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)?

[jasonmd]

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?

[Bsch4477]

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]

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.]

[jasonmd]

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. 

[Opus 17 · Accepted solution]

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.

[jasonmd]

You are most helpful kind sir! Thank you for the thoughtful and timely response @Opus 17 . 

[Anonymous]

irs reg 1.125-4(c)(2)(iii) provides that if employment termination allows you to contribute to HSA provide FSA coverage is terminated. 

Under the last-month rule, you are considered to
be an eligible individual for the entire year if you
are an eligible individual on the first day of the last
month of your tax year (December 1 for most taxpayers).
If you meet these requirements, you are an eligible individual
even if your spouse has non-HDHP family coverage,
provided your spouse’s coverage doesn’t cover you.
Also, you may be an eligible individual even if you receive
hospital care or medical services under any law administered
by the Secretary of Veterans Affairs for a service-
connected disability.
 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.
Testing period. If contributions were made to your
HSA based on you being an eligible individual for the entire
year under the last-month rule, you must remain an eligible
individual during the testing period. For the
last-month rule, the testing period begins with the last
month of your tax year and ends on the last day of the

12th month following that month (for example, December
1, 2019, through December 31, 2020).
If you fail to remain an eligible individual during the testing
period, for reasons other than death or becoming disabled,
you will have to include in income the total contributions
made to your HSA that wouldn’t have been made
except for the last-month rule. You include this amount in
your income in the year in which you fail to be an eligible
individual. This amount is also subject to a 10% additional
tax. The income and additional tax are calculated on Form
8889, Part III.

in short if you use the last month rule for 2020 you must stay an eligible individual for all of 2021.

this assumes you are not married