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HSAs & Limited Purpose FSA/Post Deductible FSA


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According to Rev. Rul. 2004-45 (May 11, 2004), eligible individuals (who must be covered by a high-deductible health plan) may continue to contribute to an HSA while also covered by one or more of the following types of employer-provided plans that reimburse employee medical expenses:

-limited purpose FSAs and HRAs that restrict reimbursements to certain permitted benefits such as vision, dental or preventive care benefits;

-suspended HRAs where the employee has elected to forgo health reimbursements for the coverage period;

-post-deductible FSAs or HRAs that only provide reimbursements after the minimum annual deductible has been satisfied; or

-retirement HRAs that only provide reimbursements after an employee retires.

1) Based on the above, is it possible to use both a General Use Post-Deductible FSA and a Limited Purpose FSA in the same organization? IRS has stated that a mix of these plans can be used. The Post-Deductible FSA threshold would be the statutory minimums. Until the minimum is met, the Limited Purpose FSA would be able to reimburse all expenses not covered by the HDHP (ie not going toward the HDHP deductible).

2) If I understood all this correctly, the threshold of this Post-Deductible plan is met by reaching the statutory minimum with FSA eligible expenses?

3) In the Limited Purpose FSA, can prescription drugs be scheduled eligible in the plan docs while maintaining eligibility of the HSA holder to contribute to their HSA?

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  • 2 weeks later...

I don't see why you could not provide for a post-deductible provision and a limited use provision in the same document, let alone the same company. I would think the employee could submit vision, dental, preventive care and other permitted coverage on a first dollar basis, and then submit all other section 213 expenses, but be subjected to the HSA deductibles before they are paid out of the HSA and FSA.

On the prescription drug part, I thought the IRS guidance said that during the 2005 transition, the HDHP must NOT provide for any prescription drugs, and the second plan provides for prescription drugs (even if below the deductible amount).

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