Brian Gilmore

I don't think there's any right answer here. It's just a matter of finding an approach that works for the employer and applying it consistently. For the employer contribution piece, that's a company policy matter. Employers have full discretion in designing their HSA contribution approach. The employee contribution is subject to the Section 125 cafeteria plan rules, but there is no clear guidance on how to address final paychecks. In any case, I don't consider any preferred approach to be concern given that the irrevocable election rule doesn't apply to employee HSA contribution elections. So again, best practice is really just to apply whatever approach they prefer in a consistent manner. To you last question--Given that HSA eligibility is tied to the first day of each calendar month, I would recommend not including the HSA contribution piece on a paycheck that falls in the following month post-termination. Including the contribution could result in contributions that exceed the proportional limit.

Employers have a lot of discretion in setting the HSA contribution structure, but I've never seen an approach where an employee would get an ER HSA contribution based on being a dependent on an employee spouse's (or parent's) HDHP. That is a bizarre approach. If they allow employee pre-tax contributions to the HSA the much simpler/easier Section 125 nondiscrimination rules apply. Those rules generally require that employers make the same employer HSA contribution amount available to non-HCPs enrolled in the HDHP plan option as made available to any HCPs. More details: https://www.newfront.com/blog/employer-hsa-contributions So in theory this could work if they applied the ER family and single contribution across all future married employees. But I'm not sure why bother/risk it. The husband is going to be an HCP based on officer status, and the spouse is going to be an HCP based on the attribution rules. So at a minimum it just looks bad. They can always contribute outside of payroll, take the deduction, and avoid this issue.

You'd be hard pressed to find any nondiscrim rule that doesn't apply on a §414 controlled group basis. Of course there are some scenarios that permit disaggregation, etc., but the general rule is always that everything is viewed on a controlled group basis. The specifics of each NDT rule vary considerably, so there's no easy way to address the possible issues here on the actual testing.

Those are the comparability rules, which are essentially irrelevant. They apply only where an employer does not allow employee pre-tax HSA contributions through the cafeteria plan. Since basically every employer making contributions also allows employee pre-tax HSA contributions, the comparability rules were just a big waste of Treasury time/paper. Instead, virtually all employers follow the Section 125 nondiscrimination rules. Those are much easier to satisfy. The main limitation is the uniform election rule described above.

Yes, IRS Publication 969 and the Form 8889 Instructions both state to include earnings in the corrective distribution. Your HSA custodian should be able to calculate the earnings attributable to the excess. More details: https://www.newfront.com/blog/correcting-excess-hsa-contributions Here's the guidance-- IRS Publication 969: https://www.irs.gov/pub/irs-pdf/p969.pdf You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions. You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. IRS Form 8889 Instructions: https://www.irs.gov/pub/irs-pdf/i8889.pdf However, you can withdraw some or all of your excess contributions for 2024 and they will be treated as if they had not been contributed if: You make the withdrawal by the due date, including extensions, of your 2024 tax return (but see the Note under Excess Employer Contributions, later); You do not claim a deduction for the amount of the withdrawn contributions; and You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. ... Include on line 14b any distributions you received in 2024 that qualified as a rollover contribution to another HSA. See Rollovers, earlier. Also include any excess contributions (and the earnings on those excess contributions) included on line 14a that were withdrawn by the due date, including extensions, of your return.

