During benefits open enrollment at my employer, I signed up for both Health Savings Account (HSA) and Flexible Savings Account (FSA) for next year.
You may have heard that you can’t contribute to both HSA and FSA in the same year. It’s not true. You can contribute to HSA and FSA in the same year.
First of all, if the FSA is a dependent care FSA, you can definitely have it in conjunction with HSA.
Second, if your health care FSA and HSA don’t overlap, you can contribute to both in the same year. For example if you have FSA with one job and you join another company that offers a high deductible plan with HSA, you can sign up for the HSA for the remaining months. If you are aggressive, you can invoke the “last month rule” and contribute the full year maximum to your HSA.
Last, which is the case for me, you can contribute to both HSA and health care FSA in overlapping months in the same year as well, if the FSA is a limited purpose FSA or a post-deductible FSA.
A limited purpose FSA covers dental, vision, and other eligible expenses, but not medical or prescription drugs. A post-deductible FSA kicks in only after you satisfied the deductible in a high deductible plan. I’ve never seen a post-deductible FSA. If your employer offers an HSA-eligible medical plan, it likely will make the FSA a limited purpose FSA for those who sign up for the HSA plan.
Why do you want to contribute to a limited purpose FSA in addition to the HSA? Because you want to save more pre-tax dollars. Just use the money in the limited purpose FSA to cover dental, vision, and other eligible expenses and save more of your HSA dollars for the future.
Some dental and vision expenses are predictable. If you need a dental implant or if your kids need braces, you have the treatment plan. You know roughly how much you will pay out of pocket. If you wear contact lenses, you know how much they cost over the course of a year and how much insurance will cover. Use a limited purpose FSA to cover these expenses instead of taking money out of your HSA or paying out of pocket with post-tax dollars.
FSAs have become more flexible since the IRS allowed employers to add a 2-1/2-month grace period or a $500 rollover for unused dollars. My employer chose the $500 rollover option. When unused dollars in a limited purpose FSA roll over to the following year, they stay as limited purpose and they don’t interfere with the HSA.
What you can’t do is to contribute to an HSA and have a general purpose health care FSA for overlapping months, and if you are married, your spouse can’t have a general purpose FSA at the same time either, regardless whether the two of you are on the same health plan or whether you actually request reimbursement from your spouse’s FSA. Just the fact that you are eligible to have your medical expenses reimbursed from your spouse’s FSA disqualifies you from contributing to an HSA.
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Al says
Hi Harry. Apologies if I am asking a question that has been asked before (tried to diligently vet all previously asked questions).
I am currently enrolled in a HDHP which offers both general FSA and HSA that runs with a plan year July 1-Jun 30. I am single. To this point, I contributed only a small amount to the FSA ($250 per year, $20.83/month). Open enrollment is now and I would like to max contribute to an HSA instead of an FSA (and they do not offer limited FSAs). I have spent the entirety of the FSA balance as of April 2017. Am I eligible to start contributing to an HSA in July 2017 in its entirety ($3,400), some fraction of it (less the 2017 FSA component), or none at all (and have to wait until 2018)? And, to be certain, there is no way to contribute to 2016, correct?
Thanks a ton!
Harry Sit says
No way to contribute for 2016. You have 50% of the annual limit for 2017 (prorated by the number of months).
Alex says
Thanks, Harry! One last question– am I able to invoke the “Last Month Rule” in 2017 and contribute the maximum of $3,400 or is this not an option? Thanks again!
Harry Sit says
It’s an option but it also comes with a 12-month forward commitment. If you are not able to keep the commitment you pay a penalty. Sometimes it’s out of your control (job changes, employer changes plan, …). In general I don’t think it’s worth it, but if you want to take a chance it is an option.
R Patrick says
Thank you for your original article and answering so many people’s questions.
I was curious about the source of the FHA at Job 1 then HSA at Job 2. Several other articles and on Bogleheads discuss the ruling listed above: IRS Rev. Rul. 2004-45. I’m not seeing what you are saying explicitly. Several other articles state once you have a FHA you are out of luck for the HSA.
I had a FHA for January of 2017, 100 dollars was put into it. I spent that 100 dollars.
I quit that position January 31, 2017. I have a letter from HR stating that the FSA expires on my date of termination and the would only pay for expenses of January.
I then signed up for an ACA Silver plan with HSA (Omnia Silver HSA) because I want to reduce my taxable income for the ACA subsidy. I then contributed the single person max. I’m 1099 paid now for professional services. So FSA closed, and new job/self employed.
So according to all the replies above I am HSA eligible. I’m not sure how to show that to an auditor other than the pay stubs and the distribution forms.
I intend to take the last month rule and sign up next year for the same. I’m reconsidering that as there does not seem to be Bronze HSA plans. I may benefit from paying to get the excess out ASAP as it’s one month. (How I will need to figure out). Especially since we have no idea how and what the exchanges will look like or what they will cost in 2018.
Thanks for your help in advance.
Harry Sit says
Zoie in comment #45 posted the language from IRS Rev. Rul. 2004-45. Outside the last month rule, you are eligible in every month when you don’t have other coverage. The FSA does not give you coverage after it terminated. Signing up for a 12-month commitment for just one extra month isn’t worth it.
