Beth Martins

Thank you so much, Brian. Based on your response and the chart, it looks like if an employee is enrolling in health coverage due to a QE (regardless of which plan they choose, even an HDHP with HSA) they can only enroll or increase their health FSA. Based on this, it appears we would have to keep that Health FSA active through the balance of the plan year, and then start the HSA with the new year. If I have missed or misspoken, please let me know, and thanks again!

Hello, For midyear changes - what constitutes an eligible QE for an employee to terminate an HCFSA midyear, and then start an HSA? As background: our FSA is a general-purpose FSA, not limited-purpose nor post-deductible. We recall one of Brian Gilmore's responses on this topic (1/5/2023 "Spouse added FSA, what do I do?" more information below). We want to confirm the following scenario would be in compliance: An employee waived health insurance but elected the Health Care FSA. Then, midyear, they lose their other health insurance (say through a spouse) and that is a QE to allow them to enroll in our health coverage midyear. The employee chooses the HDHP which has an HSA. Question: Does the QE that allows the employee to enroll in health insurance midyear, combined with their choice to elect the HDHP with HSA, also allow them to terminate the HCFSA in order for the HSA to be set up prospectively? We understand from the 1/2023 Q&A referenced above that someone can enroll in an HSA midyear if the HCFSA terminates due to an eligible QE. If the scenario above is not eligible, can you please give an example of how an employee could make this switch midyear? As reference from the previously mentioned Q&A, Brian had noted the information below, and we are looking to the bold section: "The spouse's general purpose health FSA is unfortunately disqualifying coverage for both the spouse and you. Spending the health FSA down to zero doesn't change that. The health FSA will remain disqualifying coverage for both you and the spouse for the full plan year. The only exception would be if the spouse revokes the health FSA (permitted election change event needed) or terminates (and doesn't elect COBRA for the health FSA)--in which case you could prospectively start HSA contributions on a prorated limit basis (HSA eligibility is determined as of the first day of each calendar month)." Thank you in advance for your insight!