The Defense Department has made Health Care Flexible Spending Accounts (HCFSAs) available to U.S. service members for the first time, which means troops can set aside up to $3,300 tax free for medical expenses starting in March 2025.
HCFSAs are a common workplace benefit outside the military. The federal government already provided HCFSAs to civilian employees, and now it's extending the benefit to uniformed service members, one of several new quality-of-life initiatives. Those who want to enroll need to do so during 2025's special enrollment period from March 3-31.
The new HCFSAs are meant to help service members with medical costs by lowering their taxes, but military financial advocates say people need to be aware that those who don't use all of that money might lose it at the end of the year.
Who Is Eligible for a Health Care Flexible Spending Account?
Starting in 2025, the Defense Department is allowing the following service members to set aside money in an HCFSA:
- Active-duty members of the Air Force, Army, Coast Guard, Marine Corps, Navy, Space Force and NOAA Commissioned Officer Corps
- National Guard and reserve members on Active Guard Reserve duty
- National Guard and reserve members activated on Title 32 federal orders
How Much Can a Household Contribute in a Year?
HCFSA beneficiaries may contribute anywhere from $100 to $3,300 per year. In a household where two people have access to separate accounts through their employers, they may each contribute up to the maximum, for a combined $6,600.
What Will the Money Pay for?
The money in an HCFSA can pay for certain health-care costs that health insurance doesn't, including:
- Tricare deductibles and cost sharing for military families on Tricare Select
- Over-the-counter medications and other health products
- Vision and dental care
- Medical devices
- Glasses and contacts
Search the full list of eligible expenses.
How to Enroll in Your HCFSA
Enrollment is through www.fsafeds.gov. According to instructions posted by the DoD Office of Financial Readiness, to enroll:
- Go to www.fsafeds.gov and log in with your Login.gov ID and password.
- Navigate to "Enroll in a Plan" and Choose "Qualifying Life Event" (QLE).
- Select the special enrollment period from the list of QLEs.
- Enter the date you're completing the enrollment as the QLE event date.
Account Activation and Availability of Funds
Accounts are typically activated "within a few business days" of enrolling.
A portion of the service member's paychecks will go into the account on a pre-tax basis, but troops don't have to wait for it to accrue to use it: The full amount they elect to contribute will be available to cover expenses right away.
The funds must be used up by Dec. 31, 2025, or they may be lost.
Limited Carryover Means "Use It or Lose It"
Only if they reenroll will service members be allowed to carry over up to $660 in unused HCFSA funds to the following year. If they don't reenroll, the leftover money disappears, and anything above $660 disappears, no matter what.
Future Enrollment Opportunities
Enrollment for future years' HCFSAs will occur during the annual federal benefits enrollment period in November and December. Service members will also be eligible to enroll if they experience a qualifying life event, such as a permanent change of station (PCS) or the birth of a child.
Guarding Against Cost Shifting
The advocates at the Military Officers Association of America applauded the introduction of the HCFSAs, acknowledging in a statement to Military.com that the accounts could help military families save on medical expenses.
But the association also pointed out that civilian employers "sometimes shift health care costs to employees knowing FSAs can help mitigate the financial impact," pledging to "remain vigilant" in monitoring increases to out-of-pocket costs under Tricare.
"We will continue to oppose any proposals for disproportionate Tricare fee increases even though the new health care FSA will provide an option to pay those fees with pretax dollars," the association said.
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