Each year during the annual federal benefits open season, federal employees have the chance to either switch or enroll in health insurance plans through the Federal Employee Health Benefits (FEHB) program. It’s also an opportunity for them to adjust or enroll in the Federal Employees Dental and Vision Insurance Program (FEDVIP) for dental and vision coverage.
This period doesn’t just stop at insurance plans; employees can also sign up or reenroll in a health care flexible spending account (HCFSA) as part of the Federal Flexible Benefits Plan, commonly known as the FedFlex program. Information about participating in the FSAFEDS can be found online or by calling relevant services.
Exploring further, the FedFlex program also offers what’s known as a "limited expense" HCFSA or LEXHCFSA. This plan focuses solely on reimbursing out-of-pocket dental and vision expenses. There’s a unique aspect here – if an employee contributes to a Health Savings Account (HSA) and cannot participate in a standard HCFSA, they might still contribute to a LEXHCFSA.
Why Enroll in an HCFSA?
Healthcare costs are constantly climbing faster than the inflation rate. Just looking at the numbers, FEHB program health plan premiums will shoot up by 13.5% in 2025 compared to 2024. Dental and vision insurance premiums aren’t far behind and will also see a rise. Plus, out-of-pocket expenses such as deductibles, copayments, and coinsurance grow significantly each year. These skyrocketing costs affect both employees and their families since certain medical, dental, and vision expenses fall outside what most insurance plans cover.
An HCFSA offers a way out by allowing federal employees (though not retirees) to get reimbursed for many of those medical, dental, and vision costs. How this works is simple: employees agree to a voluntary salary reduction, which funds their HCFSA.
One of the main perks of contributing to an HCFSA is tax savings. All contributions are deducted from the employee’s salary before federal and state income taxes, Social Security (FICA) taxes, and the Hospital Insurance Tax (Medicare Part A) are calculated.
Eligibility for the FedFlex Program HCFSA
Federal employees across various health, dental, or vision insurance plans qualify to participate in an HCFSA through the FedFlex program. Whether they’re covered under the FEHB, FEDVIP, TriCare, or even through a spouse’s plan, as long as they’re eligible for the FEHB (regardless of actual enrollment), they can join the program.
Steps to Enroll and Contribute for 2025
To be part of the FedFlex program and contribute to an HCFSA, employees need to act during the current open season. Even those already enrolled for 2024 must reenroll for 2025.
Enrollment for the 2025 plan year, covering January 1 to December 31, is straightforward. Employees can visit the specified website or call the provided numbers, where benefit counselors are available throughout the week to assist with the process.
When signing up, employees must decide the amount they wish to contribute from their gross salary. The contribution range is between $100 and $3,300, with this upper limit having increased by $100 from 2024. It’s worth noting that federal agencies don’t match these contributions, though they do cover all administrative fees involved.
Managing HCFSA Contributions
After employees determine their 2025 contribution amount, their payroll office will evenly spread out contributions across 26 pay dates through the year. Here’s how it works:
Imagine Julia is a federal employee who opts for the maximum $3,300 HCFSA contribution in 2025. From her first paycheck in January, $126.92 will be set aside each pay period for her HCFSA. By being in the 22% federal and 8% state tax brackets, she’ll save quite a bit on taxes due to these pre-tax contributions.
The IRS now permits some funds to roll over from one year to the next, with 2025 accommodating a carryover of up to $640, a slight increase from previous years.
Accessing Your HCFSA Funds
Withdrawals from an HCFSA can only be made for qualified medical needs of the employee and their dependents. Even if the full annual contribution isn’t yet paid, employees can use up to the elected amount for eligible expenses.
Eligible Reimbursements
Numerous out-of-pocket expenses can be claimed from an HCFSA as long as they’re not covered by existing insurance. These might include chiropractic services, dental procedures, infertility treatments, and even some over-the-counter medications. However, insurance premiums for various types of coverage aren’t eligible for reimbursement.
Essential Dates and Deadlines
A summary of important dates for HCFSA in 2025 is readily available and should be noted to ensure timely actions.
About Edward A. Zurndorfer
Edward A. Zurndorfer brings years of expertise as a Certified Financial Planner and other finance-related credentials. Operating out of Silver Spring, MD, he offers tax planning and federal employee benefits consulting through EZ Accounting and Financial Services.
Disclaimer: The information shared on MyFederalRetirement.com serves general information purposes and doesn’t replace professional advice. Always consult with a professional for specific legal or accounting services. Check out the Terms of Service for more details.