R Patrick says
Thank you for your prompt reply. The information above and then searching for a few other things actually had me find out that I am not eligible for an HSA at all because the Cost Savings Subsidies push the deductible below what an HDHP would allow HSA contributions. Even of the plan says HSA on it.
So I am pulling the money out now. I found another site with how to fix that paperwork. Fortunately it’s only been in there for about 3 days.
You saved me from making a mistake that maybe I would have caught. Maybe the IRS would have caught. Three years later.
Caroline says
I have a question since you state I cannot contribute in the same month but can have both a HSA and FHSA in the same fiscal year. Would this work with plan years changing? I cannot find this exemption on the irs.gov website.
Harry Sit says
It depends on how the plan year changed. Did the FSA coverage end?
Caroline says
Thanks Harry. I have been busy at work. Plan year is June-May and the HSA ended at the end of May and was hoping to select Health FSA for the new plan year. I had been told I could by the benefits department, we use a PEO, I even asked multiple times to make sure as long as the HSA was concluded I could get a FSA and just have the money sit in the HSA for future plans/retirements. Then when I called back with the dollar amount they said I was only eligible for limited.
Harry Sit says
No problem with choosing health care FSA from June onward and it doesn’t have to be a limited purpose FSA. However, because you are only eligible for HSA for 5 months in this calendar year, your HSA contribution limit for this year is 5/12 of the normal annual limit. If you and your employer contributed more, you will have to work with your HSA provider to withdraw the excess.
June says
Just to be clear, would the 5/12 limit would be alleviated by 1 year plus one month rule?
Harry Sit says
June – The “last month rule” says if you are eligible for HSA on December 1 and you commit to stay eligible for the entire following year, you can contribute to HSA at the full limit for the current year. In Caroline’s case, if I understand correctly, she’s coming off an HSA eligible plan. She won’t be eligible for HSA on December 1. Therefore the “last month rule” doesn’t apply.
June says
Yes, you are right, sorry. In the opposite situation, (1) if someone’s FSA plan year ended mid-calendar year and they then signed up for an HAS-eligible plan, they could contribute the full amount to the HSA for that same year if they were eligible in December and the following year? (2) If the answer is yes and that was the case, there would be no need to withdraw excess contributions for the first year (half HSA), correct? (I understand that it is risky to rely on the Dec + one year rule, but I want to clarify it).
Harry Sit says
June – Only if the FSA truly ended — no expenses incurred after the end date can be ever reimbursed by the FSA, not just because the money in the FSA is already fully spent. If any money left in the FSA can still be used for expenses in December, the employee isn’t eligible for HSA in December, and therefore “last month rule” doesn’t apply.
Josh says
Didn’t see my situation in the comments above (apologies if I missed it)..
I was on my wife’s insurance and we both contributed to a medical FSA through our respective employers. In June, my employer changed insurance to an HDHP with an HSA where the company contributes $3K/yr. We chose to make the switch from my wife’s insurance to my company’s insurance. Her employer is saying they will not stop deducting her FSA contributions even though she is now in an HSA through my insurance. Do I have options to stop her FSA contributions or am I stuck? I was able to stop my FSA deductions since it was my company that switched everything up mid year.
Harry Sit says
She can ask her employer to explain why and also clarify whether not stopping her FSA contributions also means (a) she can still use the FSA money to cover expenses after her changing insurance to yours or (b) the continued deductions only make up for the total amount she signed up for (as in “12 easy payments”) but the eligible expenses must be incurred before she changed insurance.
The latter point affects whether the two of you are eligible to contribute to the HSA or receive contribution from your employer. If the answer is (a), you will have to withdraw the HSA contributions from you and your employer as excess contributions. If the answer is (b) you may have some FSA money that you can’t use because you didn’t have enough expenses before the change.
TB7 says
The easier answer would have been to remind your wife’s employer that she was able to make changes to her plan due to a qualified life event. At that point she was eligible to make changes to her benefits, including the FSA.
Sue says
Question – I am turning 65 and no longer eligible to contribute to my HSA bank account with my employer. My employer also has an FSA, since I can no longer contribute to the HSA , can I enroll in the FSA mid year and contribute to an FSA?
Harry Sit says
Enrolling in Medicare makes you ineligible for HSA contribution. If you turn 65 but you don’t enroll in Medicare you are still eligible. If you enrolled in Medicare, it counts as a qualifying life event. If you want to request a change to FSA mid-year you must notify your employer with 30 days of the life event.
MicaelaA says
This is brilliant. I so appreciate the discussion.
I’m 63 next month and plan to retire from this employer. Finally looking at their HDHP and an HSA.
Our plan year switched from Aug 15 to Oct 1 this year, so we were offered a FSA that terminates Sept 30 for those 45 days after our regular year (in which I also had an FSA). As I move to the HDHP Oct. 1, I will open an HSA. I can fund it for 2017 on Oct. 2. Must I do the 3/12’s only, or can I do the full $6750 (plus $1000 due to age=$7750)?
Am I missing something? I think the answer is in #53 above, but would like confirmation.
Harry Sit says
That’s correct. 3/12th without invoking the last month rule. Full year with the last month rule but it comes with the forward 1-year commitment and the ramifications if you fail the commitment, which isn’t necessarily 100% in your control.
MicaelaA says
Thanks!