Wow, very generous employer. To move the Section 125 nondiscrimination rules they'll have to a) allow employees to contribute pre-tax, or b) make the employer contribution a cashable flex credit. The former is not going to be an option if they're maxing out the limit with employer contributions. So they'll have to make the employer contribution a cashable flex credit if they want to keep the full employer contribution up to the limit. More details: https://www.newfront.com/blog/employer-hsa-contributions If they do that, I see no issue with the eligibility requirement based on ACA LBMM full-time status. More details: https://www.newfront.com/blog/the-aca-look-back-measurement-method As for different contribution bands based on hourly vs. salaried, I view that as not permitted by the Section 125 NDT rules--the uniform election rule specifically--assuming they're going to be more generous to the salaried class. That would result in higher ER HSA contributions to salaried HCPs who are enrolled in the same HDHP as the hourly non-HCPs. More details: https://www.newfront.com/blog/designing-health-plans-with-different-strategies Here's the relevant cites: Treas. Reg. §54.4980G-5: Q-1. If an employer makes contributions through a section 125 cafeteria plan to the HSA of each employee who is an eligible individual, are the contributions subject to the comparability rules? A-1. (a) In general. No. The comparability rules do not apply to HSA contributions that an employer makes through a section 125 cafeteria plan. However, contributions to an HSA made through a cafeteria plan are subject to the section 125 nondiscrimination rules (eligibility rules, contributions and benefits tests and key employee concentration tests). See section 125(b), (c) and (g) and the regulations thereunder. (b) Contributions made through a section 125 cafeteria plan. Employer contributions to employees’ HSAs are made through a section 125 cafeteria plan and are subject to the section 125 cafeteria plan nondiscrimination rules and not the comparability rules if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (meaning that all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction. Prop. Treas. Reg. §1.125-7(c)(2): (2) Benefit availability and benefit election. A cafeteria plan does not discriminate with respect to contributions and benefits if either qualified benefits and total benefits, or employer contributions allocable to statutory nontaxable benefits and employer contributions allocable to total benefits, do not discriminate in favor of highly compensated participants. A cafeteria plan must satisfy this paragraph (c) with respect to both benefit availability and benefit utilization. Thus, a plan must give each similarly situated participant a uniform opportunity to elect qualified benefits, and the actual election of qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect permitted taxable benefits)…A plan must also give each similarly situated participant a uniform election with respect to employer contributions, and the actual election with respect to employer contributions for qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect to receive employer contributions as permitted taxable benefits). Prop. Treas. Reg. §1.125-7(e)(2): (2) Similarly situated. In determining which participants are similarly situated, reasonable differences in plan benefits may be taken into account (for example, variations in plan benefits offered to employees working in different geographical locations or to employees with family coverage versus employee-only coverage). Slide summary: 2025 Newfront Go All the Way with HSA Guide 2025 Newfront Section 125 Cafeteria Plans Guide

Yes, I agree. I think that's perfectly fine and a normal approach. Plus, as you noted, it's definitely way better to have a calendar plan year dependent care FSA going forward to avoid multiple issues. Normally I would recommend a prorated limit on a short plan year to avoid complications, but if it's a brand new plan I agree that's a non-issue. More details: https://www.newfront.com/blog/dependent-care-fsa-limit-challenges

