Health care FSA and spouse HSA

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Rocky77
Posts: 31
Joined: Thu Aug 27, 2020 6:40 pm

Health care FSA and spouse HSA

Post by Rocky77 »

I have asked this question to my HR and the company ( health equity) that handles my health care FSA and have been told I can open a health care FSA but I am not convinced. Here is the situation:
My wife is enrolled in a HDHP ( high deductible high premium) plan for herself and kids through her employer and she has a HSA account with her employer.
I am covered in health insurance through my employer. We have open enrollment now and my company offers health care FSA ( flexible spending account). I read somewhere that one cannot open a health care FSA if spouse has HSA even though I dont use her HSA funds to pay for my health expenses. However, when I called my HR and health equity, both of the CSRs ( customer service reps) very confidently told me that I can open a health care FSA. I tried to read the IRS guidelines for this situation, but their language is very unclear and confusing. Does someone have a clear answer for this ( along with reference please)? Thanks a lot for your help, 🙏
regularguy455
Posts: 487
Joined: Tue Jul 18, 2017 2:08 pm

Re: Health care FSA and spouse HSA

Post by regularguy455 »

I’m pretty sure your only option is using a limited purpose FSA. This is only for dental and vision. You would need to drill down with HR to see if your FSA qualifies. Here’s some more info: https://www.investopedia.com/articles/p ... se-fsa.asp
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Health care FSA and spouse HSA

Post by tashnewbie »

Check out page 5 of the IRS 2020 Pub. 969 (https://www.irs.gov/pub/irs-pdf/p969.pdf), which I've excerpted below:
Other employee health plans. An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses can’t generally make contributions to an HSA. 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.
While this language refers to the employee and not their spouse, a FSA is other health coverage for the HSA-holding spouse, because a general purpose FSA can be used to pay healthcare expenses of the HSA-holding spouse. If you have a general purpose FSA, it makes your spouse ineligible to contribute to a HSA. Either you need to only use a limited-purpose FSA (for dental and vision), if available, or just forego using a FSA (or the HSA).

Also check out this article by TFB: https://thefinancebuff.com/hsa-and-fsa-same-year.html
Kaizen Soze
Posts: 351
Joined: Thu Apr 11, 2019 1:47 pm

Re: Health care FSA and spouse HSA

Post by Kaizen Soze »

As far as I know, if you have an HSA then you cannot contribute to a general purpose FSA. You're still eligible to contribute to a limited purpose FSA (dental/vision) or dependent care FSA, just not a general purpose FSA.

https://www.irs.gov/publications/p969
Other employee health plans. An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses can’t generally make contributions to an HSA. FSAs and HRAs are discussed later.
cas
Posts: 2258
Joined: Wed Apr 26, 2017 8:41 am

Re: Health care FSA and spouse HSA

Post by cas »

(Edit: tashnewbie, Kaisen Soze and I were typing at the same time.)

The problem is that if you have a (general purpose) FSA, your spouse's medical expenses *can* be reimbursed from those funds. So, even if your spouse never actually does get reimbursement from the FSA, she is still considered "covered" by it.

And IRS Publication 969 (on HSAs) -> "Other Employee Health Plans" says (additions mine):
An employee [your wife] covered by an HDHP [her health insurance through her employer] and a health FSA [your FSA through your employer] or an HRA that pays or reimburses qualified medical expenses can’t generally make contributions to an HSA.
User avatar
Nate79
Posts: 9373
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Health care FSA and spouse HSA

Post by Nate79 »

This is really a nuanced very specific issue and I bet your HR isn't so familiar with the details to understand this problem. The answers provided are correct and your HR is wrong/uninformed.
Duzz78
Posts: 158
Joined: Sat May 15, 2021 9:10 pm

Re: Health care FSA and spouse HSA

Post by Duzz78 »

I agree with the others. You can only open a Limited Purpose FSA account. As others have said, only dental and vision is covered. You can have only if your employer offers it. Go through your vision and dental costs from the last year, maybe 2 years back. Choose those you know you will have to see if it is worth opening this separate account.

I can see you would want to have both-to maximize your tax deferred dollars. But you lose some options. There is not much in a LPFSA account that can't be reimburse by your HSA account. Compare the lists. Also you loose some options by splitting your tax deferred dollars. You have the option not to spend your HSA dollars and let them accumulate. If a bad medical year comes along, you have the option of taking the IRS Medical Tax Exemption provided you have not spent those deductions using HSA dollars. And you might need those funds from your LPFSA to help get your over the AGI requirement. Most people do with an employer based insurance. But because your also have a HDHP, your wife's premiums, (i assume your insurance is free of premiums), your deductibles and OOPS may let you qualify more easily, but not always. You also lose out the investing growth by putting your funds into the LPFSA. You can't invest those funds like your HSA funds.
Last edited by Duzz78 on Fri May 21, 2021 8:23 am, edited 1 time in total.
nolesrule
Posts: 2631
Joined: Thu Feb 26, 2015 9:59 am

Re: Health care FSA and spouse HSA

Post by nolesrule »

Just a reminder that OP has not stated an LPFSA is available. Usually those are only offered through an employer that is also offering an HSA. I have yet to see an employer that offers an FSA and LPFSA.

That said, if a LPFSA is available, I'd use it for reimbursement of known dental and vision while not impacting HSA contributions. That's what we do as both are available through my wife's employer. We're in the middle of braces this year and next year, so the LPFSA has been an extra tax-saving bonus.
AnEngineer
Posts: 2414
Joined: Sat Jun 27, 2020 4:05 pm

Re: Health care FSA and spouse HSA

Post by AnEngineer »

I think the direction of statements is getting confused. The FSA rules do not prohibit having an HSA, but HSA contribution rules prohibit having an FSA. Thus, you could have the FSA, but it would make your wife ineligible for HSA contributions. I think this explains your HR's response.
terran
Posts: 3050
Joined: Sat Jan 10, 2015 9:50 pm

Re: Health care FSA and spouse HSA

Post by terran »

AnEngineer wrote: ↑Fri May 21, 2021 7:35 am I think the direction of statements is getting confused. The FSA rules do not prohibit having an HSA, but HSA contribution rules prohibit having an FSA. Thus, you could have the FSA, but it would make your wife ineligible for HSA contributions. I think this explains your HR's response.
Good point. If Rocky77's employer doesn't offer an HSA it probably shouldn't be a surprise that they say opening the FSA is fine. Really this is a question for Rocky's wife's HR who would probably tell her she/they can't contribute to an HSA in any year that her spouse has a balance in an FSA (including carryover from a previous year).
Post Reply