HSA and FSA??

I cannot figure out if my situation is similar those already asked?

I have a High Deducible Health Plan with and HSA which I contribute to as a single.

My wife works for a municipality and has access to a FSA with her Health Plan.

We are on separate plans, separate "companies", my wife has my daughter on her plan.

Can I contribute to my HSA as an individual and my wife contribute to her FSA?

Thanks,

Ed

22 hours ago, EdP said:

Can I contribute to my HSA as an individual and my wife contribute to her FSA?

Not if you can be reimbursed by the FSA, as spouse. This is a classic problem, i.e. the spouse's FSA provides first dollar coverage, inadvertently. Most employers by now have HSA-friendly options, however, in their FSAs, whereby the spouse can elect that the money in the FSA can only be used by family members not covered by the HSA. You need to check if your spouse's plan has that option and if your spouse selected it.

Thank you, that is the best explanation I have come across. 

Ed

Yes, a general purpose health FSA blocks HSA eligibility for both the employee and spouse.

Coverage under a general purpose health FSA for the employee or spouse is disqualifying coverage for both individuals. This is because an employee can reimburse pre-deductible expenses under the health FSA for both the employee and the spouse.

The result is that if either spouse is enrolled in a general purpose health FSA, neither spouse is HSA eligible. They can still be covered by an HDHP, but they cannot make or receive HSA contributions.

Here's an overview: https://www.theabdteam.com/blog/hsa-interaction-health-fsa-2/

Here's the relevant cite:

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.

I have two jobs. I have an FSA medical plan account for one job and need to update my medical for the other. Can I also have an HSA with the other employer? Or can I open another FSA, and if so, what is the limit for both? Is it 3200 for both or 3200 for each plan? 

You cannot have an HSA with Employer #2 because your general purpose health FSA with Employer #1 is disqualifying coverage that prevents you from being HSA-eligible.  That means you cannot make or receive HSA contributions for as long as your general purpose health FSA coverage remains in effect.

You can have another health FSA with Employer #2. The health FSA limit is purely a plan year limit specific to each particular employer's plan.  It's not an individual limit and it has nothing to do with each employee, the calendar year, etc.  So employees could have two or more different (unrelated) employers and elect $3,200 with each in the same calendar year and have no problems.

The only time the health FSA contribution limit would have to be combined is if the employee was moving between entities within the employer.  Where the two employers are unrelated (as is almost always the case), the employee will have a full new limit.   So as long as the two employers are unrelated, you can make a full $3,200 election under each health FSA.

(Note that the $5k dependent care FSA limit is a global calendar year limit aggregated over all employers combined. This is different from the health FSA limit, which is tied to each employer plan.)

More details:

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

IRS Notice 2012-40:
https://www.irs.gov/irb/2012-26_IRB/ar09.html

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.