HSA Deductibility for "flex dollars"

[Allen]

Our work has an HSA plan that has employees cover $200.36 per pay period.

They also provide 'flex' dollars at $238.26 per pay period.  Those flex dollars can offset 1:1 healthcare expenses. In the HSA plan, excess flows directly into the HSA at 1:1.  If there are any flex dollars remaining (which would be employees on other plans) you get that money as pay in your paycheck at 50 cents on the dollar.

For money that flows from 'flex' to HSA does that money count as an employer contribution (that I can't write off) or does that count as a portion of my contribution that I can write off? (and by write off, I mean reduce my adjusted gross income)

[MDM]

You might want to be more concerned about whether the FSA makes you ineligible for the HSA (if I interpreted 'flex' correctly).  E.g., see http://www.rockfordinsurance.net/HSA_FSA.aspx: " If you have both a Health Savings Account (HSA) and a Flexible Spending Account (FSA), then the FSA must be a limited FSA."

[MoonShadow]

Our work has an HSA plan that has employees cover $200.36 per pay period.

They also provide 'flex' dollars at $238.26 per pay period.  Those flex dollars can offset 1:1 healthcare expenses. In the HSA plan, excess flows directly into the HSA at 1:1.  If there are any flex dollars remaining (which would be employees on other plans) you get that money as pay in your paycheck at 50 cents on the dollar.

For money that flows from 'flex' to HSA does that money count as an employer contribution (that I can't write off) or does that count as a portion of my contribution that I can write off? (and by write off, I mean reduce my adjusted gross income)

Neither.  If you have a flex spending plan paired with an HSA, then it's a limited flex plan, only valid for dental and vision expenses.  If this is the case, then both the HSA contributions and any Flex spending contributions that you could claim on your taxes; are already deducted from your gross income before income (or even FICA) taxes are calculated.  You have nothing more you can claim, whether or not your employer is contributing to the flex plan or not.

[mr_orange]

You might want to be more concerned about whether the FSA makes you ineligible for the HSA (if I interpreted 'flex' correctly).  E.g., see http://www.rockfordinsurance.net/HSA_FSA.aspx: " If you have both a Health Savings Account (HSA) and a Flexible Spending Account (FSA), then the FSA must be a limited FSA."

Posting to follow.

If anyone grazes over the link MDM posted in this thread you shouldn't.  There is some great information in there about consequences of not using the limited FSA in the current tax year.  Before I read this I thought the FSA was like the HSA and it could be used as a retirement account without tax consequences at age 65.  Nope!

[Penny Lane]

That's right, M Orange, you must use all the FSA money in the calendar year it accrues.  Now that I am retired from my "real" job and consult parttime, I pay my own high deductible health insurance plan ( gulp-- age matters) and contribute to the HSA.  I have massive tIRA $; if you do or any appreciated stock, you can do a one time only payment of your HSA from those accounts and not pay tax on it.  You must follow very specific rules, but I did it last year.  Some HSA companies don't even seem to know about this, or know all the rules when you call them, so read the IRS rule first before.  You don't, for instance, have until April 15 of the year following to make the contribution as you do otherwise.

[mr_orange]

For my W2 employer I did some research on this today.  I called WageWorks and sent this email to my boss for my team's benefit:

For everyone’s benefit I called WageWorks by following the prompts at this number: <Redacted> Benefits Center <Redacted> option 1, option 1.  Here is what they told me:

1.   You can contribute up to $2,550 or some such to the FSA.  I may have remembered this total incorrectly, but it is close
2.   You can “roll over” up to $500 to the next year in your FSA.  So this means you only have to get the amount correct that you’ll use within $500, which seems a lot more reasonable
3.   The $500 constraint is by plan and not by year.  So you can’t do $500/year and have it function like a retirement plan unless you care about $500 in total at age 65, which is silly

So people would just need to be able to get within $500 of their real medical spending number to avoid forfeiting money with a roughly $2500 upper constraint. 

Examples:

-Spending is estimated as $2000 for the year and you spend $1500.  You can then roll this $500 to the next year
-Spending is estimated at $1k for the year and you spend $200.  You can roll $500 to the next year and you’d forfeit $300

Hope this helps others.

[Allen]

There is some confusion over the term 'flex dollars', I don't mean a FSA.  We do have an FSA but I'm not eligible for it because I have an HSA.  Our "Flex dollars" are $192 that every employee gets that can offset medical, dental and vision employee portion of expenses.  You get bonus 'flex dollars' for being healthy on the employee annual wellness plan which if you are in the highest health category gives you an extra $60.  So if there is anything left over in the flex dollars after paying the employee portion of the medical/dental/vision expenses, it first flows into the HSA if you have one, and then into your paycheck at a 50 cents on the dollar rate.

I'm asking if the flex money that flows into the HSA would be something I could later call a contribution and reduce my adjusted gross income.

[seattlecyclone]

If the employer puts money directly in your HSA on your behalf, it generally won't appear on your W-2 as income, so it's in a sense already deducted. You don't get to double deduct it by then subtracting it from your income when you fill out your taxes.