I want an HSA, but I have an FSA

[Merrie]

Every time I see the topic of HSAs come up on the forums I kind of sigh. My work only offers an FSA and if you do some health tests they throw a couple hundred bucks in an HRA for you. I definitely have an HDHP but my employer definitely does not fund or even offer an HSA.

So I always thought I was stuck. But I just read a little more about it and it looks like one can open up an HSA on one's own, it doesn't have to be through an employer... but one can't have an HRA or FSA.

But, what if I have access to the FSA and HRA but deliberately don't use them? Can I then open an HSA? I did find a thing saying you can deactivate your HRA and thereby qualify for an HSA. This won't be an issue if I use the HRA funds this year (not a problem) and don't do the steps to fund it next year. But what about an FSA? If I can use an FSA but opt not to, can I use an HSA?

Bonus question, if in a future year I switch health plans to something that's not an HDHP, I assume I wouldn't be able to contribute to an HSA that year, but I can still keep what I already have in the HSA, right?

[ambimammular]

I also have an FSA, and am very interested in the answers to your questions.

[kpd905]

Bonus question, if in a future year I switch health plans to something that's not an HDHP, I assume I wouldn't be able to contribute to an HSA that year, but I can still keep what I already have in the HSA, right?

Yes, you can keep everything in the HSA.  And you can also use the money in the HSA to pay for any of your expenses even in a year when you dont' have a HDHP.

[Merrie]

I spent a bunch of time navigating the IRS phone tree, but apparently whatever options you select, they don't offer tax help in August (wish they'd just say that up front). So I'm going to have to go in to their office and ask. I have several questions including this one. I will let you guys know what I find out. Of course, if anyone already knows the answer, I'm interested. I seem to keep having these tax questions that are too esoteric for either the IRS website or these forums.

[Dulcimina]

I have a limited expenses FSA and an HSA, both through my employer.  The LEX FSA covers only dental and vision.

[Merrie]

Yeah, I did see that stuff about a limited expense FSA being okay. My employer offers a day care one which I assume would qualify. But the regular FSA is not limited.

[I'm a red panda]

It is my understanding that as long as you are not contributing to (in any given year) the FSA, you can have the HSA.

I have access to an FSA but have to decline it because my husband has an HSA.  If I used the FSA, it would make him ineligible for his HSA.


(This only applies to medical ones; limited FSAs for dental/vision or the dependent care FSAs are okay to use with an HSA. But if they CAN be used for medical, even if you don't- that's where the problem comes in.)

[gergg]

There are some FSAs which are compatible with HSAs as mentioned above.  I have one through my job that I put known expenses into (e.g. my yearly eye exam and contacts purchase).

[jorjor]

Every time I see the topic of HSAs come up on the forums I kind of sigh. My work only offers an FSA and if you do some health tests they throw a couple hundred bucks in an HRA for you. I definitely have an HDHP but my employer definitely does not fund or even offer an HSA.

Just to make sure, do you "definitely have an HDHP" because the deductible is high, or have you made sure by reading the requirements? Having a high deductible is not enough to make a plan an HSA-eligible HDHP, and many people gloss over that part. Some plans with high deductibles are not HSA-eligble. Make sure that all services other than some preventive coverage accumulate toward the deductible, and that your OOP Maximum isn't too high (the maximum OOP Max for an HSA-eligible plan is actually lower than that required to be an ACA compliant plan).

[jorjor]

The reason I ask is because of examples like the following: I have an HSA-eligible plan with my company. When benefits were announced, the plan was announced with a $2,500 individual deductible, and $5,000 family deductible with an embedded deductible, meaning that once a single person on the family plan incurs $2,500 in expenses, the deductible would be met and the plan would start paying In contrast, a non-embedded or "aggregate" deductible would require that individual to meet the family deductible of $5,000. However, the minimum family deductible for an HSA plan in 2015 is $2,600 and HSA regulations state that anyone on a family plan must meet the minimum family deductible before insurer cost sharing begins.

The $100 difference could have crushed the HSA-eligibility of the plan for any family policies. I work as an actuary at a consulting firm with some very smart health insurance minds, but that little detail slipped by whoever was in charge of constructing our own benefits, as well as slipped by the insurer who was administering the coverage. Someone in my office caught it and told them, and they announced sometime during or after open enrollment that the individual deductible would now be $2,600 which would allow the embedded deductible in family policies while maintaining HSA eligibility.

I guess what I'm saying is that it's good to check on these things.

[Merrie]

I take your point, jorjor, and I am going to look into it in more detail. I also have the option to switch plans before next year, and there are a lot of options--we have at least three each under bronze, bronze plus, and silver that are listed as "high deductible" and it seems likely that at least one of them qualifies. I looked on my employer's website and the current plan says it does NOT qualify, but I don't know if it says that because it really doesn't or because they don't offer an HSA (tricky). So I am definitely going to pursue it further.

[Merrie]

Looking into this more, it looks like since our prescription benefit does not have a deductible, even though everything else does, that renders us ineligible. Fudge! I'm not licked yet though. There are several different plans, maybe one of them is an option. I'm also going to reprice the Obamacare plans this year and see if any of them offer us a better deal than what we're getting through my employer.

[jorjor]

I take your point, jorjor, and I am going to look into it in more detail. I also have the option to switch plans before next year, and there are a lot of options--we have at least three each under bronze, bronze plus, and silver that are listed as "high deductible" and it seems likely that at least one of them qualifies. I looked on my employer's website and the current plan says it does NOT qualify, but I don't know if it says that because it really doesn't or because they don't offer an HSA (tricky). So I am definitely going to pursue it further.

Shoot. At the surface, "high deductible health plan" seems pretty straight forward. Unfortunately, many employers/insurers advertise something under the name "high deductible health plan" that has a high deductible but isn't an "HSA eligible high deductible health plan" for the reason you described. People are used to having some services subject to copayments without deductibles, drugs being one of the most common. Unfortunately, that cuts out HSA eligibilty.

[Merrie]

My husband says, cynically, that they want to force us to use an FSA instead of an HSA so they can pocket the leftover money.

To me, the model where you have to predict the previous year how much money to set aside for your medical expenses is ... weird and backwards. It seems like there should be a better way to compensate for the unexpected.

My slightly less cynical rejoinder to his statement is that I DO, after all, work for a chain drug store, and price breaks on drugs are kind of what you would expect them to provide.

Open enrollment is some time this fall. I'm going to see what else is offered.

[I'm a red panda]

My husband says, cynically, that they want to force us to use an FSA instead of an HSA so they can pocket the leftover money.

This can work out the other way for companies too.
With a medical (not dependent care, which can only be reimbursed after it is contributed) FSA, you can take the reimbursement before you make the payroll contribution.  I once had a very expensive January and ended up submitting reimbursements for my entire year's allotment in one month.  I got laid off in May.  I never had to put the other money into the account; I asked HR, and she said specifically that is a risk employers take on when they offer FSAs.  What was even funnier is when I got rehired in August they asked me if I'd like to contribute to an FSA. "No, I don't think so, not this year" :)