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Carryover/Rollover of HRA to limited Purpose FSA


BVoss

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I am looking for information that either expressly allows or prohibits the carryover of HRA funds into a limited purpose FSA. (An employer group is adopting a HDHP, along with an HSA and a limited purpose FSA). All the guidance we are uncovering relates to HSA conversions. -- If the HRA is amended to allow for qualified distributions to the newly established limited purpose FSA, is this permissible? Our two member team here is divided and we could use some ideas/pointers. Team "yes" is thinking that because a LPFSA can be funded both by employer and employee contributions, this would be allowed. Team "no" is erring on the side of caution -- until we find something saying it can be done, it cannot be done.

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Not a subject matter expert either but researching and brainstorming and my immediate thought is team "no"...I found this http://www.conexismarketing.com/employees/faq-library/health-reimbursement-arrangements-faqs

" An HRA balance cannot be cashed out, rolled over into another plan, or used for any purpose other than reimbursement of eligible medical expenses" so it sounds like it can only rollover within the HRA plan year to year.

But I don't know this company or have any other backup on it.

And you can't distribute it unless it is for qualified expenses and if you are moving it to an FSA, there aren't any qualified expenses yet.

You might also go to IRS Publication 969 and read their links to notices under the HRS distribution section. I didn't want to delve that deep, but their basic statement is that any distributions must go to paying medical expenses directly (at usage time). Those might give backup to the link above.

So I am leaning toward team "no".

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