Haha, thanks guys. Belgarath, you're making a glass half full pitch here. I agree. The glass half empty side is the HCEs lose a portion of the tax-advantaged benefit that they expected. Some of that can be made up for usually with the dependent care tax credit, but it's really about managing expectations. Many employers go overboard and cap HCE contributions from the outset at some arbitrary number in the desperate attempt to try to avoid giving HCEs bad news or to avoid minor payroll tweaks. I'm not a fan of that approach. In my mind you aim for the full $5k and work downward from there (based on the pre-test results) to get every last pre-tax dollar you can for the HCEs. The communications challenge is convincing those HCEs they're better off reducing downward from $5k than they would have otherwise been by capping them from the outset at a lower number than the test results might have required. Here's the good, the bad, and the ugly of strategies I've seen out there in the world to try to address the issue-- https://www.newfront.com/blog/the-dependent-care-fsa-average-benefits-test Strategies to Avoid ABT Failures: The Good, the Bad, and the Ugly Employers clearly become frustrated with failing the ABT year after year, and in many cases they overcompensate with approaches that unnecessarily harm HCEs. The following are a few of those strategies: The Good: Offer an Employer Matching Contribution to Non-HCEs The only approach to reducing the risk of testing failure that is recommended is to incentivize NHCEs to participate in greater numbers and to a greater degree. Although it is uncommon because of the increased employer cost, a few employers have taken the smart approach of offering NHCEs additional employer contributions as a carrot to encourage greater participation. One particularly effective approach is to offer an employer matching contribution to the dependent care FSA for NHCEs that operates in a similar manner as a 401(k) plan matching contribution. For example, the employer might offer a dollar-for-dollar matching contribution for NHCEs of up to $500. This will entice greater participation and higher elections from NHCEs, which will in turn significantly improve the employer’s chances of passing the ABT. The Bad: Limit HCE Contributions to a Reduced Level from the Outset A common approach that is not recommended is for employers to simply cap HCE elections from the beginning at a reduced level. For example, HCEs may elect only up to $3,000 instead of the standard $5,000 limit available to NHCEs. Although this approach does improve the chances of passing the ABT because it will decrease HCE dependent care FSA benefits by design, it does so in a very haphazard manner. In that example, allowing HCEs full elections and pre-testing may have resulted in a required reduction of $5,000 HCE elections to $4,000 to reach a passing 55% level. However, by capping HCE elections at $3,000, the employer would have effectively preemptively precluded HCEs from enjoying an additional $1,000 pre-tax contribution. This approach is therefore not recommended because it will always either a) cause HCEs not to be able to take advantage of the maximum permitted pre-tax election, or b) require only a slightly smaller correction to HCE contributions than would have otherwise been required if they initially could have elected up to the full $5,000 maximum. The Ugly: Permit Only NHCEs to Participate in the Dependent Care FSA This approach has the advantage of guaranteeing the plan will pass the ABT because 100% of the benefits will be for NHCEs. However, needless to say this approach does not go over well with the HCEs who are blocked entirely from dependent care FSA participation. Best Practice Approach Employers should not preemptively cap HCE elections at the outset, but instead run an early pre-test (e.g., summer for a calendar plan year) to determine any reduced contribution limit required to pass the ABT. This approach ensures that HCEs receive the maximum pre-tax benefit that can be made available. Although it is common for employers not to pass the ABT in pre-test results, running the test early will typically catch the issue before HCEs have contributed up to the reduced limit needed to achieve 55%. The administrative burden is relatively minor where the adjustment simply requires a payroll contribution cap for HCEs. Slide summary: 2025 Newfront Section 125 Cafeteria Plans Guide

Hi there, congrats. Your finance will need to use the marriage event to drop the general purpose health FSA to preserve your HSA eligibility going forward after the marriage. There will likely be a run-out period to submit claims incurred prior to dropping the health FSA. The company can provide the details, but it's typically in the neighborhood of 90 days. If she switches to your HDHP, you'll be able to contribute the prorated family limit for the remainder of the year.

Yes, assuming you met all other HSA eligibility requirements. Mere eligibility for the health FSA (without enrollment) doesn't present any HSA eligibility issues. It's only a problem (i.e., disqualifying coverage) when enrolled.

Yes, that's correct. The HSA contribution limits are calculated on a monthly basis. This means you are able to contribute 1/12 of the employee-only limit for the months of the year in employee-only HDHP coverage, and 1/12 of the family limit for the months of the year in family HDHP coverage. The overall annual contribution limit is the sum of those two prorated employee-only and family contribution numbers. The IRS provides a useful chart to complete this calculation in the “Line 3 Limitation Chart and Worksheet” section of the Form 8889 Instructions: https://www.irs.gov/pub/irs-pdf/i8889.pdf