Bruce says
I’m switching to an HSA from an HRA plan on Oct. 1. I had $2500 in an FSA before under the HRA plan, of which $1500 remain. The FSA has a grace period for expenses until Dec. 15. Under the IRS rules, will I not be able to spend the $1500 for medical expenses during the grace period? My HR dept. told me to call an accountant, they don’t do taxes.
Harry Sit says
As your employer what happens to the FSA after you choose HSA on Oct. 1. If it stays as a general purpose FSA, you can spend the money until the end of the grace period but you won’t be eligible for HSA contributions for 2017. If it converts to a limited purpose HSA, you can spend the money until the end of the grace period but only on dental and vision expenses, but you will be eligible for HSA contributions for Oct. – Dec. 2017. Only your employer can tell you whether the FSA stays as general purpose or it converts to limited purpose.
Bruce says
Thank you for your prompt response, Harry. Excellent forum, by the way!
SW says
I contributed to an FSA plan for 2017 for $2,600. The balance is $0. Left the company March 6. Coverage was through the end of March.
I left that employer and joined a new employer and enrolled in HSA for $2,600. Became eligible on March 13.
Am I subject to a pro-rated limit on my HSA? What is the total limit I can contribute to the HSA for 2017?
Harry Sit says
Pro-rated 9 months April – December before the last month rule. Single coverage $3,400 * 9 / 12 = $2,550. Higher limit for family coverage and age 55 or over.
SW says
I should make a correction to #60 above. I elected $2,600 for the FSA plan. I contributed $500. The balance of the of the FSA plan before I left the employer was $0.
Dan says
I skimmed through these posts and didn’t find anything that fit my situation. I have an HSA that currently has no more funds in it. I have contributed to it in this tax year but eventually stopped and withdrew all the money. I plan on closing the HSA since I no longer use it. I am starting a new job that offers an FSA, but I’m not sure if I would qualify for a general purpose FSA or limited. So my question is this: if I close my HSA before I make my first contribution to the FSA, can I sign up for a general purpose FSA? Or do I only qualify for a limited FSA because I had contributed to an HSA earlier in the year? I won’t have a FSA overlapping with an HSA in the same year, but I didn’t know if having an HSA for part of the year leaves you only qualifying for a limited FSA or if you’re free to sign up for a general purpose FSA.
Harry Sit says
See reply to Caroline in comment 53.
Andy says
Hello,
My wife was contributing to a general purpose FSA, but she resigned from her job in Jan. 2017 to become a stay at home mom. So beginning Feb. 2017, I got my wife and child enrolled in my employer sponsored HDHP. Am I allowed to contribute 11/12th (Feb. through Dec. 2017) of the max allowed for family in my HSA? Or, because my wife had FSA for one month, it disallows me to contribute to the HSA account altogether?
Harry Sit says
Yes you can contribute 11/12th. It’s covered in the fourth paragraph.
Josh says
I currently (2017 year health plan) have a PPO health plan with an FSA, with $950 remaining in the FSA. For 2018, I am considering switching to the High Deductible plan which has an HSA. My company allows me to rollover my unused FSA dollars from 2017 to 2018, as long as the services are incurred before March 15, 2018. If I decide to change to the High Deductible plan for 2018 and start using an HSA, can I use my rolled over FSA funds in conjunction with the HSA? The reason I ask is because I want to get Lasik eye surgery in early 2018, so I am hoping I can use my $950 rolled over FSA funds from 2017, plus the new HSA that would start in 2018 should I choose to go that plan route. If I get the surgery in early 2018, can I combine FSA rollover from prior year 2017 with HSA from current year 2018 for the same medical expense (Lasik)?
Harry Sit says
Ask your employer whether the FSA dollars roll over as a general purpose FSA or a limited purpose FSA. If general purpose, your HSA contribution for 2018 will be limited to 9/12th of the annual limit. If limited purpose, the dollars rolled over will be limited to only dental and vision, which is OK because you want to use them for Lasik, but your HSA contributions for 2018 will be the full annual limit. Either way you are able to use the FSA dollars for Lasik.
Josh says
Thanks for the reply. I am also not sure if Lasik is considered a limited FSA expense or general purpose. I will check with my employer as to what purpose type the rolled over FSA is considered. I also posted this question on https://www.reddit.com/r/personalfinance/comments/7adokg/using_fsa_rollover_from_prior_year_hsa_from/ and a user there is saying that the rolled over amount can’t be used for surgery.
Caroline says
I used my Limited FSA for Lasik, it’s vision, not medical. We were asking about having a health FSA for part of the year and HSA for other part, which is different from the Limited FSA allowed in addition to HSA.
Mrbasicshark says
What if we did not sign up or was not eligible for an HSA so we signed up for an FSA. However later in the year the Employer provided some HSA for use to use (not taking from our check just freely provided by employer). How would that work then?
Harry Sit says
If the FSA didn’t end, you can work with the HSA provider to withdraw the employer contribution to the HSA as excess contribution. You will pay tax on the money withdrawn but it’s still free money from the employer.
Josh says
I currently have an FSA for 2017 but will be switching to an HSA in 2018. My company has an FSA rollover period that rolls over from 2017 and the leftover funds can be used up until 3/15/2018. The FSA is general purpose. Since I have an FSA rollover, I am not allowed to start contributing to my HSA until 4/1/2018, because I can’t contribute to my HSA while the FSA is still active during the rollover. My question is, if I have a surgery in January 2018, can I pay for part of the surgery with my FSA rollover money, and then pay off the remaining balance of the surgery cost with my HSA in April once I am allowed to contribute to it? Or does the HSA not let you pay for services that occurred before I was eligible to start contributing to it (4/1/2018)? Basically I want to use a combination of the FSA rollover money AND the HSA money for the same surgery.
