Author Topic: Coordination of FSA and HSA benefits between spouses  (Read 6074 times)

charis

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Coordination of FSA and HSA benefits between spouses
« on: September 03, 2015, 12:13:05 PM »
Can anyone help me out here?

We currently have a family HDHP with and HSA.  If, for 2016, my husband gets on a single health plan and opens a health FSA through his work (while myself and the kids keep the current plan through my work), can he use funds from his FSA to pay for some of my medical costs that do not count toward my deductible (LASIK specifically)?

I haven't found anyone/anywhere that can answer this question.

seattlecyclone

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #1 on: September 03, 2015, 12:22:38 PM »
Good question. I don't see this situation called out explicitly on the IRS website, but this blog post says the following:

Quote
Perhaps the employee’s spouse enrolls in a health FSA through the spouse’s employer – the employee with the HDHP cannot contribute to an HSA. A health FSA that reimburses all qualified medical expenses is a health plan that constitutes other coverage, which makes the employee ineligible to contribute to the HSA. The employee is only eligible to contribute to the HSA if the health FSA is a limited purpose health FSA or a post-deductible health FSA.

This page for Vanguard employee benefits says something similar:

Quote
Disqualifying health coverage is health coverage that will pay for your medical expenses (other than preventive care) before the HDHP deductible is met. Examples include:

  • Coverage under a spouse's health reimbursement arrangement (HRA).
  • Coverage under a spouse's general purpose health care flexible spending account (FSA).
            Note: If you are enrolled in the HDHP and your spouse works at Vanguard and has elected a general purpose health care FSA, the FSA will automatically cover you. Therefore, contributions to your HSA will be impermissible during the general purpose health care FSA coverage period. This is typically the case even if your spouse works for another employer; however, it is best to check with his or her benefits department.

Based on that I wouldn't contribute to an HSA if my spouse had a general-purpose FSA. A limited-purpose FSA would probably be okay though.

charis

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #2 on: September 03, 2015, 12:38:00 PM »
Interesting.  Neither of us has access to a limited purpose FSA (I am not 100% about H's, but if he did, it would be a nice surprise). 

I am hung up on the "post deductible" language because in my plan, LASIK doesn't count toward the deductible at all.  If I have no coverage for that procedure and it is an unqualified medical expense,  the FSA shouldn't be deemed "other coverage" for that procedure.   For argument's sake, if I reached my deductible first (using qualified medical expenses) and got LASIK on top of that, then I could use my spouse's FSA for that procedure?  That doesn't make sense - in neither situation do you have "other coverage,"  so the result is the same, effectively.

We'll check with H's employer, but I have my doubts that they will know the answer.  And, in any case, we would be using his FSA funds first and my HSA funds second so I don't know which employer needs to weigh in here (my plan didn't know and told me to contact H's plan).

« Last Edit: September 03, 2015, 12:42:34 PM by jezebel »

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #3 on: September 03, 2015, 12:41:44 PM »
As pointed out- you have an HSA if your spouse contributes to an medical-FSA.

Your employers will likely have no idea.
I worked for the largest employer in my state and the HR department had NEVER had to deal with someone wondering what to do in this exact situation.  I imagine most people just contribute to both not realizing it is against the tax code.

In our situation, I gave up use of the FSA so that my husband could have the HSA.  (The reason it was a hassle is the employer gave us $90 a month into the FSA as a benefit; and to NOT do that required a ton of paperwork... that had to be redone every year.)  But putting him on my insurance would have cost us a lot more than what I gave up in FSA benefits.

seattlecyclone

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #4 on: September 03, 2015, 12:47:14 PM »
I am hung up on the "post deductible" language because in my plan, LASIK doesn't count toward the deductible at all.  If I have no coverage for that procedure and it is an unqualified medical expense,  the FSA shouldn't be deemed "other coverage" for that procedure.   For argument's sake, if I reached my deductible first (using qualified medical expenses) and got LASIK on top of that, then I could use my spouse's FSA for that procedure?  That doesn't make sense - in neither situation do you have "other coverage,"  so the result is the same, effectively.

I think the fact that your husband's FSA could be used for your pre-deductible medical expenses is enough to disqualify you from making HSA contributions; whether or not the FSA actually is used for these expenses is immaterial.

charis

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #5 on: September 03, 2015, 12:51:38 PM »
I think the fact that your husband's FSA could be used for your pre-deductible medical expenses is enough to disqualify you from making HSA contributions; whether or not the FSA actually is used for these expenses is immaterial.

Ok, that makes sense.

In our situation, I gave up use of the FSA so that my husband could have the HSA.  (The reason it was a hassle is the employer gave us $90 a month into the FSA as a benefit; and to NOT do that required a ton of paperwork... that had to be redone every year.)  But putting him on my insurance would have cost us a lot more than what I gave up in FSA benefits.

We already have the HSA (contributed 2014 and 2015).  My understanding is that if my husband opened the FSA for next year, we could use the funds from the FSA (and/or the HSA) but not contribute to the HSA while he has the FSA.

**Added wrinkle** H is currently in a one-year contract that ends in mid-2016.  Which means we would lose the FSA (termination or new employment is a qualifying event) and possibly (?) start contributing to the HSA again at that point.
« Last Edit: September 03, 2015, 12:58:30 PM by jezebel »

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #6 on: September 03, 2015, 12:57:31 PM »

We already have the HSA (contributed 2014 and 2015).  My understanding is that if my husband opened the FSA for next year, we could use the funds from the FSA (and/or the HSA) but not contribute to the HSA while he has the FSA.