I assume you're referring to the CMS Medicare Part D creditable coverage disclosure. The guidance says to report the total number of Part D eligible individuals covered by the plan as of the first day of the plan year, including COBRA participants. Any severance payment here (even if ostensibly to assist with the COBRA premium, if elected) is irrelevant. What matters is if they are enrolled in the plan, including COBRA. CMS Part D Disclosure Guidance: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/CreditableCoverageDisclosureUserManual05292012.pdf 10. Number of Part D Eligible Individuals expected to be covered under these Plan(s) as of the Beginning Date of the Plan Year. While CMS recognizes that many entities will not be able to provide an exact number of Part D eligible individuals, entities should estimate the number of covered Part D eligible individuals under the Options offered under the type of coverage for which they are providing the Disclosure Notice to CMS. This estimate should be the total number of Medicare eligible individuals, less any Medicare eligible individual(s) being claimed under the RDS program, that are expected to be covered under the entity’s RDS prescription drug plan options (this includes active, disabled, individuals on COBRA and retired individuals). For purposes of this disclosure question, a “Medicare eligible individual being claimed under the RDS program” is any qualified covered retiree for which the entity is expected to collect the retiree drug subsidy. This is a numeric field and must be filled in with a number. Entities should work with their current vendors (Insurance carrier, TPA, PBM, Consultant, etc.) to verify whether the prescription drug plan(s) offered by entity covers any Medicare eligible individuals (including active, retired, disabled individuals and their dependents or any individuals on COBRA) at the start of each plan year. If the entity has a plan participant that will be or becomes eligible for Part D coverage during the plan year, the entity should not include these individuals on their Disclosure to CMS form if they were not effective on the beginning date of the plan year. These individual(s) should be included on their annual Disclosure to CMS form at the beginning date of the next plan year. Entities are required; however, to provide a disclosure of creditable coverage status to the individual prior to when they become Medicare eligible as outlined in the General Creditable Coverage Guidance at http://www.cms.hhs.gov/CreditableCoverage/.

I assume you meant that you have a health FSA (not HSA) in 2025. HSA eligibility is relevant only to the ability to make/receive HSA contributions. It doesn't affect the ability to continue to have an HSA with a remaining balance. It just means your spouse cannot contribute any further in 2025. Furthermore, your spouse can still use that HSA (after losing HSA eligibility) to cover qualifying medical expenses tax-free. Individuals do not have to maintain HSA eligibility to take tax-free distributions for medical expenses.

So they went from a proposed $40k §4980H assessment to having IRS checks in hand totaling over $130k? That's one of the crazier stories I've ever heard. Never heard of that happening in the 226J context. I guess there isn't anything to do but continue to inform the IRS of the error each time and request guidance on how to handle. Maybe next time they'll get $60k...

In theory it can be done, but in reality it generally does not occur for a number of practical reasons: If fully insured, the insurance carrier won't allow it. If self-insured, they likely have stop-loss that won't allow it. ERISA requires the plan be administered pursuant to its written terms. An employer using its ability to interpret plan terms to allow an individual to continue coverage beyond the plan's standard COBRA terms would create a plan precedent that must be applied to other similarly situated individuals. COBRA has inherent adverse selection issues. Even if the employer could get through all those issues (very unlikely), it would simply be quite expensive to expand beyond the required timeframes. These are generally the same reason employers do not allow extensions on election/payment deadlines. More details: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-x Slide summary: 2024 Newfront COBRA for Employers Guide

Always consult your personal tax adviser for specific guidance to your situation. But I'm not seeing an end-of-year deadline here. In any case, there may be custodian deadlines etc., so taking care of it this year might still be prudent.

Check with the HSA custodian how to address that issue. They may be able to treat the distributions as a mistaken distribution, in which case you would be able to return the funds to the HSA to have them re-distributed as a corrective distribution. Here's an overview: https://www.newfront.com/blog/correcting-mistaken-hsa-distributions