To phrase a different way, will they deny my HSA reimbrusement for a surgery that occurred in January and say that because I wasn’t eligible to contribute to my HSA until April, that I can’t use the money for anything that happened before April?
Harry Sit says
The expenses must be incurred after the HSA is opened. If you currently have HSA elsewhere or if you had HSA in the previous 18 months before your new HSA is opened, the “opened” date of your new HSA is backdated. If this will be your first HSA ever, ask your employer or the HSA provider whether your HSA is considered to be opened on January 1 even though you don’t contribute to it until later.
Kdm says
Thanks. Harry. After a little more digging It looks like it may have been an HIA not an HSA. Not sure though. Got to dig even more to see. Thanks again for your reply and this article. We never realized the restrictions on these accounts till reading this.
Amy says
I currently have an FSA that is not limited (my current insurance is not an HDHP). My plan year runs from Jan. 1, 2017-Dec. 31, 2017 for the FSA. I have 486 dollars left to use in my FSA. My employer is switching to a High Deductible Health Plan on July 1, 2018 and will be making a contribution to an HSA for us. I have a 3 month grace period (Jan-March 2018) to use the remainder of my FSA up. If I use the rollover can I still open the HSA in July of 2018?
The provider for my FSA says that I can use the rollover in 2018 and still open up an HSA in 2018. I’m not sure I believe him. I am not making any new contributions to the FSA in 2018, it would simply be using up the money I contributed in 2017.
Harry Sit says
You can still open the HSA in July 2018 because your FSA doesn’t overlap with it when the FSA ends in March 2018 whether you still have money in it by that time. However the maximum contribution from both you and your employer to the HSA for 2018 will be half of the normal annual limit because you will only have HDHP for half a year.
jason says
I currently do not have either an FSA or HSA.
To pay for lasik in early March 2018, I am thinking about getting a high deductible health insurance plan with HSA and a Limited Expense Health Care FSA (limited purpose FSA). The funds available through FSA ( maximum amount of $2,650 available on day one of plan year) will not be sufficient to cover the cost of lasik. May I pay for the remaining balance with the available balance from the newly established HSA?
Is there any IRS rule against or foreseen complication resulting from such practice?
Thanks,
Jason
Harry Sit says
That works perfectly.
jason says
Thanks. I just wanted to make sure that using both FSA and HSA to pay for a single procedure in the manner described is not double-dipping.
Doria says
I have an HSA through my employer. My employer also offers a flex plan. I know I can do dental and vision expenses for this. However what is the “other eligible expenses?” In specific does that include supplemental insurance like accidental, STD, LTD, Cancer premiums…. I have been searching for this information in guidelines and I’m struggling to find anything.
“A limited purpose FSA covers dental, vision, and other eligible expenses, but not medical or prescription drugs.Nov 24, 2015”
Harry Sit says
From IRS Publication 969, page 4:
You can have additional insurance that provides benefits only for the following items:
– Liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property.
– A specific disease or illness.
– A fixed amount per day (or other period) of hospitalization.
– Accidents
– Disability
– Dental care
– Vision care
– Long-term care
The limited-purpose FSA can pay for expenses on the list above except long-term care.
Doria says
I understand you can have additional insurance. Can you flex the cost of the premiums for cancer insurance? for accidental insurance? For example, we purchased accidental insurance from a different company from a previous employer of my husband. These premiums are taken out of our checking account each month. Can I submit this premium as a flex plan expense?
Harry Sit says
Insurance premiums are not eligible expenses for a Flexible Spending Account.
Corrine says
In January 2017 I enrolled in an FSA. I also have a VEBA(HRA) through an employer. In July I switched to an HDHP with HSA instead of a VEBA. I understood that the funds in my VEBA now become limited. According to the FSA provider, the funds in my FSA also became limited when money was deposited into my HSA in September. I had some medical expenses in August. Does this mean the FSA is limited all the way back to January, or just starting in September when the HSA was funded? Or should I not have put funds into the HSA and do an excess contribution withdrawal? If so, does this have to be done by 12/31?
Harry Sit says
If the FSA provider told you the account became limited in September then that’s the date of the switch. It goes by the service date. Ask your FSA provider about your medical expense in August.
Corrine says
The FSA provider told me it became a limited account as soon as funds were deposited into the HSA, however, they also told me it was limited for the entire year. I didn’t know if there was an option to be the whole year or just as soon as funds were deposited, what exactly the law is.
Harry Sit says
The law says a general purpose FSA can turn into a limited purpose FSA on an effective date. It doesn’t go backwards.
Zachary Fair says
I have a general-purpose FSA through my employer of which I contributed and used the full $2500 throughout the year. My wife took a job in August and began contributing to an HSA unbeknownst to me. I understand that that is not allowed. I need to know the best way to deal with it. I read all your comments above and it sounds like I need to contact her HSA provider and withdraw ‘excess’ contributions. In your reply to comment #41, you referenced IRS publication 969, search ‘excess’. It says the following:
———————->
Excess contributions. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions aren’t deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return.
Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account.
You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions.
