Author Topic: HSA & FSAs spouse issues  (Read 13785 times)

CommonCents

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HSA & FSAs spouse issues
« on: December 13, 2013, 11:07:12 AM »
My husband learned yesterday his work will offered a high deductible plan, with a $1500 contribution for 2013 to a HSA.  I'm reading online that you can't do this if you have a spouse with a general FSA.  I think I have an option for a general FSA at my office.  [ETA: And it looks like I can submit claims for him.]  If I choose not to enroll in the FSA, are we ok then to take the high deductible plan with $1500 employer contribution to the HSA?
« Last Edit: December 13, 2013, 11:08:51 AM by CommonCents »

Heart of Tin

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Re: HSA & FSAs spouse issues
« Reply #1 on: December 13, 2013, 11:14:03 AM »
Here's an excerpt from IRS Publication 969 regarding qualifying for HSA contributions:

Quote
Qualifying for an HSA

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.

You have no other health coverage except what is permitted under Other health coverage , later.

You are not enrolled in Medicare.

You cannot be claimed as a dependent on someone else's 2012 tax return.

...

ther employee health plans.   An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA. Health FSAs and HRAs are discussed later.
  However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements.
Limited-purpose health FSA or HRA. These arrangements can pay or reimburse the items listed earlier under Other health coverage, except long-term care. Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible.

Suspended HRA. Before the beginning of an HRA coverage period, you can elect to suspend the HRA. The HRA does not pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. When the suspension period ends, you are no longer eligible to make contributions to an HSA.

Post-deductible health FSA or HRA. These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met.

Retirement HRA. This arrangement pays or reimburses only those medical expenses incurred after retirement. After retirement you are no longer eligible to make contributions to an HSA.

...

Other health coverage.   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan.
   You can have additional insurance that provides benefits only for the following items.
Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property.

A specific disease or illness.

A fixed amount per day (or other period) of hospitalization.

  You can also have coverage (whether provided through insurance or otherwise) for the following items.
Accidents.

Disability.

Dental care.

Vision care.

Long-term care.
-Source: http://www.irs.gov/publications/p969/ar02.html

Does that clear it up?
« Last Edit: December 13, 2013, 11:17:05 AM by Heart of Tin »

CommonCents

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Re: HSA & FSAs spouse issues
« Reply #2 on: December 13, 2013, 11:15:13 AM »
This is one of the links that popped up.  It looks like enrollment is a no go (IF 1) general and 2) applies to all family members), but I wanted confirmation that we're ok if we simply don't enroll in my plan.  They are afraid we'd double-submit receipts.   We just found out yesterday, and today is the last day for me to enroll in my plan (which we had been planning to do) so we are in crunch time on deciding.  Delightful that his employer is so late telling him.

http://www.tangohealth.com/posts/hsa-compliance-webinar-qa/

Can an employee be eligible for the HSA if his spouse has an FSA through her employer? What about a working spouse’s FSA that isn’t known to the primary employer group’s HSA?

That is a complex question. There are Flexible Spending Arrangements (FSA) for various purposes. The most common are for  “general purpose”  and “limited purpose” healthcare, commuter, and childcare. The “limited purpose” FSAs specifically cover vision, dental and preventive care but exclude other healthcare expenses that would disqualify HSA eligibility. So the answer depends on the kind of FSA it is. Only the “general purpose” healthcare FSA would disqualify an individual or their spouse from HSA eligibility, so for purposes of this response let’s assume that the spouse has a general purpose FSA.

The next question to ask is whether or not the spouse’s FSA can be used for the employee’s expenses. The employee only becomes HSA ineligible if the spouse’s general purpose FSA could be used to cover the employee’s expenses.  If the spouse has individual coverage and his FSA only covers himself, the spouse’s general purpose HSA would not make the employee HSA-ineligible.

Employers do not have responsibility under IRS rules for tracking whether an employee’s spouse has an FSA with the spouse’s employer, but it can become an administrative headache and a very negative experience for employer and  employee when this is discovered later (hopefully not through an audit!) and the employee and possibly the employer become responsible for penalties and taxes on ineligible contributions.  Making sure employees know these rules prior to opening the HSA through repeated communication is recommended. Even just asking if the employee’s spouse has an FSA can alert an employer as to which employees they may need to more carefully screen.

More information can be found in IRS Notice 2008-59, Q&A 8.

As long as the FSA is depleted at the end of the calendar year

CommonCents

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Re: HSA & FSAs spouse issues
« Reply #3 on: December 13, 2013, 11:19:54 AM »
That's helpful Tim, although it doesn't fully explain why I've read elsewhere that I cannot have an HSA.  Perhaps it's a nuance under this line: "However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan."

My health plan doesn't cover him, so we're good there.  But if I signed up for the FSA, then that *would* cover him, rendering us potentially ineligible assuming that "non-HDHP coverage" includes FSA and not just health plans.  (I wouldn't normally think submitting receipts is the same as coverage, but perhaps it is.)

msilenus

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Re: HSA & FSAs spouse issues
« Reply #4 on: December 13, 2013, 11:34:46 AM »
Yes, if there's any risk that you might have an FSA able to pay for someone with an HSA at the same time, the first thing you need to do is drain the FSA ASAP.  Kill it, and make sure it stays dead. 

It's pretty easy to wind up with both accidentally.  I have no idea how to unfuck that situation, and would be very curious to learn if anyone here knows.

You can get a limited-use FSA and still have an HSA, but those are very ... well ... limited.

CanuckExpat

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Re: HSA & FSAs spouse issues
« Reply #5 on: December 13, 2013, 02:08:53 PM »
CommonCents- it looks like you're okay as long as you don't sign up for the FSA.

This sounds right and is the route we took. I purposely turned down my FSA due to my wife having an HSA

CommonCents

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Re: HSA & FSAs spouse issues
« Reply #6 on: December 13, 2013, 02:52:17 PM »
Thanks all!