Yeah that's a bummer. Happens all the time unfortunately. 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). Here's an overview: https://www.newfront.com/blog/hsa-interaction-health-fsa-2 I agree with your approach to notify your employer not to make any further ER HSA contributions because you are not HSA-eligible. As they noted, you can also revoke your EE HSA contribution election for any reason (you don't need a permitted election change event), so that was the right approach , too. Here's an overview: https://www.newfront.com/blog/hsa-contribution-election-changes-2 For the ineligible (excess) contributions already made, I recommend working with the HSA custodian to take a corrective distribution. That will avoid a 6% excise tax that would otherwise apply for the excess contribution. You'll need to take care of that by the tax filing deadline on 4/15. Here's an overview: https://www.newfront.com/blog/correcting-excess-hsa-contributions Slide summary: 2024 Newfront Go All the Way with HSA Guide

No. The HSA rules define family HDHP coverage as any coverage other than self-only coverage. This means that employees who are HSA-eligible and cover at least one other individual under the HDHP (e.g., employee + spouse, employee + domestic partner, employee + child(ren), employee + family) can contribute up to the family HSA limit. Where an employee is enrolled in individual-only HDHP coverage and HSA-eligible for the entire calendar year, the contribution limit is the statutory limit for individual coverage. Here's the simplest explanation: IRS Publication 969: https://www.irs.gov/pub/irs-pdf/p969.pdf Self-only HDHP coverage is HDHP coverage for only an eligible individual. Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual). Example. You, an eligible individual, and your dependent child are covered under an “employee plus one” HDHP offered by your employer. This is family HDHP coverage. More details: https://www.newfront.com/blog/hsas-and-family-members Slide summary: 2024 Newfront Go All the Way with HSA Guide

First of all, sorry to hear about your medical situation. Also, sorry to have to deal with the medical and health insurance side at the same time. That's always difficult. The good news is that you have an EBSA Benefits Advisor on the case and providing significant assistance. As long as the medical providers continue to provide services (fortunately the DOL was able to assist with that re the surgery), all the claims can be retroactively processed and paid correctly through COBRA if/when this issue gets resolved. The DOL can impose $110/day penalties. Even if there is some aspect of the situation that is somewhat more favorable to the employer's side that isn't mentioned here, at a minimum they failed to promptly provide the Notice of Termination as required. But generally the DOL will try to exhaust all efforts to resolve the issue informally without the need to take it the enforcement level If it doesn't get resolved. Absent the EBSA being able to satisfactorily resolve the issue, it sounds like you have an excellent case that any plaintiff side attorney should be salivating to take. That would allow you to pursue recovery of payment for any claims that should have been paid under the plan, plus "other relief" as the court deems proper. Again, an attorney would likely get creative here given the medical situation, etc.

HSA eligibility is determined as of the first day of each calendar month. You can therefore become HSA-eligible again once you satisfy all of the requirements on the first day of a month by a) no longer being enrolled in any part of Medicare, b) having no other disqualifying coverage, and c) enrollment in an HDHP. If this occurs mid-year, you will have a prorated contribution limit (including prorated catch-up amount) based on the number of months of HSA-eligibility. You can avoid that prorated limit if you take advantage of the last-month rule by maintaining HSA eligibility from December of the year at issue through the entire following year. Here's an IRS Information Letter addressing the issue and referring to the same form you mentioned: https://www.irs.gov/pub/irs-wd/17-0003.pdf The question of whether an employee enrolled in Medicare can withdraw from the program and thereby participate in an employer’s HSA program is not within the jurisdiction of the IRS. This question should be directed to the Social Security Administration at 1-800-772-1213; ask for Form CMS-1763, Request for Termination of Premium Hospital and/or Supplemental Medical Insurance. More details: https://www.newfront.com/blog/how-medicare-affects-hsa-eligibility https://www.newfront.com/blog/the-hsa-proportional-contribution-limit Slide summary: 2024 Newfront Go All the Way with HSA Guide

