Understanding FSAFEDS: How Federal Employees Can Save on Healthcare & Dependent Care Costs

FSAFEDS is the Flexible Spending Account Program for federal employees, administered by the Office of Personnel Management (OPM). It allows employees to allocate pre-tax money to pay for qualified out-of-pocket expenses, lowering taxable income in the process.

The program is available to most federal employees who are eligible for Federal Employee Health Benefits (FEHB), though dependent care accounts have slightly broader eligibility.

The Three Types of FSAFEDS Accounts

1. Health Care FSA (HCFSA)

This account covers medical, dental, vision, and prescription expenses not fully reimbursed by insurance.
Eligible expenses include:

  • Copays and deductibles

  • Prescription drugs

  • Glasses and contacts

  • Dental treatments and orthodontics

  • Over-the-counter medications

  • Menstrual care products

  • Mental health counseling (licensed providers)

Key advantage: You can use your full annual election amount on day one of the plan year.

2. Limited Expense Health Care FSA (LEX HCFSA)

Designed for employees enrolled in FEHB High Deductible Health Plans (HDHPs) with an HSA, this account only covers dental and vision expenses.

If you want tax savings but need to preserve HSA eligibility, this is the right account.

3. Dependent Care FSA (DCFSA)

This account helps pay for care of qualifying dependents so you can work, look for work, or attend school.

Eligible expenses include:

  • Childcare, daycare, or preschool

  • Before/after-school care

  • Elder care for dependent adults

  • Summer day camps (not overnight camps)

Unlike health FSAs, DCFSA funds are available as they are contributed throughout the year.

How Much Can You Contribute?

Contribution limits are set by the IRS and may change each year:

  • HCFSA/LEX HCFSA: Usually several thousand dollars per year (the IRS updates this annually)

  • DCFSA: Up to $5,000 per household (or $2,500 if married filing separately)

Because contributions are tax-free, the more you set aside, the more you save.

Why Federal Employees Benefit So Much from FSAFEDS

✔ Lower taxable income

Every dollar you contribute escapes federal income tax, Social Security, and Medicare taxes.

✔ Immediate savings on predictable expenses

If you already know you’ll spend money on glasses, copays, contact lenses, dental work, or childcare, an FSA is essentially a discount program backed by tax savings.

✔ Automatic payroll deductions

Your contributions come straight from your paycheck—no hassle, no added budgeting.

✔ Plenty of eligible expenses

Many people underestimate how many everyday costs can be paid with FSA funds.

Important Rules to Know

1. Use-It-or-Lose-It

Traditionally, FSAs required you to spend funds by the end of the plan year, but FSAFEDS now offers:

  • A carryover for Health Care and Limited Expense FSAs, allowing several hundred dollars to roll into the next year.

2. Grace period for DCFSA

Dependent Care FSAs typically allow a grace period to spend remaining funds.

3. Open Season enrollment

You must enroll during the annual Federal Benefits Open Season, unless you experience a qualifying life event.

Tips to Maximize Your FSAFEDS Savings

✔ Track your annual spending

Look at last year’s medical and dependent care expenses so you can set a realistic contribution amount.

✔ Use the FSAFEDS calculator

The program provides tools to estimate tax savings before you choose your annual election.

✔ Buy eligible products strategically

Many retailers mark which items are FSA-eligible, making it easy to spend remaining funds before the year ends.

✔ Use the mobile app

Snap pictures of receipts and submit claims instantly.

✔ Don’t forget seasonal expenses

Dental cleanings, new glasses, sunscreen, first-aid supplies, and childcare during school breaks all count.

Is FSAFEDS Right for You?

If you have predictable healthcare, dental/vision, or dependent care expenses—and most federal employees do—FSAFEDS is one of the easiest ways to increase your tax savings each year.

Whether you’re planning for a child’s summer camp, upcoming dental work, or regular prescriptions, an FSA can keep more money in your pocket and reduce the financial stress of everyday expenses.

 

Benefits Counseling, Federal Employee Benefits, FSAFEDSJon Thomas• FSAFEDS, • FSAFEDS benefits, • Federal FSA program, • Federal employee FSA, • Health Care FSA federal, • Dependent Care FSA federal, • Limited Expense FSA federal, • Federal employee benefits FSA, • Pre-tax benefits federal employees