You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made.
You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.
*CAUTION*
If you fail to remain an eligible individual during any of the testing periods, discussed earlier, the amount you have to include in income isn’t an excess contribution. If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later.
<———————-
My concern is the last bit. Would my circumstances have equated to "fail(ing) to remain eligible during any of the testing periods"? Whichever the case may be, am I best off withdrawing the funds regardless ASAP so they don't effect 2018 as well, or if I am going to be penalized anyway, should I just leave the funds where they are and use them toward health care expenses anyway?
Also, it doesn't seem logical or prudent, but in comment 8, Randall said "To note, the IRS does not have a method of accounting for your FSA contributions and activity, as this is not reported on your federal taxes." Is it safe to assume this comment should not contribute to the decision about how best to resolve my issue? Thanks ahead of time.
Harry Sit says
The testing period refers to having used the last-month rule and not keeping up with the required commitment. It doesn’t apply to your situation. Even though it’s true your wife’s ineligibility is hard to detect, now that you know it, I would still do it by the book and not sweep it under the carpet. If you withdraw the excess now, you are not penalized. If she contributed as pre-tax through her paycheck, paying tax on the withdrawn amount just makes it as if she didn’t contribute in the first place.
Zachary Fair says
I contacted her HSA admin. The first associate assured me that HSA and FSA accounts are able to be used together so long as I didn’t also have a non-HDHP associated with my FSA, which I do not. Suspecting this to be incorrect, I called back and was told by a different associate that my wife is in fact ineligible. I was referred to an excess contribution withdrawal form that I have to fax in and wait two weeks for processing. So it will unavoidably take place in 2018, albeit before my tax due date. Hopefully that will not incur any tax penalties.
I was informed that they have an option to simply apply the excess contribution to my 2018 funds (my FSA will be closed for 2018, with $0 balance), as opposed to receiving a check. She said that this would not trigger any additional income tax requirements for my 2017 taxes because the funds would be applied directly to my 2018 contributions. It would simply count toward my max limit for that year. Are you familiar with this option? I am skeptical due to the misinformation that I received in the first call.
Harry Sit says
I would just just do the straight withdrawal of excess and keep it separate from the 2018 contributions. The less complicated, more obvious, and easier to explain the better.
Sara says
I had an HSA for the whole year of 2017, but became ineligible on Jan 1, 2018 due to the company adding an HRA and FSA. I have read that you can still contribute to your prior year HSA up to the tax filing deadline of the next year. So I have until April 18th, 2018 or thereabouts to contribute up to the max HSA contribution for 2017. Can I do this, but have an general FSA for 2018? The contributions would run concurrently but would be for different tax years. Please advise!!
Harry Sit says
If you and your employer didn’t contribute to the maximum limit in 2017 you can still contribute the difference yourself up to April 17, 2018 (not April 18). It doesn’t matter you became ineligible in 2018 when you are contributing for the previous year.
Sara says
Thank you Harry. It is good to know I can do this on my own. If my employer is willing, can I assume they can also make the 2017 HSA pretax deductions for me , and still take the pre-tax deductions for the 2018 FSA?
Harry Sit says
The employer isn’t able to do it now for the previous year. You will have to do it directly with the HSA provider and then take a deduction yourself on your tax return.
Susan says
I have read all the Q & A and I’m still not sure I know the answer to my question. –Due to a debit card not being run for the correct amount on a vision claim, our general-purpose FSA had $1.47 remaining in it on 12/31/17. I filed for the remainder of the vision claim on 1/31/18 to withdraw the $1.47. Does this mean we are only allowed to contribute 9/12 or the eligible amount for our HSA plan that began on 1/1/18? The FSA did not convert to a limited-use FSA.
I appreciate all the helpful information on this site.
Harry Sit says
It doesn’t matter how much money the FSA had on 12/31. The key question is whether it provides any coverage for services done in 2018. If the money is only available for claims with a service date in the previous year, your HSA eligibility isn’t affected.
Susan says
Thank you so much for that clarification. Much appreciated!
Cam says
On 3/1/2018 my spouse (who doesn’t work or have insurance coverage anymore) and I got married and I added her to my healthcare plan. Prior to this I had an HDHP with an HSA. I used this life event to change to a non-HDHP plan, therefore making me ineligible for the HSA. Due to this I also elected to open an FSA at the same time. My benefits email states that this is all effective as of 3/1/2018, but payroll has already processed an HSA contribution that will go though on the 6th. I assume, based on reading everything above, that I will need to withdraw the last HSA contribution and pay taxes on it as part of my income next year in order to keep everything lawful. Is that correct? Is there anything else I need to do because I have switched from an HSA to an FSA? Thanks in advance.
Harry Sit says
The HSA contribution is limited by dollars not by time. By having the HSA in the first two months of the year, you are eligible to contribute 2/12th of the annual limit. As long as your total for the year (including any amount contributed by your employer) doesn’t exceed the limit, it doesn’t matter when you contributed.
Paul W. says
If I have both a HSA and a Limited-Purpose FSA, when requesting reimbursement for a specific qualified expense that will zero out the FSA balance, can I then request reimbursement for the remaining amount from my HSA? For example, say I have $100 remaining in my FSA for the year and my HSA has $500, and I purchase a $300 pair of glasses. I can submit the $300 expense to my FSA and be reimbursed for $100 (the remaining FSA balance), but can I then also request reimbursement from my HSA for $200 (the remaining un-reimbursed glasses expense)? I assume this is allowed but can find no IRS guidance in researching this particular scenario.
