Health Care Flexible Spending Account (FSA) overview
A Health Care Flexible Spending Account (FSA) helps employees save on healthcare-related expenses by using pre-tax funds to cover eligible medical, dental, and vision costs. This guide outlines the key information you need to support your employees in utilizing this benefit effectively.
Contributions to the FSA
Employees contribute to their FSAs through pre-tax payroll deductions, with a maximum contribution of $3,300 set for 2025. While employer contributions to the FSA are optional, any employer contributions are also pre-tax, maximizing employees’ purchasing power. Funds become available at the start of the plan year. Contributions are communicated to Level via a contributions file.
Eligible expenses
Health FSA covers a range of healthcare expenses, such as:
-
Medical Costs: Doctor visits, co-pays, and prescription medications.
-
Dental and Vision: Dental exams, orthodontics, glasses, and contacts.
-
Medical Equipment: Essential devices like crutches or first-aid supplies.
Certain items may require a prescription or a doctor’s note of medical necessity. Employees can check their specific plan guidelines within the Level app to confirm what’s covered.
Eligibility and enrollment
Employees are generally eligible to enroll during:
-
Open enrollment periods
-
New hire periods
-
Qualifying life events
The Level App provides enrollment timelines and eligibility information. HR can also assist employees with any specific enrollment questions.
Explicit enrollment
Requires an enrollment file or manual action to specific details about new enrollments or enrollment changes.
This enrollment type is frequently used for Flexible Spending Accounts, but check out our Enrollment article for more options.
How employees can make purchases
Employees can either use the Level Card directly for FSA-covered expenses or pay out of pocket and submit claims for reimbursement through the Level App.
Where can the Level Visa® Card be used?
Employees can use the Level Card to make a co-payment at a doctor’s office, purchase prescriptions at the pharmacy, buy a new pair of glasses, and more.
- Employees can visit the sigis.org site for a list of merchants using the Inventory Information Approval System (IIAS) that automatically identifies eligible medical expenses.
- For a higher chance of card approval without needing a receipt, employees should consider purchasing eligible Health FSA items at the pharmacy counter rather than at a general checkout register.
Using the Level Visa® Card at a store without an IRS-approved checkout system
If employees use the Level card to pay for an eligible expense at a merchant without an IRS-approved system, their card may be declined.
- If the card is declined, we encourage employees to use another method to pay for the purchase and then submit a reimbursement claim, along with the itemized receipt and documentation, to be reimbursed.
- If the card is accepted, employees still may need to verify the card transaction by submitting a copy of their itemized receipt with documentation. If this is the case, employees will receive a notice asking for verification.
- Please note: A provider or merchant’s terminal set up may not accept the card, even if your purchase is an eligible expense.
Grace period for unused funds
FSA funds are typically subject to a “use-it-or-lose-it” policy at the end of the year, meaning any remaining balance is forfeited unless the plan includes a grace period or a run-out period. Level provides an intake form during onboarding for your selected plans, which include an exhaustive list of all eligible coverage categories as well as customizable plan design features for the selected plan, including grace periods and run-out periods. Please feel free to reach out to your account manager or success@level.com to request our intake form for your review and plan configuration.
Termination
If an employee leaves the company, their remaining FSA funds are managed according to IRS regulations and your company’s policy. In some cases, COBRA may offer continuation options for FSAs, allowing employees to continue using their funds post-employment. The specific treatment may vary, so it’s essential to confirm the company’s stance and communicate it to departing employees if needed. All terminated employees will continue to have access to their Level account only to review past transactions and expenses.
The Level Visa® Card is issued by The Bancorp Bank, N.A., pursuant to a license from Visa U.S.A Inc. Card usage restrictions apply.