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HSA & FSA


Guest sphile

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Can an individual use an FSA to pay for their over the counter meds if they are participating in an FSA? Thanks!

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Guest fritzreb

I think you meant to ask if an individual can use an FSA to pay for over the coutner meds if they are participating in an HSA?

The answer is yes, over the counter drugs can be reimbursed from an FSA even if the FSA particpant is covered by an HSA eligible high deductible health plan and a health savigns account.

Individuals covered under HSA eligible HDHPs can participate in a "limited use FSA". The FSA can only provide coverage for health expenses not associated with the health insurance plan deductible. Expenses eligible for reimbursement from a "limited use FSA" include over the counter drugs, dental expenses, vision expenses, medical mileage reimbursement, etc.

If the individual elects to drop the HSA HDHP he would be eligible to participate in an FSA without limitations. This is true even if he has a balance in his HSA. He can either save his HSA funds for future use or withdraw his HSA funds for eligible medical expenses without penalty (even at the same time he is reimbursed from an FSA, but not for the same expenses) or withdraw his HSA funds with penalty.

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  • 3 weeks later...
Guest grafals

See Rev. Rul. 2004-45.

A participant in an HSA cannot make deductible contributions to the HSA if they are also participating in an FSA unless the FSA is a limited FSA.

A limited FSA must either only provide for reimbursement of benefits not covered by the HSA (like dental or vision), OR restrict reimbursements under the FSA to only reimburse amounts AFTER the HDHP deductible is met.

Note that Rev. Rul. 2004-45 makes clear that if you are participating in an unrestricted FSA, you are in fact NOT ELIGIBLE to contribute to an HSA. That is differenent than saying you can have an unrestricted FSA and optionally choose not request reimbursements until you meet your HDHP deductible or for only those things not covered by the HSA. If the FSA isn't limited by its terms, then you can't have the HSA (or at least you can't deduct the contributions).

You also can't split the plan year. If you participate in an FSA and want to participate in an HSA that year, you must waive your right to benefits under the FSA for the coverage period under the FSA (i.e. lose it). And, you may not alter your salary election for the FSA (unless you have a family status change under HIPAA).

Put simply, you can't have an HSA if you HAVE an FSA, unless the FSA was designed to meet the requirements of Rev. Rul. 2004-45.

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I agree with Grafals. If you look at the actual law, it appears that you can have other coverage (such as an FSA) as long as it covers expenses not covered by the HDHP. However, the IRS stated that for drugs, that's not the case. In other words, you could have a HDHP that doesn't cover drugs, yet the IRS position is that after the transition period, having outside drug coverage blows eligiblity for an HSA. Makes no sense to me based on the statute - but I don't know who wants to fight the IRS on this one. Thus, if you have an FSA that covers nonprescription drugs, it's still drug coverage and blows eligiblity for the HSA unless the FSA only pays after the HD has been met (or is limited to dental, vision, etc. which in this case it isn't limited).

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Guest fritzreb

Can an individual use an FSA to pay for their over the counter meds if they are participating in an FSA? Thanks!

An individual participating in an HSA (contributing to the HSA) and participating in a limited use FSA can have over the counter drugs reimbursed from the FSA provided:

1. The high deductible health plan associated w/ the HSA does not cover over the counter medicines (most plans do not, but based on previous posts, evidently some health plans do pay for nyquil, tylenol, etc. after the deductible is met). Provided the HDHP does not provide any benefits for over the counter meds, those expenses are eligible under the limited use FSA.

2. The FSA plan established by the employer specifically limits the use of the FSA for expenses not associated with the HDHP. The limited use FSA plan should list expenses eligible for reimbursement from the FSA plan (such as over the counter meds, dental, vision, medical mileage, etc.).

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  • 2 years later...
Guest dancedjeric

My fiancee and I have decided it was best to go under one insurance plan since her plan will allow to cover me since we live together, even though we are not married yet. (Our wedding is in October) The plan we are going under is a HDHP and she will be contributing the deductible basically into an HSA. Her open enrollment time is now though, effective July 1. My question is this, up to this point, I've been insured through another provider through my employer. The plan I currently have is a standard plan with an FSA. From what we have read, we can not have my FSA if she is going to have her HSA when we go under the HDHP plan together. I'm not sure if this is true, how the contributions work regarding the FSA committment, and when I cancel my insurance through my employer which it sounds like I can if I show I am covered elsewhere, how does the FSA cancel? Do I still have to contribute the rest of the committment or does my contributions stop and I owe up to that point? What if I still have funds available in the FSA, can they be used for any amount of time after the July? This is all very confusing. Any assistance would be greatly appreciated!

Eric ;)

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Guest taxesquire

Just want to make sure I understand - your fiancee's plan runs from 7/1-6/30 and your plan runs on the calendar year? You participate in your plan with individual coverage and have an FSA, and your fiancee plans to elect spousal coverage in her HDHP?

I think you might be better off enrolling in her plan after your marriage. You'll have 30 days to elect in. Otherwise, I think you'll wind up with dual coverage through year-end since you haven't incurred an event that would allow you to drop coverage. I actually don't think you can get around it. As long as you remain eligible for coverage through your employer, you won't be entitled to enter her plan except for open enrollment or another HIPAA event (like marriage). I think your cheapest alternative is to elect in 30 days after your marriage and hope that coverage is effective as of the 1st day of the following month, at which time you'll have dual coverage.

Next, look at your FSA document. If you would be allowed to use the FSA for your fiancee's expenses, and you are funding the FSA, then she will not be eligible to fund the HSA. Hopefully, it is restricted to spousal or dependent expenses. If so, then she can max out on her HSA contributions between July and October, then she'll be ineligible to fund again until January, assuming you don't elect into the FSA again.

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