Solved: FSA and HSA in same year okay?
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marven
New Member

FSA and HSA in same year okay?

I had reached almost the max contributions for health FSA through one employer in 2014

Then I changed jobs.

Can I also contribute to an HSA now that I have a high-deductible account?
And how much am I allowed - the prorate of the maximum?


Thank you
Mari

1 Best answer

Accepted Solutions
ghost
Level 8

FSA and HSA in same year okay?

The answer is NO. You cannot be covered by a general purpose health FSA and make HSA contributions. Because your health FSA is active (available to you for payment of medical expenses) through the end of this calendar year, that makes you ineligible to contribute to a HSA this year.

"Interaction Between HSAs and Health FSAs

Section 223(a) allows a deduction for contributions to an HSA for an “eligible individual” for any month during the taxable year. An “eligible individual” is defined in § 223(c)(1)(A) and means, in general, with respect to any month, any individual who is covered under an HDHP on the first day of such month and is not, while covered under an HDHP, “covered under any health plan which is not a high-deductible health plan, and which provides coverage for any benefit which is covered under the high-deductible health plan.”

In addition to coverage under an HDHP, § 223(c)(1)(B) provides that an eligible individual may have disregarded coverage, including “permitted insurance” and “permitted coverage.” Section 223(c)(2)(C) also provides a safe harbor for the absence of a preventive care deductible. See Notice 2004-23, 2004-1 C.B. 725. Therefore, under § 223, an individual who is eligible to contribute to an HSA must be covered by a health plan that is an HDHP, and may also have permitted insurance, permitted coverage and preventive care, but no other coverage. A health FSA that reimburses all qualified § 213(d) medical expenses without other restrictions is a health plan that constitutes other coverage. Consequently, an individual who is covered by a health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA. This result is the same even if the individual is covered by a health FSA sponsored by a spouse’s employer.

However, as described in Rev. Rul. 2004-45, 2004-1 C.B. 971, an individual who is otherwise eligible for an HSA may be covered under specific types of health FSAs and remain eligible to contribute to an HSA. One arrangement is a limited-purpose health FSA, which pays or reimburses expenses only for preventive care and “permitted coverage” (e.g., dental care and vision care). Another HSA-compatible arrangement is a post-deductible health FSA, which pays or reimburses preventive care and for other qualified medical expenses only if incurred after the minimum annual deductible for the HDHP under § 223(c)(2)(A) is satisfied. This means that qualified medical expenses incurred before the HDHP deductible is satisfied may not be reimbursed by a post-deductible FSA even after the HDHP deductible has been satisfied. To summarize, an otherwise HSA eligible individual will remain eligible if covered under a limited-purpose health FSA or a post-deductible FSA, or a combination of both."

http://www.irs.gov/irb/2005-49_IRB/ar08.html#d0e1151

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6 Replies
ghost
Level 8

FSA and HSA in same year okay?

The answer is NO. You cannot be covered by a general purpose health FSA and make HSA contributions. Because your health FSA is active (available to you for payment of medical expenses) through the end of this calendar year, that makes you ineligible to contribute to a HSA this year.

"Interaction Between HSAs and Health FSAs

Section 223(a) allows a deduction for contributions to an HSA for an “eligible individual” for any month during the taxable year. An “eligible individual” is defined in § 223(c)(1)(A) and means, in general, with respect to any month, any individual who is covered under an HDHP on the first day of such month and is not, while covered under an HDHP, “covered under any health plan which is not a high-deductible health plan, and which provides coverage for any benefit which is covered under the high-deductible health plan.”

In addition to coverage under an HDHP, § 223(c)(1)(B) provides that an eligible individual may have disregarded coverage, including “permitted insurance” and “permitted coverage.” Section 223(c)(2)(C) also provides a safe harbor for the absence of a preventive care deductible. See Notice 2004-23, 2004-1 C.B. 725. Therefore, under § 223, an individual who is eligible to contribute to an HSA must be covered by a health plan that is an HDHP, and may also have permitted insurance, permitted coverage and preventive care, but no other coverage. A health FSA that reimburses all qualified § 213(d) medical expenses without other restrictions is a health plan that constitutes other coverage. Consequently, an individual who is covered by a health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA. This result is the same even if the individual is covered by a health FSA sponsored by a spouse’s employer.