The Forms 1095-B were solely the carrier's responsibility and only addressing §6055 (MEC) reporting. The §6056 (ER mandate) reporting is the component missed by the employer not providing/filing the Forms 1095-C, assuming the employer is an ALE. So there is no action item for the 1095-B. That was never the client's responsibility, and it appears it was handled properly regardless. For the missed Forms 1095-C, the client will have to decide how to proceed. We're past the timeframe for the standard reduced penalty relief (that ended 8/1). If arguing for reasonable cause relief, filing asap will likely improve the chances of success. More details: https://www.newfront.com/blog/aca-reporting-requirements-in-2025 Slide summary: 2024 Newfront ACA Employer Mandate & ACA Reporting Guide

Hi Bill, yes I agree with your assessment. Lots of interesting issues teed up here. As to when you can make the contributions up to that proportional limit--I interpret the rules to require that you wait until you are HSA-eligible. When you lose HSA eligibility mid-year you can still contribute up to the proportional limit up to the tax filing deadline in the period following the loss of HSA eligibility, but I do not believe you can front-load HSA contributions (even when restricting up to the eventual proportional limit) prior to a period of HSA eligibility. This point does matter because you cannot take tax-free medical distributions for expenses incurred prior to establishment of your HSA. I've copied the relevant cites below for you to consider with your personal tax adviser if you want to press the issue. More details: https://www.newfront.com/blog/hsa-establishment-date Keep in mind that you could still take advantage of the last-month rule to make the full 2025 contribution. That would require you remain HSA-eligible through all of 2026. More details: https://www.newfront.com/blog/the-hsa-proportional-contribution-limit As to the grace period, unfortunately this will block your HSA eligibility for an additional three months (July, August, September) unless you wife spends down the FSA balance to zero prior to the end of the plan year (6/30). So I would definitely make that a priority. Use sites that specialize in FSA expenses to spend it down timely if necessary. More details: https://www.newfront.com/blog/health-fsa-carryover-grace-period-affect-hsa-eligibility-2 Here's the relevant cites re when you can start funding in 2025-- IRS Notice 2004-2: https://www.irs.gov/pub/irs-drop/n-04-2.pdf Q-2. Who is eligible to establish an HSA? A-2. An “eligible individual” can establish an HSA. An “eligible individual” means, with respect to any month, any individual who: (1) is covered under a high-deductible health plan (HDHP) on the first day of such month; (2) is not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain limited types of coverage); (3) is not enrolled in Medicare (generally, has not yet reached age 65); and (4) may not be claimed as a dependent on another person’s tax return. … Q-26. What are the “qualified medical expenses” that are eligible for tax-free distributions? A-26. The term “qualified medical expenses” are expenses paid by the account beneficiary, his or her spouse or dependents for medical care as defined in section 213(d) (including nonprescription drugs as described in Rev. Rul. 2003-102, 2003-38 I.R.B. 559), but only to the extent the expenses are not covered by insurance or otherwise. The qualified medical expenses must be incurred only after the HSA has been established. For purposes of determining the itemized deduction for medical expenses, medical expenses paid or reimbursed by distributions from an HSA are not treated as expenses paid for medical care under section 213. IRS Notice 2008-59: https://www.irs.gov/pub/irs-drop/n-08-59.pdf Q-38. When is an HSA established? A-38. An HSA is an exempt trust established through a written governing instrument under state law. Section 223(d)(1). State trust law determines when an HSA is established. Most state trust laws require that for a trust to exist, an asset must be held in trust; thus, most state trust laws require that a trust must be funded to be established. Whether the account beneficiary’s signature is required to establish the trust also depends on state law. Slide summary: 2024 Newfront Go All the Way with HSA Guide

