Eligible for COBRA under FSA or health plan of former employer

[Guest Thomas2006]

If an employee terminates employment with another employer and is eligible for COBRA under the employer's FSA and health plan, is the individual eligible for his new employer's HSA as of the first of the next month? For example, Employee A terminates employment with Employer X on 5/01/08. Employee A was participating in X's FSA and health plan and receives the cobra paperwork on 5/15/08 (and has 60 days to complete it). Is employee A eligible for HSA coverage under her new employer's plan (Employer Y) on 6/1/08? Does eligibility matter (or just participation)? If Employee A indicates she is not going to elect COBRA, is that enough?

[masteff]

Code Section 223© uses the word "covered" and not "eligible for".

(1) Eligible individual

(A) In general

The term “eligible individual” means, with respect to any month, any individual if—

(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and

(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan—

(I) which is not a high deductible health plan, and

(II) which provides coverage for any benefit which is covered under the high deductible health plan.

[Jacmo]

To expand a little: The question is always "can I contribute to an HSA?" Yes, if you have a qualified high deductible health plan andyou do not have other first dollar coverage. Employee A can make contributions to an HSA with the new employer untilshe decides to elect Cobra under the previous employer's plan, at which point, he/she can no longer contribute to the HSA.