Harry Sit says
Yes. The requirement is only your HSA distribution covers qualified medical expenses not reimbursed elsewhere.
Paul W. says
That’s what I thought, thanks for the reply.
Brooke says
Hi, we have an HSA with our HDHS but that coverage ends 3/31/18. We contributed 1712.50 to the HSA for 2018. My husband’s new insurance isn’t high deductible and they have an FSA. Can we contribute $2650 to the FSA for 2018 or only (2650/12*9)=$1987.50?
Thank you!!
Harry Sit says
The law does not require prorating the FSA contributions. You employer may set a lower limit.
Chrissie Larson says
We had an HSA last year with the high deductible plan. This year we have the FSA w/o the HDHP. we are 56 and I made an additional contribution to the HSA in January via a catch up contribution. Can I use both the HSA & FSA for 2018 expenses ? Very confusing. Thanks!
Harry Sit says
Assuming your HSA contribution was for last year when you had the HSA-eligible plan, once the money is in the HSA, it can be used for qualified medical expenses regardless what insurance you currently have or whether you have an FSA. You just can’t double dip with the same expense already reimbursed elsewhere. See comment #80 above.
Val says
Thanks for the informative post! Didn’t see this one covered:
I have a stepson who is covered by both of his families. My family is on a HDHP, HSA-eligible plan (with employer contribution), and my stepson’s mom is switching to a PPO, low-deductible plan with an FSA. The mom’s HR is saying that we can’t have both for my stepson due to this rule.
Our family has other children and would qualify for the “family” HSA limit regardless of whether or not my stepson was taken into account. No one else in my family has additional health insurance. All medical expenses are split 50/50 between parents.
Thoughts?
Harry Sit says
The HSA eligibility is checked on the person who contributes, not on the other family members. As long as you have HSA-eligible plan and nothing else, whether other family members have other coverage or not doesn’t matter.
Val says
Thanks for sharing your thoughts . . . so the contribution limit be the family limit, I assume?
Harry Sit says
Yes.
Kristi says
Currently, I have a non-HDHP with a FSA that covers me and my four children.
My husband is covered by his employer with a non-HDHP.
On July 1st, I plan to switch myself and my children to a HDHP with HSA.
What are my contribution limits for the HSA? At the end of June, I will have contributed $1200 to my FSA (which have already been spent on braces, leaving me with a zero FSA balance.)
Am I able to contribute up to the family limit of $6850 since I am covering my children?
Would the limit be lower since I am only contributing for 6 months?
And, is that limit lower since I have already contributed the $1200 to my FSA? And, what are total limits in future limits with limited FSA and HSA?
Harry Sit says
If your switch is with the same employer, ask your employer what happens to your FSA. If it terminates or it turns into a limited purpose FSA, you can contribute to the HSA up to 50% of $6,850 (6 out of 12 months). If you’d like to invoke the last-month rule and commit to the HDHP for another year, you can contribute the full $6,850, which I don’t recommend, but it’s an option.
Peg says
So if I have a PPO plan, and my husband has a HDHP plan ( separate single coverage thru our individual employers), the only options are for me to have a FSA, OR for my husband to have a SINGLE HSA??? He can’t deduct the FAMILY amt??? That doesn’t seem fair.
Harry Sit says
That’s correct. Fair or not, they made the law that way.
Emily says
My husband is starting a new job next Monday, April 30th. My husband and son are currently on my insurance through my employer, a PPO with FSA, since his current employer does not offer health insurance. His new employer offers two HDHP plans with HSA (no other options). He will need to sign up for the HDHP plan since my employer charges a surcharge for spouses who are covered by other plans. What are our options for the FSA and HSA? Can I terminate contributions to the FSA as of April 30 and then my husband can contribute 8/12 of the annual limit to the HSA? I have been reimbursed more from the FSA than I’ve contributed from my paycheck so far this year. Will I be required to pay that back to my company? I guess the other option is to continue the FSA for the rest of the year and withdraw the new employer’s contribution to the HSA as excess? Thanks in advance.
Harry Sit says
Because you will stay on your insurance, I don’t think your employer will let you terminate contributions to the FSA, but please check with your employer.
Daved and Confused says
Question: My wife and I are on her HDHP (HSA eligible). We mistakenly enrolled in both the HSA & general (non-limited) FSA for 2018. We are on track to contribute the maximum to the HSA ($6200 in our contributions, $700 by employer). For the FSA, we are on track to contribute $1000 for the year. We have not made any claims or used the FSA funds at all so far this calendar year. If the employer allows, could we stop contributing to FSA now and let the money go *poof* at the end of the year and keep the HSA fully maxed out? If we never take an FSA payout, is it as if we never had it? I know it’s a waste of a few hundred dollars, but it seems like this may be the easiest solution vs. trying to reverse the much larger HSA contributions (both ours & employers) and somehow pay FICA & income tax the HSA. It seems like a nightmare to deal with HR trying to reverse/unwind the HSA, especially since the HSA has been fully invested through our HSA custodian (and is currently below what we contributed). Any tips would be appreciated.
