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HSAs and FSAs

Am I HSA Eligible if I own an FSA?

When considering your HSA eligibility, it's important to understand how having (or being covered by) a Flexible Spending Arrangement (FSA) may affect you. If you have a health or medical FSA, or are covered by your spouse's, you are not eligible to contribute to a Health Savings Account. This is because both a health FSA and an HSA are both tax-advantaged accounts that can be used to cover the same types of expenses, as well as to cover the expenses of your spouse or tax dependents, so the IRS limits coverage to one or the other to prevent double-dipping.

If you are on or covered by a limited-purpose or dependent care Flexible Spending Arrangement, however, you may still be eligible to open and contribute to a Health Savings Account.  It may even be possible to convert your health FSA to a limited-purpose FSA, but you will need to contact your FSA provider to find out if this is an option for you.

When planning to switch from the FSA to the HSA:

The FSA must have a $0 balance on the last day of the month of the plan year in order to be HSA-eligible on the first day of the next month. Otherwise, an FSA with a balance may enter a "grace period" in which FSA coverage extends for up to an additional 2.5 months after the plan year ends. Once the grace period ends, you can fund your HSA starting on the first day of the following month..

For more information about HSAs and FSAs, read this IRS publication: http://www.irs.gov/pub/irs-pdf/p969.pdf

 

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