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FSA and HSA In Conflict?

Having an Flexible Savings Account (FSA) can prevent you from making contribution to your Health Savings Account (HSA). While that may seem odd, the rules for making a contribution to an HSA is that you are covered under a qualified high-deductible health plan (HDHP) and you are not covered by any other plan that is not a HDHP. An FSA is treated as a health plan, and it is not high-deductible.

This restriction only applies to general-purpose FSAs. This is an FSA that reimburses all qualified medical expenses. A "limited-purpose" FSA does not cause this conflict. "Limited-purpose" FSAs often only cover expenses for vision and/or dental. So a "limited-purpose" FSA is not incompatible with making HSA contributions.

This restriction is not limited to making contributions to both accounts. Having a carry-over balance in your FSA from the prior year is sufficient to disqualify you from making contributions to an HSA in the current year. So careful planning is required.

Note that the restriction is for making contributions to an HSA - not using existing funds in an HSA to cover current medical expenses. So moving from an HSA in one year to an FSA in the following year is just fine.

If you have questions about this, please contact us.