Harry Sit says
I don’t think the employer will allow you to stop contributing to the FSA or disclaim it. When you withdraw the HSA contributions as excess contributions, you contact the custodian directly, not through HR.
Kathy says
Husband and wife both enrolled in husband’s employer’s traditional PPO plan. Wife got a new job and enrolled as a single coverage in her employer’s HDHP with HSA. Effective date is 6/1/2018. We removed the wife off our PPO plan effective 6/1/2018. All good so far. The issue is the FSA plan we offer. It’s a general use FSA plan and husband has only used a small portion of it. I understand this needs to either be changed to a limited use (dental & vision) FSA or his wife can’t contribute to her new HSA plan. Knowing the wife is already signed up for the HDHP and HSA plan, we need to change the husband to a limiited use FSA. My question is this: Can he change (reduce) the dollar amount of his annual election now at midyear? He didn’t know his wife would get a new job with insurance benefits when he signed up for our FSA plan and he made his election based on his situation at the time.
Harry Sit says
The IRS allows it as a change in employment status. Your plan may or may not allow it. See Under what circumstances can employees make mid-year election changes to their health Flexible Spending Account? from Society of Human Resource Management.
Kathy says
Thanks. Do you have the IRS publication that specifies this? I can’t seem to find anything.
Harry Sit says
See 26 CFR 1.125-4 – Permitted election changes. Just the IRS allowing it isn’t enough. Your plan document also has to allow it.
Lisa H says
Thank you for this informative thread… I read through all the comments and didn’t see a clear answer to my situation. Due to employer challenges, we were covered by a family HDHP in January and February and contributed $2100 to our HSA. We were again enrolled in a HDHP (through the ACA marketplace) in April 2018 but did not make additional contributions (no insurance coverage in March or May). We have used all the of the money in our HSA to reimburse for medical expenses incurred in January. From reading the above comments, our limit to contribute for 2018 is 3/12 annual limit, or $1725. How do we report the extra $375 that we should not have contributed (since we already used it, we can’t remove it as an excess contribution). We have a new non-HDHP since June 1, 2018. If our employer will allow it, my understanding is that we can open a general use FSA and contribute the maximum allowed amount ($2650) but can only use that money for expenses incurred AFTER the FSA is opened, not to reimburse any expenses incurred before then?
Teresa In Education says
I am an educator for a public school. My employer offers a HDHP ($5,000). The school district currently frontloads $4,000 into an HSA. Can my employer also put an additional $1,000 into a post deductible FSA? This would only be utilized if my medical expenses exceed $4,000. Also, would the $1,000 placed in the FSA revert back to the employer if not used? Thank you for your consideration.
Harry Sit says
Yes post deductible FSA is allowed in conjunction with HSA. It can also be used for dental and vision. Please ask your employer what happens to any unspent money.
Lane says
I got bad advice from my company’s HR department. I was told that I could terminate my FSA when my wife’s employer switched us from a PPO to a HDHP with HSA. We are covered under my wife’s health plan. I asked what documentation I needed to provide and was told that nothing could be done until the new plan took effect – July 1. On July 2 I called the benefits administrator to tell them that the new plan had taken effect and that I wanted to cancel the FSA because we can’t contribute to FSA and HSA at same time. I’m now told that our plan only allows changes to FSA at enrollment periods. What are my options? What kind of penalty am I looking at for having both an FSA and HSA?
Harry Sit says
If you can’t terminate your FSA, you just need to withdraw the HSA money as excess contributions. Any money her employer contributed, now withdrawn, is yours to keep, but taxable, just like her salary. You still come out ahead. Any money she contributed herself becomes taxable, just as if she didn’t contribute in the first place. You are not penalized there. Be sure to work with the HSA provider and follow their special procedure for withdrawing excess contributions.
Kent says
I am enrolled in an HSA and contributing 1/1/18 – 7/31/18 and enrolled in an Limited FSA for same period. I am changing locations within my employer and the HDHP + HSA is no longer eligible, so I have to enroll in the PPO plan as of 8/1/18.
Am I eligible /what ruling enables me to convert my limited FSA to a general or full purpose FSA as of 8/1/18? Or do I have to keep it limited for the remaining of the year?
Harry Sit says
The IRS no longer requires that your FSA be limited to dental and vision. Please check with your employer to see if the employer allows lifting the limitation. The employer can be more restrictive than the IRS.
Caroline says
Harry, when did they change this? This https://www.irs.gov/publications/p969#en_US_2017_publink1000204042 dated March 2018 still says it needs to be limited if you are contributing to both.
Harry Sit says
Caroline – After Kent stops being covered under an HDHP on 8/1/2018, he also isn’t eligible for contributing to an HSA for the remainder of the year. He’s not contributing to both after 8/1/2018.
Stella says
I have 2 jobs and signed up for insurance on both (long story for another day). Job 1 has an HRA which I used to pay deductibles and medical expenses . Job 2 has an HSA (me and employer contribute) which I have used occasionally when I forgot my HRA card. I fear I messed up with my with my taxes. What can I do?
Tiffani says
My husband had an unexpected job offer & will be changing employers next month, with a start date of 2/15. Due to this change we have a number of moving parts that I’m trying to ensure we get correct.
CURRENT: He has family coverage via an HMO with an FSA that we are funding for $2650* in 2019. Coverage will end on 2/28/19.