1. Will this make me ineligible for HSA even if we don't plan on using any FSA distributions for my expenses? We will strictly make sure FSA distributions are only used by my wife. This will make both of you HSA-ineligible. It doesn't matter who actually uses the arrangement, what matters is you have the coverage in place. HSA eligibility is blocked by any disqualifying coverage, which generally includes any pre-deductible health coverage for non-preventive medical expenses. The health FSA is disqualifying for both your spouse and you because it enables both of you to incur reimbursable expenses pre-deductible. 2. Does my wife being in a PPO plan also makes me ineligible for HSA assuming she denies FSA? HSA eligibility is determined on an individual by individual basis. If your wife enrolls in a PPO, that will block her ability to make and receive HSA contributions in an HSA in her name. It will have no effect on your HSA eligibility--assuming she does not enroll you as a dependent in the PPO. I find it weird that both husband and wife can have their own HSA (if on HDHP) and have their own FSA (if both on PPO) but one HSA and one FSA is not allowed. That's not correct. The PPO is disqualifying coverage that blocks HSA eligibility for anyone enrolled in the PPO. What makes the health FSA different from the PPO is that the health FSA covers both spouses if just one is enrolled. More details if interested-- IRS Notice 2005-86: https://www.irs.gov/pub/irs-drop/n-05-86.pdf Interaction Between HSAs and Health FSAs Section 223(a) allows a deduction for contributions to an HSA for an “eligible individual” for any month during the taxable year. An “eligible individual” is defined in § 223(c)(1)(A) and means, in general, with respect to any month, any individual who is covered under an HDHP on the first day of such month and is not, while covered under an HDHP, “covered under any health plan which is not a high-deductible health plan, and which provides coverage for any benefit which is covered under the high-deductible health plan.” In addition to coverage under an HDHP, § 223(c)(1)(B) provides that an eligible individual may have disregarded coverage, including “permitted insurance” and “permitted coverage.” Section 223(c)(2)(C) also provides a safe harbor for the absence of a preventive care deductible. See Notice 2004-23, 2004-1 C.B. 725. Therefore, under § 223, an individual who is eligible to contribute to an HSA must be covered by a health plan that is an HDHP, and may also have permitted insurance, permitted coverage and preventive care, but no other coverage. A health FSA that reimburses all qualified § 213(d) medical expenses without other restrictions is a health plan that constitutes other coverage. Consequently, an individual who is covered by a health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA. This result is the same even if the individual is covered by a health FSA sponsored by a spouse’s employer. However, as described in Rev. Rul. 2004-45, 2004-1 C.B. 971, an individual who is otherwise eligible for an HSA may be covered under specific types of health FSAs and remain eligible to contribute to an HSA. One arrangement is a limited-purpose health FSA, which pays or reimburses expenses only for preventive care and “permitted coverage” (e.g., dental care and vision care). Another HSA-compatible arrangement is a post-deductible health FSA, which pays or reimburses preventive care and for other qualified medical expenses only if incurred after the minimum annual deductible for the HDHP under § 223(c)(2)(A) is satisfied. This means that qualified medical expenses incurred before the HDHP deductible is satisfied may not be reimbursed by a post-deductible HDHP even after the HDHP deductible had been satisfied. To summarize, an otherwise HSA eligible individual will remain eligible if covered under a limited-purpose health FSA or a post-deductible FSA, or a combination of both.

For an example, here's one I looked at recently with this issue: PREMIUM RATE CHANGES FOR MEDICAL PLANS The premium rates in effect on the Policy Effective Date are shown in the policy’s Premium Rate Schedule. [redacted] has the right to change the premium rates as of any of these dates: The Policy Effective Date, or if later, any subsequent Policy Anniversary Date, if: It is discovered that the group is offering employees alternate health care benefits with an insurance company(ies) and/or health care service plan(s) other than [redacted] without the written concurrence of [redacted]; … Any date that [redacted] determines that the group is modifying, or has modified, plan benefits, by changing an insured person’s financial liability under the plan, by it paying a part of the insured person’s deductibles, coinsurance, co-payments, out-of-pocket maximums, or for non-participating providers, the balance-billed charges, if any. The group may not partially pay, reimburse, or otherwise reduce, the insured person’s financial responsibility under the plan without first notifying [redacted] in writing in at least 30-days advance of implementing such a practice and [redacted] agreeing, in writing, to that practice. In the absence of [redacted] agreeing to such a practice, the group must communicate the plan benefits to the insured employees without modification.