LPFSAs let you plan ahead for your out-of-pocket expenses, so the right contribution amount for either FSA type will ultimately depend on how much you expect to spend on eligible expenses.
Here are a few things to consider:
- If you contribute more, you may increase your tax savings. You can maximize your tax savings if you contribute more.
- Your company may choose to contribute to your LPFSA. If so, you'll be able to see the amount when you set up your plan. Company contributions count towards your annual maximum limit for a Child & Elderly Care FSA, but not towards the limit for a Limited Purpose FSA.
- LPFSAs are "use it or lose it" accounts. Any funds you don't spend by the end of the plan year (or when your employment ends) go back to your employer, so don't contribute more than you're sure you will spend.
- Contribution amounts can't be changed. Once the plan starts, you can only change your contribution amount(s) after a birth, death, change in marital status, or other qualifying life event.