have HSA medical plan, company opened FSA. didn't notice for 2 years. any recourse to get funds back?

hi - had an HSA account with ~$3k. employer changed providers. looks like employer opened FSA not HSA. i never rec'd cards, didn't realize this. i've been paying med exp and saving receipts. saw today that the 'old' HSA ~$3k balance is not reflected in the FSA account. i have an HSA medical plan, is this a rectifiable error that will restore my prior HSA $3k, plus last years payroll deposits?  or, is all the money gone because they started an FSA in error instead of an HSA? thanks.  also, if employer HR is not helpful, do i have any recourse?

Unfortunately, at least some of the money is gone.  The health FSA rules require forfeiture of unused amounts at the end of the end of the plan year (plus any associated grace period/run-out period).

The only saving grace may be the carryover.  If your plan has a carryover feature (many plans do, but not all), you should have carried over the max.  That carryover limit was $640 from '24 to '25.  Any excess would have been forfeited.

• More details: https://www.newfront.com/blog/fsa-experience-gains-from-forfeitures

There's nothing prohibiting having a health FSA while covered by an HDHP.  It simply blocks your HSA eligibility.  So it's not necessarily an employer error.  You would have to look at what you elected.  If you actually elected the HSA (seems unlikely, but possible), that would be quite a situation because it would be too late to make HSA contributions for prior years.

Slide summary:

2025 Newfront Section 125 Cafeteria Plans Guide

ok, thank you. looks like no wiggle room on the FSA due to being started in error. thank you. now i guess i have to go fight with his work over converting the FSA to an HSA so he doesn't lose this years money also.  

if they won't or can't accommodate having an HSA, are there any penalties or what have you if he transfers from the FSA to the HSA? 

or any other suggestions on how to handle this has an HSA from before and an FSA now, and really want the money in an HSA instead

There's no way to address the issue for prior years at this point.  HSA contributions for a prior year cannot be made after 4/15.  There's also no way to transfer an FSA to an HSA.  So unfortunately it's a cautionary tale to keep on top of your paystub and benefits. 

Best you could hope for would be for the employer to provide an employer contribution to the HSA for 2025 as a corrective measure.  However, the employer should not even consider that unless they truly made an error implementing your election (i.e., you actually elected HSA).

If this were truly an Employer error when transferring TPAs, there's no responsibility on the part of the employer to make her whole?

There's no clear way to handle, but yes they should do something in that situation where it is clear employer error.  I'm skeptical that occurred here, though.  These are usually employee election mistakes.

Here's some discussion if it was a clear employer error--

https://www.newfront.com/blog/correcting-missed-hsa-contributions

Missed Employer HSA Contribution: Prior Year (Correction After 4/15)

In some cases, employers will not discover the missed employer contribution until after the tax filing deadline (generally April 15) has already passed. This unfortunately means that the employer can no longer make the missed contribution attributable to the prior year (i.e., the year in which the employer missed the contribution).

Employers will generally attempt to correct the missed contribution in this situation by simply making the HSA contribution attributable to the current year (i.e., the year of the corrective contribution). However, there are a couple of potential pitfalls to be aware of with this approach:

1. If the employee is no longer HSA-eligible in the current year (e.g., the employee is no longer enrolled in the HDHP), the employer cannot make an HSA contribution for the current year.
2. If the employee remains HSA-eligible in the current year, the extra contribution could cause the employee to either exceed the proportional contribution limit (e.g., if the employee loses HSA eligibility mid-year), or the statutory maximum contribution limit (e.g., if the employee had already set elections to reach the maximum amount for the current year and does not adjust them accordingly).

Nonetheless, making the HSA contribution attributable to the current year is still typically the best option under the circumstances to address the missed contribution if the employee is still HSA-eligible and confirms an understanding of the applicable limits. If the employee had previously made an HSA contribution election designed to meet the statutory maximum, the employee will need to reduce that election going forward by the amount of the employer’s corrective contribution.

Otherwise, the other reasonable alternative would be to provide standard taxable income in the amount of the missed contribution. If still HSA-eligible, the affected employee could choose to use that additional compensation to elect a higher pre-tax HSA contribution election in the current year, which would ultimately create essentially the equivalent result as the current year employer HSA contribution correction approach.

Potential Complications:

• Employees who are no longer HSA-eligible in the current year (e.g., they are no longer enrolled in the HDHP) cannot receive a current year HSA contribution. In this case, employers should consider making the missed payment to the employee as standard taxable cash compensation.
• If the employee has terminated from employment, the HSA account with the employer’s designated custodian may no longer be open. Furthermore, it may be difficult for the employer to ascertain the former employee’s HSA-eligibility status in the current year. Accordingly, in this case employers should consider making the missed payment to the former employee as standard taxable cash compensation.
• Employees may argue that they should receive some form of lost earnings compensation for the duration of the failure. Although there are no specific rules addressing this (unlike, for example, the EPCRS lost earnings rules that apply in the 401(k) context), employers might consider accommodating such a request. If the additional amount is included in the HSA contribution, that will count toward the current year annual contribution limit, potentially requiring the employee to further reduce their HSA contribution election.
• If the employer reported the amount withheld as an HSA contribution on the prior year Form W-2 (Box 12, Code W), the employer would generally need to issue a corrected Form W-2c reflecting the actual amount of HSA contributions for the prior year.