Right- you cannot make contributions to an HSA if you have an FSA.  Sorry "have" wasn't the right word; for us, I had an FSA before he had the HSA, so I had to stop using it.  He still has and contribute to the HSA, so I was applying my situation, not yours. I find these issues so confusing. 


(Also- the place my husband is using for Lasik suggested I contribute to an FSA anyway, and in the unlikely case we were audited claim we didn't know... seems like bad advice to me.)

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #7 on: September 03, 2015, 01:00:30 PM »

**Added wrinkle** H is currently in a one-year contract that ends in mid-2016.  Which means we would lose the FSA (termination or new employment is a qualifying event) and possibly (?) start contributing to the HSA again at that point.

I'm not sure if that is a wrinkle or the loop hole you need.  You would not contribute to your HSA while he has this job. When he loses it, you can do so again.

The IRS regulation say you cannot contribute to an HSA when you have an FSA.

charis

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #8 on: September 03, 2015, 01:01:13 PM »
Gotcha - this is majorly confusing.  Did you see my "wrinkle"? 

I think the chances of being audited if you contribute to an HSA and FSA in the same year are probably really good even if you were miraculously able to follow the rules.

Yes, the best case scenario that I see is getting the FSA and using all of the funds before his contract ends, then start contributing to the HSA again (because you can max it out even when you are eligible for only part of the year).  Although an audit would probably be likely.
« Last Edit: September 03, 2015, 01:04:29 PM by jezebel »

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #9 on: September 03, 2015, 01:17:54 PM »
Gotcha - this is majorly confusing.  Did you see my "wrinkle"? 

I think the chances of being audited if you contribute to an HSA and FSA in the same year are probably really good even if you were miraculously able to follow the rules.

Yes, the best case scenario that I see is getting the FSA and using all of the funds before his contract ends, then start contributing to the HSA again (because you can max it out even when you are eligible for only part of the year).  Although an audit would probably be likely.

The money saved might not be worth the hassle of preparing for an audit, even if you did things correctly.

If you do choose to use the FSA- keep in mind that you get to use all the funds allocated to the FSA for the year, whether they were contributed or not.  In a different job, I was laid off in May- due to some early medical expenses, I had exhausted my FSA in March.  I never contributed the May-December parts of the FSA, but I did get to use it :)  (The company rehired me in October and asked me if I wanted to contribute to an FSA for the rest of the year, since the money was already spent, I declined...)

charis

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #10 on: September 03, 2015, 01:29:39 PM »

The money saved might not be worth the hassle of preparing for an audit, even if you did things correctly.

If you do choose to use the FSA- keep in mind that you get to use all the funds allocated to the FSA for the year, whether they were contributed or not.  In a different job, I was laid off in May- due to some early medical expenses, I had exhausted my FSA in March.  I never contributed the May-December parts of the FSA, but I did get to use it :)  (The company rehired me in October and asked me if I wanted to contribute to an FSA for the rest of the year, since the money was already spent, I declined...)

So if we allocate for the max contribution, we can use all of that ($2500) in the beginning of the year, before it is even contributed?  That's wild.

I was audited years ago, but I don't remember it being too bad - just mailed in some paperwork.  Maybe it wasn't an actual audit - I received a letter about a specific issue and I went paperwork in to explain.
« Last Edit: September 03, 2015, 02:19:55 PM by jezebel »

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #11 on: September 03, 2015, 01:42:03 PM »
So if we allocate for the max contribution, we can use all of that ($2500) in the beginning of the year, before it is even contributed?  That's wild.

It might be different because he KNOWS his position won't last the full year; but yep, that's how it works.  But I think most of the time it works out that people lose money because they didn't use enough, so the companies win on the gamble to offer the FSA.


This article cites the IRS code that allows this
http://www.cleverdude.com/content/changing-or-losing-job-dont-forget-to-use-your-fsa-dollars/

charis

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #12 on: September 03, 2015, 02:05:06 PM »
It could be different for him, which is ok since we were planning to contribute that money anyway because we want the tax deduction.

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #13 on: September 03, 2015, 02:15:03 PM »
It could be different for him, which is ok since we were planning to contribute that money anyway because we want the tax deduction.

Free money is better than a deduction :)

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #14 on: November 18, 2015, 02:48:28 PM »
Bummed to read this thread :-( DH's open enrollment already closed, and he already signed up for an FSA. My work just started with the HD-HSA plan, which would be great for us since we will would most likely not have to use any money, barring an unanticipated accident or illness (no chronic conditions, no kids).

Seriously, though, I asked: the HSA administrators, the HR folks at my work, and the tax accountant. Got different answers from each. >:-(
Thanks for all who replied, even if it's not the answer I was hoping for!

smalllife

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Re: Coordination of FSA and HSA benefits between spouses
« Reply #15 on: November 18, 2015, 03:05:51 PM »
I was bummed too - I just had to turn down the FSA at my job (they refuse to do a HDHP) because my husband will be switching jobs this year with a high likelihood of HSA eligibility.  The lack of a limited medical FSA made the already-sketchy gamble on expenses not worth the risk.  It's a shame companies and policies discourage spouses from being on the same plan if both employed then put in language like this which prevents the full use of benefits offered.