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Answered: Is it Legal for People to Use FSAs and HSAs Together?

Answered: Is it Legal for People to Use FSAs and HSAs Together?

With open enrollment likely around the corner for many countless organizations—and ongoing onboarding operations throughout the year—HR administrators need to stay on top of essential benefits topics. For healthcare, one of the most common questions that may come up is whether or not users can own both a health savings account (HSA) and a flexible spending accounts (FSA). 

Find out what users need to know about using HSAs and FSAs together.

 

What's the Difference Between an HSA and an FSA?

A health savings account (HSA) is a personal bank account with significant tax advantages that can be used by an individual to pay for medical expenses, typically on high-deductible health insurance plans.

Meanwhile, flexible spending accounts (FSA) allow employees to set aside pre-taxed funds for healthcare or dependent care expenses. Keep in mind that HSAs and FSAs aren’t mutually exclusive—employees can utilize both of these benefits. 

While there are restrictions on contributions for both types of accounts, there are three key differences between the two:

  1. HSA funds roll over year to year, while FSAs tend to expire at the end of the calendar year (or at the end of the plan year), though there may be a carryover or grace period, depending on the plan
  2. Employers and employees can contribute to HSAs and FSAs, but there are limits to what an employer can contribute to an FSA based on what an employee contributes 
  3. Unlike HSAs, you do not have to be a member of a high deductible health plan to contribute to an FSA

 

Can You Use HSA and FSA Together?

Yes, people can use an HSA and an FSA together, though there are some exceptions. FSAstore.com points out that because a flexible savings account is considered "other health coverage" per IRS Publication 969, a "run-of-the-mill" FSA likely won't be compatible with an HSA. 

On the other hand, the same resource published by FSAstore.com indicates that employees can pair an HSA with a limited-purpose FSA or a post-deductible health FSA. The former FSA is mainly reserved for qualifying dental and vision expenses while the latter is reserved to pay for health expenses once an HDHP deductible has been met.  

 

HSA and FSA Benefits: Simplified

For HSA account holders, a little bit of understanding goes a long way. Key benefits for health savings accounts include:

  • Triple-tax savings on deposited funds
  • Account funds are automatically rolled over each year
  • Money can be used indefinitely, so long as the purchase is a qualified medical expense
  • People can invest their HSA funds to maximize long-term benefits

On the other hand, individuals with FSAs benefit from the following:

  • No eligibility requirements
  • Reduced out-of-pocket costs for qualified expenses
  • Significant tax savings
  • Linked to a debit card for easy use
  • Immediate access to funds

 

Why Do HSAs and FSAs Matter?

By offering varied, flexible benefits to your employees during your company’s open enrollment period, you’re doing more than just showcasing the organization’s generosity. Strong benefits packages matter to workers.

Not only do they help recruit new employees, but benefits can improve your retainment efforts as well. Job-hopping has become a more common trend in recent years, but if you’re able to provide ongoing value for your team, these concerns can be mitigated. 

Put another way, with proper education on the positives of both HSAs and FSAs—and a potent HRIS that helps you maintain and administer these benefits—you can make your team stronger in the short- and long-term.

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