However, as described in Rev. Rul. 2004-45, 2004-1 C.B. 971, an individual who is otherwise eligible for an HSA may be covered under specific types of health FSAs and remain eligible to contribute to an HSA. One arrangement is a limited-purpose health FSA, which pays or reimburses expenses only for preventive care and “permitted coverage” (e.g., dental care and vision care). Another HSA-compatible arrangement is a post-deductible health FSA, which pays or reimburses preventive care and for other qualified medical expenses only if incurred after the minimum annual deductible for the HDHP under § 223(c)(2)(A) is satisfied. This means that qualified medical expenses incurred before the HDHP deductible is satisfied may not be reimbursed by a post-deductible FSA even after the HDHP deductible has been satisfied. To summarize, an otherwise HSA eligible individual will remain eligible if covered under a limited-purpose health FSA or a post-deductible FSA, or a combination of both."

http://www.irs.gov/irb/2005-49_IRB/ar08.html#d0e1151

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TaxGuyBill
Level 9

FSA and HSA in same year okay?

You should try to 'use up' the FSA this year, because any carryovers could void next year's HSA contributions as well.  (The second link is the 'official' one, but the first link is easier to read).
<a href="http://www.ajg.com/media/946483/technical-bulletion-irs-clarifies-two-rules-for-health-fsas.pdf" rel="nofollow" target="_blank">http://www.ajg.com/media/946483/technical-bulletion-irs-clarifies-two-rules-for-health-fsas.pdf</a>
<a href="http://www.irs.gov/pub/irs-wd/1413005.pdf" rel="nofollow" target="_blank">http://www.irs.gov/pub/irs-wd/1413005.pdf</a>
MichaelN1
New Member

FSA and HSA in same year okay?

According to IRS Publication 969, you are allowed to have both an HSA and an FSA in the same year. HSA contributions are report on your Form 1040, but there are no reporting requirements for contributions to an FSA.

For the HSA: "For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. If you have family HDHP coverage you can contribute up to $6,550."

For the FSA: "For plan years beginning after December 31, 2012, salary reduction contributions to a health FSA cannot be more than $2,500 a year (or any lower amount set by the plan). This amount is indexed for inflation and may change from year to year."

This link will take you right to the IRS publication.

http://www.irs.gov/pub/irs-pdf/p969.pdf


jasonmd
Level 2

FSA and HSA in same year okay?

I am confused by the response, but you've offered way more clarity than a lot of others so far! You state that, "Because your health FSA is active (available to you for payment of medical expenses) through the end of this calendar year, that makes you ineligible to contribute to a HSA this year."

 

I am in a similar situation and do not understand how the FSA is considered active. Once employment terminates, the benefit is finished. Here is info from the FSA provider at my previous employer:

 

What happens if I leave employment during the year?

 

If your employment ends or your eligibility for the FSA ends during the Plan Year, you cease being eligible to use your Health FSA and/or Dependent Care FSA funds for new expenses as of midnight on the day of termination and your debit card will be inactivated. You will still be able to submit claims for eligible health care expenses incurred on or before your termination date through your runout period.

 

Has the IRS ruled on changing jobs and FSA no longer being "active"? Is there any ability to move to an HSA if the FSA benefit is no longer applicable?

Anonymous
Not applicable

FSA and HSA in same year okay?

from irs pub 969

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

 

summary from IRS reg 1.125-4

An FSA's coverage period ends either at the time the plan year ends for one's plan or at the time when one's coverage under that plan ends. An example of such an event is the loss of coverage due to a separation from the employer. (1.125-4(c)(iii)

 

Opus 17
Level 15

FSA and HSA in same year okay?


@jasonmd wrote:

I am confused by the response, but you've offered way more clarity than a lot of others so far! You state that, "Because your health FSA is active (available to you for payment of medical expenses) through the end of this calendar year, that makes you ineligible to contribute to a HSA this year."

 

I am in a similar situation and do not understand how the FSA is considered active. Once employment terminates, the benefit is finished. Here is info from the FSA provider at my previous employer:

 

What happens if I leave employment during the year?

 

If your employment ends or your eligibility for the FSA ends during the Plan Year, you cease being eligible to use your Health FSA and/or Dependent Care FSA funds for new expenses as of midnight on the day of termination and your debit card will be inactivated. You will still be able to submit claims for eligible health care expenses incurred on or before your termination date through your runout period.

 

Has the IRS ruled on changing jobs and FSA no longer being "active"? Is there any ability to move to an HSA if the FSA benefit is no longer applicable?


Beware you are jumping on an old thread (the 2019 date is not accurate) and not all the responses are necessarily current.

 

You are ineligible to contribute to an HSA if you have "other coverage" that is not an HDHP.  An  FSA counts as "other coverage" but only while you are covered.  If you terminate employment with employer A, you need to determine when your FSA coverage ends.  It might end with termination, or it might end when the funds are used up, or there might be a grace period or some other provision of your benefit plan.  You may need to check with your previous employer to be sure.

 

If you are no longer "covered" by your old employer's FSA, then it does not stop you from contributing to an HSA once the coverage ends. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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