A new benefit that will go into effect in 2025 could help service members reduce their health care costs as the military will soon offer its troops flexible spending accounts for health care, the Defense Department announced Friday.

Military members will have the first opportunity to open health care flexible spending accounts during a special enrollment period in March 2025. They can contribute up to $3,200 per year from their pretax income for eligible health care expenses, with a minimum contribution of $100 per year. The Internal Revenue Service sets the eligible expenses and contribution limits, although the latter may vary by tax year.

This benefit is one of seven initiatives announced by Secretary of Defense Lloyd Austin on Friday to improve the quality of life for military members and their families.

Essentially, it’s a savings account that can be used to pay for things not covered by health or dental insurance. Such accounts have been available to employees of many federal agencies and private companies for years.

More than 300 IRS-approved health expenses are eligible, including copayments and deductibles, copayments for braces, eyeglasses and contact lenses, prescription drugs, over-the-counter drugs and wellness treatments such as acupuncture, massage and chiropractic.

In addition, numerous other items come into consideration, such as hand disinfectants and menstrual care products.

Military service members choose their contribution amount, which is automatically deducted from their paycheck and deposited into their FSA throughout the year. Because FSA contributions are not subject to payroll taxes, participants can save an average of 30% on eligible health care expenses, according to the Federal Flexible Spending Account Program (FSAFEDS). FSAFEDS, which administers the program, offers a calculator to determine potential annual savings.

FSAFEDS also administers the Department of Defense Dependent Care Flexible Spending Account Benefit, available to military members beginning in 2024.

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Military personnel must submit receipts or other documentation with their application form.

Once the enrollment period begins, military members can enroll online at fsafeds.gov. Military members must use and claim their FSA funds by the end of the plan year on December 31. Military members can carry over up to $640 of unused funds into the next year when they re-enroll.

Otherwise, it is a case of “use or lose”: military members lose all funds that they do not use during the plan year.

If both spouses are eligible for a health care FSA, each earner can have a separate account and jointly contribute between $200 and $6,400 per year.

The Department of Defense offers free assistance to military members in deciding whether to use this benefit through appointments with a personal financial or tax advisor through the Department of Defense’s Office of Financial Readiness and Military OneSource. Additional information, including financial and tax implications, will be available at a later date on the Department of Defense Financial Readiness website.

In the meantime, troops can begin gathering receipts and information about their own health care expenses to decide whether to open a health care FSA in March and how much to contribute.