Paying for procedure with both HSA and FSA

[CoffeeToaster]

I am planning for vision correction surgery in the new year and I'm struggling to find a definitive answer on the IRS site for whether funds from both an HSA and FSA can be used for the procedure.

To maximize the amount I can put into my HSA for the year I was looking to use the FSA fully for the procedure, but only if I can pay the remainder out of the HSA account.

The total procedure cost will be around $4,000 so with the $2,500 from FSA (employer hasn't updated to the new '17 limit) I would like to pay for the remaining $1,500 from my HSA.
If I can use the HSA funds like this, then I would look at "booking" that amount for future re-imbursement to enable those funds to continue to stay invested and grow.

Thanks in advance.

[seattlecyclone]

You can't double-dip between the two accounts for the exact same expense (i.e. paying $4,000 out of your FSA and then "reimbursing" yourself from the HSA as well), but what you describe (paying part of the balance from the HSA and the rest from the FSA) should be perfectly fine.

Also keep in mind that the optimal HSA strategy for people who are able to max out all of their available tax shelters (HSA, IRA, 401(k), etc.) is to pay for medical expenses out of post-tax funds, save the receipts, and "reimburse" yourself years down the road after the HSA has grown and you're in the withdrawal phase.

[Jack]

Vision might be a gray area, but FSAs and HSAs are supposed to be mutually-exclusive. I would expect that either the procedure is "medical" in which case only your HSA can be used to pay for it, or "vision" in which case only your FSA can be used to pay for it, but not both.

[BlueLesPaul]

Access to a general-purpose FSA (an FSA that can be used for medical, dental and vision expenses) does prevent you from making HSA contributions, but you can have a limited-purpose FSA (LFSA) that can only be used for dental and vision expenses and still be eligible to make HSA contributions.  Prop Reg § 1.125-5(m)(3)  The cafeteria plan must have language in it that allows an employee to elected a LFSA and also need to have language in it to allow HSA contributions through the cafeteria plan.

If you have a pre-existing HSA and are no longer making HSA contributions, you can either elect an LFSA or a general purpose FSA and then make HSA contribution(s) at a future date when you are (still) HSA-eligible.

As for your situation, if you already have an HSA established prior to when you incurred the medical expense, you can either elect an LFSA and/or a general purpose FSA to pay the first $2,500.  At a future date when you are (still) HSA eligible, you can then make HSA contribution(s)  and immediately disburse funds from the HSA to reimburse yourself for the remaining $1,500 that you paid for out-of-pocket.  Just make sure that your FSA election also beings before you incur the $4,000 expense.  Also, you will need to maintain all recepts from the FSA and the HSA in case you need to substantiate the expense related to either benefit.

If you have not established an HSA, you will want to elect an LFSA in order to establish the HSA before you incur the expenses so that you can reimburse yourself at a later day.  When an HSA is established is determined by state law, but it is usually when you make your first contribution into the HSA.

[CoffeeToaster]

We have an HSA as part of our HDHP along with a limited purpose FSA vision/dental. So it seems like I'll contribute to both per my plan rules, and pay for the surgery with both FSA and HSA funds, first 2500 from FSA and remainder from HSA.

[Need2Save]

Yes!  You can do this.  You have clarified that you have Limited Purpose FSA which can only be used for dental or vision expenses.  Once you exhaust those funds it's up to you if you want to also dip into your HSA for the remainder of the balance.   As long as you don't count the same portion twice (double dip), you are good. 

We did this in 2014 when my hubby had laser surgery.  It also helped that my employer provided $2,000 in HSA funds that year.  That brought our $4,000 eye surgery bill down to $2,000 out of pocket for us which we funded with the LPFSA!  Beautiful way to save with pretax dollars!    Be sure to save your receipts and how you break down the bill of FSA vs. HSA for auditing purposes should you ever need it.  We were able to pay with two seperate debit cards (one from HSA account and one from FSA account) with our provider by telling how much to charge to each card.  They were very accommodating.  No problems at all!