Can I contribute to FSA limit after job switch in 06/2022?

[2win]

Hi, I had HSA with my previous employer and had contributed total ~$2500 in year 2022 until I changed job in 06/2022. Can I sign up FSA with my new employer and contribute to FSA limit (which is ~$2800 for year 2022)?  I wanna ensure it is allowed per IRS rules. Thanks!

[Brian Gilmore]

The short answer is yes, you may make a full new $2,850 health FSA election with the new employer's plan (as long as the two employers are unrelated).  The health FSA plan year salary reduction contribution limit is tied to each employer.  It's not an individual limit.

Full details:

https://www.newfront.com/blog/health-fsa-salary-reduction-contribution-limit-2

New Hires: Unlimited Health FSA Elections Among Multiple Employers

Employees can contribute up to $2,850 (2022) to the health FSA with as many unrelated employers as they are employed by.   So employees with two unrelated employers in the same year may contribute the max to both employer’s plans—even though the annual total may exceed $2,850 (2022).

This is because the health FSA $2,850 (2022) salary reduction contribution limit is merely a plan year maximum.  It’s not an individual maximum.  Employees can therefore make full $2,850 (2022) elections to multiple health FSA plans in the same year.

(Note that this is different from the dependent care FSA, which imposes an individual calendar year maximum.  The dependent care FSA rules limit total calendar year contributions to $5,000 (or $2,500 if married filing separately) over all employers combined.)

...

IRS Notice 2012-40:

https://www.irs.gov/irb/2012-26_IRB

All employers that are treated as a single employer under § 414(b), (c), or (m), relating to controlled groups and affiliated service groups, are treated as a single employer for purposes of the $2,500 limit. If an employee participates in multiple cafeteria plans offering health FSAs maintained by members of a controlled group or affiliated service group, the employee’s total health FSA salary reduction contributions under all of the cafeteria plans are limited to $2,500 (as indexed for inflation). Section 125(g)(4). However, an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 (as indexed for inflation) under each employer’s health FSA.

[2win]

@Brian Gilmore Thanks! I had medical HSA with my previous employer from 01/01/2022 through 06/10/2022. So essentially my concern is that whether I can have a medical FSA after/following a medical HSA (with different employer) in the same calendar year. Can you please confirm that is not a problem(and I don't violate IRS rule)? Thanks!

[Brian Gilmore]

Sorry--I missed that you were in an HSA previously.  Yes, that's not a problem.  You will not be HSA-eligible (i.e., able to make or receive HSA contributions) when enrolled in the general purpose health FSA.  But it sounds like you're not going to be in an HDHP anyway, so not an issue.

You will have a proportional HSA contribution limit of 6/12 (1/2) of the standard individual or family limit.  You can elect up to the full $2,850 limit in the health FSA for the remainder of the plan year without affecting that prior period of HSA eligibility. 

The health FSA is only disqualifying coverage for HSA purposes going forward because you will not be able to incur reimbursable FSA claims prior to enrollment (i.e., your health FSA coverage is prospective).

More details:

• https://www.newfront.com/blog/hsa-interaction-health-fsa-2
• https://www.newfront.com/blog/the-hsa-proportional-contribution-limit
• 2022 Newfront Go All the Way with HSA Guide

[Sweeny919]

My company got bought and my FSA account was immediately shut down and I could only submit claims for events that happened beforehand.  As I enroll in FSA with the new employer, I want to understand if I can get max contribution $3,050 for the year or do I need to factor how much I already spent at my "old" employer.  I am trying to find out if the employers are considered related and thus need to follow different rules.

[Brian Gilmore]

This one depends on how the employer handles the transition.

Here's an overview with details on the options: https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2

Here's a slide summary:

2023 Newfront M&A for H&W Employee Benefits Guide