Guest Kristine

Can you have both an FSA and HSA?

8 posts in this topic

Here is the situation:

An employer has an FSA and wants to add an HSA. Some of the employees who have exaused their FSA, but are still contributing into it, want to sign up for the HSA... Is this possible??!!

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Yes, you can have both, but it is not an easy thing to do. Your question stated that many people have exhausted their fsa and now want an HSA concerns me. It apears that people believe that the two are similar, when in fact they are not.

Because it is so complicated, and the penalties can be significant, I suggest you use someone who has the expertise to fully understand what you are trying to do and also have the ability to implement it properly.

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Kristine: Yes, it is possible for an employer to have both an FSA and an HSA. BUT: I don't think that any employee that currently has an FSA (exhausted or not) will be able to elect an HSA option until their participation in the FSA ends. When they signed the FSA election form it was for the full plan year. When that ends, then they can elect the FSA or the HSA for the new plan year.

(all of this assumes of course that a HDHP will be available, to go along with the HSA option; additionally, there are what are called limited purpose and "after the deductible" FSAs which can be legally offered with HSAs, but I very much doubt that's what you're talking about here.)

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An employee can elect a high deductible health care plan (one that is eligible for an HSA) regardless of whether they participate in an FSA or not. If they do participate in an FSA, they may not be able to open or contribute to an HSA depending on the type of FSA and what they use it for. If it is a limited purpose FSA, i.e., only reimburses OTC medication and supplies, and unreimbursed dental and vision expenses, then they can open or contribute to the HSA. They may not use an FSA to reimburse for medical expenses unless they have already met the deductible under the HDHP. Hope this helps.

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For those employees with spouses: "You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met." Note the "can pay". It is not will pay or may pay.

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Kristine: Yes, it is possible for an employer to have both an FSA and an HSA. BUT: I don't think that any employee that currently has an FSA (exhausted or not) will be able to elect an HSA option until their participation in the FSA ends. When they signed the FSA election form it was for the full plan year. When that ends, then they can elect the FSA or the HSA for the new plan year.

(all of this assumes of course that a HDHP will be available, to go along with the HSA option; additionally, there are what are called limited purpose and "after the deductible" FSAs which can be legally offered with HSAs, but I very much doubt that's what you're talking about here.)

What is an HDHP? Sorry, I am a student trying to learn more about this topic for a research paper. Thanks!

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The end result is that these employees most likely cannot now contribute to an HSA. Primarily because they would not have an HDHP since it is very unlikely that the current medical coverage would qualify as an HDHP. Also they would not be able to stop contributing to the FSA ( no qualifying event) and contributing to both would serve no purpose.

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