Can I contribute to an HSA account at a new job if I contributed to an FSA at a previous company (old job) in the same calendar year (2020)?

Forum|Forum|5 years ago
October 19, 2020
6 replies
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I found the following on the IRS website (Publication 969) that states the following:

"Other employee health plans. An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can’t make contributions to an HSA."

Does the IRS have guidance or any rulings on whether an individual is considered "covered" when employment at Company A (old job) terminates and employment at Company B (new job) begins?

TurboTax Self Employed Online

Best answer by Opus 17

I believe that you are correct that you are eligible under the last month rule. There is a clause in publication 969 that is not found in the actual internal revenue code, and that clause confused me when I read it earlier.

Bsch4477

Level 15

The last month rule says that if you are covered on December 1 you can make the full year’s contribution. But you have to be covered for the next 12 months.

Opus 17

Level 15

~~The last month rule does not apply in your case, because you had other coverage earlier in the year.~~

~~“You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month if you didn’t otherwise have coverage.”~~

There are two parts to your question. First, can you make any HSA contributions? You are disqualified from making HSA contributions if you are “covered“ by other medical coverage. Other medical coverage includes your FSA. If you are still eligible to request reimbursement from your FSA for expenses you incur after you change jobs, then you are not eligible to contribute to the HSA. However, if your FSA coverage ended when you terminated your previous employment and you can’t seek additional reimbursement for medical expenses, then you are no longer covered by the FSA and you can make contributions to the HSA under the new employer.

Second, is the question of how much can you contribute. ~~Since you had other medical coverage previously during the year, you can’t use the last month rule.~~ Your eligibility is determined by the number of months in which you are only covered by a qualifying HDHP. You can contribute $285 per month if you are single and $581 per month if you are covered by a family HDHP, for each month when you were covered by eligible insurance on the first of the month. For example, if you started your new job on October 15, then you can make two months’ worth of HSA contributions for 2020 (Nov and Dec).

[Corrected to state you can use the last month rule. Just beware of the testing period requirement to maintain qualifying coverage for all of 2021.]

jasonmdAuthor

Level 2

My FSA did end upon leaving my previous employer (March 2020). To be clear, it ended on the last day of the month of March. I was unable to use the benefits card or place additional requests for reimbursement.

When I started my new role that same month, I was on a traditional healthcare plan (PPO). We did not have an HSA option until open enrollment (this month-October).

Based on your response, am I right to assume that I am now only eligible for two (2) months of HSA contributions?

I am rather confused as to the eligibility for the last-month rule. Under what circumstances can someone be eligible? I thought that I was elgible under the last-month rule. Maybe others are wrongly advising that the last-month rule applies to certain circumstances when it does not. I though job changers were the most likely candidates for the last-month rule.