*Our FSA was funded fully solely due to orthodontia needs this year. We’re going to move treatment up to start at the beginning of February so we don’t lose the $500+ we’ve already contributed. Since we’re able to utilize the full amount immediately this will essentially be like getting a $2000 bonus.
NEW: Family coverage via a HDHP with HSA plan. New employer adds $2000 to the HSA account for employees. Coverage will begin on 3/1/2019.
My questions are these:
1) Are we able to contribute to the HSA in 2019? From reading previous comments & IRS document I believe that since the FSA (terminated 2/28) and HSA (effective 3/1) don’t overlap, then we will be able to contribute into the HSA for 2019.
2) If we can contribute to the HSA in 2019, are we eligible to contribute the full amount (minus employers contributions) for 2019 OR are we only eligible for 10/12 of the year?
Harry Sit says
1) He is eligible because the FSA and HSA don’t overlap.
2) He is eligible for 10/12th of the year if he continues the family coverage to the end of the year. He can invoke the last month rule to get additional 2/12th but that comes with strings attached. If he changes job or insurance again next year it can bring additional complications.
Mary Beverlin says
Hi! Husband has HDHP through employer. Contributed to HSA ($7900 – he is 56) and LPFSA ($2600). W2 Box 12 says W$10,500. Form 5498-SA is $7900. When attempting to file taxes it says we overpaid $2600 and will pay 6% tax…it also changes our refund by $500. Am I correct that the $2600 should not have been included in box 12? I have looked on IRS website for verification but nothing found that is specific. Thanks!
Harry Sit says
You are correct. Code W is specifically for HSA. Please contact the employer to have the W-2 corrected. See IRS instructions for W-2 (page 29):
https://www.irs.gov/pub/irs-pdf/iw2w3.pdf
Mary Beverlin says
Thank you. We contacted them two weeks ago and again yesterday. Same response…they’ll look into it and call us. They haven’t. I did read on the IRS website they have until the end of February to attemt a solution and then we can call IRS and they will contact employer. This is a large auto manufacturer. Very frustrating. Thank for confirming.
Falah says
in 2018 i had a hsa from jan through July with my previous employer. I started my new employer in August and they offered a fsa account. Based on this can i still contribute to my hsa today through post tax contributions since i haven’t contributed the max allowed. If i understand correctly but please correct:
Max contr allowed: $6900/12*7=$4025
Ytd contribution: $1000
Does this mean i can still contribute $3025 before tax is due to my hsa account even with having an fsa account now?
Harry Sit says
Yes. Be sure to check the box on the contribution form to say it’s for the previous year and be sure to take the tax deduction for this contribution on your tax return.
Falah says
Awesome. Thanks for the quick response. This is so helpful.
JR says
Hi Harry – Similar scenario as post #79… Entire family enrolled in my medical coverage and HSA. Making small contributions every paycheck required to get company match (which posts quarterly). Wife took a new job, signed up for her own insurance and a general FSA with small payroll deductions. Her coverage/FSA begins April 1st but it’s too late to cancel. We can/will cancel at next open enrollment which will close out the FSA completely effective September 1st. Therefore, do I need to take any corrective action given that the combined HSA contributions between myself and my employer will only total around $1,200 for the entirety of 2019 (again, spread evenly throughout the year – mine every paycheck, theirs quarterly)? I understand that for the five months I’m covered by my wife’s FSA I’m not HSA eligible making my total contribution limit 7/12 of the normal max. Given that I’m not exceeding this even though small HSA contributions would be going in during the ‘not eligible’ window, is any corrective action necessary? If so, the wrinkle is that even if I drop my contributions to zero, it’s too late to stop the associated quarterly match from my employer for what I’ve already contributed in 2019. So even if I stop today, they will match what I’ve already contributed to it this quarter and deposit it as of my check of April 5th (4 days into the effective timeframe of my wife’s FSA). So do I need to pull that match money out as excess? It seems unnecessary since I’m far below the annual HSA contribution limit and can put it right back in (in the form of increasing my contribution amount) once the FSA is shut down on Sept 1st… As long as I stay below the 7/12 amount. Thanks for your insights!
Harry Sit says
If the total HSA contributions for the year will be under the recalculated limit, no need to withdraw. It sounds like you still have other dependents covered by the plan after your wife took the new job. If you are down to just yourself in the HSA-eligible plan you calculate your limit as single for September to December.
Jess says
Hi Harry,
For year 2019, I contribute to FSA per my employer from my paycheck. I had underestimated my medical related expenses, thus I’ve used up my FSA contribution already for 2019 in medical reimbursement. I do have HSA from previous years’ contributions. For the remaining of this year, while I’m still in the FSA-eligible plan, would I be able to get reimbursement for this year’s remaining medical expense via HSA if I save the receipts? Want to confirm if I can get HSA reimbursement later for medical costs incurred while I’m on FSA Plan. I assume this won’t be an issue but just to ensure. I may plan to let my HSA grow in index fund, save medical receipts, and claim reimbursement years later. Thanks for your time.
Harry Sit says
You can still use existing HSA money. You just can’t add new money to the HSA.
Falah says
Hoping you can help me or direct me to where I can get the answer on if the specific items below are HSA eligible.
– diaper cream
– diapers
– feminine product like pads and panty liners
– multivitimans
– baby formula specifically eleCare junior toddler formula
Harry Sit says
Google “HSA eligible expenses.” Those items are not eligible.