent, and funds can roll over each year.

Maximize your FSA by avoiding a few common pitfalls:

• Contributing too much. This could mean your eligible out-of-pocket expenses are lower than the amount put into the FSA–if you don’t use all the money, you lose it
• Misunderstanding timelines. Some FSA plans allow the full year contribution to be available at the beginning of the plan year, while others accumulate through payroll deductions. Understand your plan to align spending with contributions for the year.
• Confusing rules. IRS, plan administrator, and IRS rules can be confusing; when in doubt, know that the IRS sets the funding limits, the plan sets the eligible expenses, and the employer determines which of its employees are eligible to sign up to have an FSA.
• Missing deadlines, including for claims, card use, and election periods
• Over-assuming FSA eligibility. Not every health-related purchase qualifies as a medical expense. Consult your plan to better understand which purchases are eligible.
• Forgetting to save receipts or requested documentation.
• Not checking balances. Periodically checking carryover balances, grace periods, claims decisions, or requests for supplemental documents can help ensure you are not left with a balance to forfeit at the end of the calendar year.

An FSA can ease the burden of health spending and help families plan for medical costs.

Because FSAs hold a set dollar amount available within the plan year, they can be used for immediate or near-term healthcare needs. FSAs are also useful for families with predictable and recurring healthcare expenses, so they work best when contribution amounts align with realistic annual spending. Active planning and a strategic contribution amount allow you to maximize tax savings while bridging any insurance coverage gaps. FSAs also reduce reliance on personal credit cards if unexpected medical costs arise.

Always be attentive to timelines for claims, whether purchases are FSA-eligible, and keep supporting documentation and receipts in case administrators request substantiation.

HSA/FSA eligibility isn't one-size-fits-all. Eligibility depends on the product, a person’s medical need, and their plan. Some purchases are simply qualified medical expenses (like bandages or thermometers), while others might require additional documentation, such as an LMN, to prove they're treating a medical condition. Always review product details and plan rules to determine whether a product may be FSA-eligible.

Truemed* can help facilitate the documentation process, making it easier for customers to use HSA/FSA funds for potentially eligible purchases while staying compliant with IRS requirements.

*Truemed is for qualified customers. Learn more at truemed.com/disclosures.

When using an FSA account, remember that an expense’s eligibility depends on the plan, IRS rules, and the specific item or service. Some products or services may require additional substantiation, like an LMN.

Qualified customers may be able to use HSA or FSA funds for eligible products with Truemed, but ultimately, plan administrators make the final decisions around eligibility and reimbursements. For qualified customers shopping with Truemed, there is no additional cost on the platform because the cost of Truemed’s services is included in the purchase price.

There is a wide range of potentially-eligible expenses you might be able to use FSA funds for, including mattresses, running shoes, supplements, gym memberships, and more.

Truemed helps qualified customers maximize their HSAs and FSAs. To shop with Truemed, start by checking whether a product or service is normally considered a qualifying medical expense and whether you might need an LMN. Then, complete a health intake survey that will be reviewed by an independent licensed clinician. The independent licensed practitioner will review your medical history and, if you qualify, will issue an LMN. Buy the item—either by paying directly with your HSA/FSA card at checkout or by using a regular credit/debit card, seeking HSA/FSA reimbursement afterward.

Truemed does not make eligibility determinations, but it offers support if you get a denial of reimbursement and need to provide substantiation documentation.

• https://www.irs.gov/publications/p502
• https://www.irs.gov/publications/p969
• https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/