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My employer offers/manages an FSA (Flexible Spending Account) as part of my health care plan. I put in $800 last year and barely managed to use it up, including expenses in the allowed grace period (through Mar 15). Since I'm pretty new to this, I decided not to put any in this year for fear of losing it (and plan to reevaluate based on expenses this year).

Since I am enrolled in an HDHP, though, I've also been looking at the HSA (Health Savings Account) option, which rolls over year-to-year, but I've read through IRS publication 969 and can't tell if I can even have an HSA. The only part I found that touched on this was:

Other 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.

And it doesn't say a whole lot more about the situation (at least as far as I could see).

Am I considered 'covered' by a health FSA if my employer offers it as an option, or only if I elect to participate? I.e., if I do not elect to participate in an employee-offered FSA, can I open my own HSA (assuming I meet all other qualifications)?

If I do participate in the FSA but contribute under maximum (so say I put in the minimum of $240 or w/e), is there any provision for also contributing to an HSA, or does this clause eliminate that? (I assume the latter in this case, but would like some resources describing this interaction)

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@mhoran_psprep is correct. But the wrinkle is you do participate in the FSA because you have any amount of money in it. So this year, you are not eligible for the HSA without a qualifying life event to change your insurance. – MrChrister Feb 11 '13 at 23:12
@MrChrister, I had money in it for the 2012 plan year, but did not put any in for the 2013 year, so it would seem that I should be eligible this year... – johnny Feb 12 '13 at 14:32
You should check. You are trying to spend the 2012 money, but if nobody is putting money into an FSA for 2013 for you, then you can get that HSA. Confirm with your HR or insurance agent to be sure. – MrChrister Feb 12 '13 at 16:49
up vote 4 down vote accepted

You are not considered covered by an FSA unless you pick it. Many companies offer a high deductible plan and a linked HSA, and another option that has a regular policy with a Flexible Savings account. If the presence of the FSA option disqualified all employees from the HSA, that would be a big problem.

Because the HSA can't be used for dental and vision, you can have a limited use FSA for dental and vision at the same time you have a HSA.

I just went though these options during open season last fall.

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hmm... I think dental and vision are the two things I used our FSA for the most (a new pair of glasses are what finally used up the balance)... Would a limited purpose FSA have to be supplied by my employer (like a regular FSA), or could I sign up for that on my own? Are there limits to [separate/combined?] contributions when you have both? – johnny Feb 12 '13 at 14:35
@johnny - there is a kind of FSA ( for dental and vision that still allows for an HSA. – MrChrister Feb 12 '13 at 16:56
An HSA can be used to pay dental and vision expenses. – Greg Feb 20 '13 at 22:15
@Greg is right - IRS pub 969 points to IRS pub 502 for qualified HSA expenses, and most dental (not teeth whitening) and vision expenses (including contacts & glasses) are included. – johnny Feb 21 '13 at 15:19
My company has clarified the information they gave us. The HSA can be used for dental and vision; but if you do, you could deplete the funds in the HSA before hitting the deductible for medical. Therefore the limited FSA can be used for dental and vision because they are a separate policy from the medical insurance. They corrected their documents at the end of January two months after open season. If you know you will have dental and vision costs (braces, root canal, glasses) you should consider the use of the limited FSA because it will increase the tax deductible amount by up to $2500. – mhoran_psprep Feb 21 '13 at 16:06

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