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Can the Health Savings Account (HSA) and the Flexible Spending Account (FSA) Be Combined?

By James Edholm

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Published: 15Mar2012
Word count: 567
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A large number of people are including the HSA to their benefit offerings; they are doing this either to replace or doing it alongside a conventional HMO product. There is strong belief that trouble is bound to erupt where there is an existing Flexible Spending Account.

HSA & FSA Together A health related Flexible Spending Account cannot coexist with an Health Savings Account - at least, that is the general rule of thumb that we all are made to believe. Okay, let's give it a moment's thought, if you are including an HSA to your conventional HMO+FSA options. Below are a couple of the questions that a lot of people would be asking:

Would I be able to keep Flexible Spending Account for staff that are sticking with their HMO plan or are on their husband's/wife's plan? - Certainly. You do not need to cease the FSA for HMO participants or members of staff that are covered elsewhere.

Would I be able to provide Dependent Care Assistance Plan to staff who are also HSA participants? - Certainly. The only prohibited reimbursements are healthcare reimbursement FSA's.

What about the staff that are moving from HMO to HSA. Will there be any problems with FSA? - Small considerations. Employees in a Flexible Spending Account (or HRA) cannot make nor receive any Health Savings Account contributions, till the HRA/FSA plan year comes to an end.

- Within the FSA "grace period" (the two and a half months right after the end of the FSA plan year during which one can still put forward their claims from the previous year), the worker is only qualified:

a. If his/her Flexible Spending Account balance was zero dollars at the end of the FSA plan year b. When the 75day grace period comes to an end.

- Having a Limited Purpose Health Savings Account, which offers payouts only for vision and dental work, might be a really good solution.

Okay, what if my Flexible Spending Account is a calendar year, but my health plan will start later on in the year? - An employee will not be able to enter the HSA till the FSA plan year comes to an end. - An employee can start contributing to the HAS on the 1st of January of the succeeding calendar year - that is, if there is no grace period.

- If there is a period of grace and the member of staff had some funds left in his/her FSA on the 31st of December, the staff cannot receive or contribute funds until when the grace period comes to an end.

Can a worker who is over 65 years of age contribute to a Health Savings Account? - Yes, providing that he or she is also not receiving social security benefits or Medicare. Wait a minute; I thought that turning 65 will automatically enroll the staff in Medicare Part A. - No, turning 65 years of age makes one qualified to signup for Medicare.

When the employee enrols in and chooses to receive Social Security benefits, only then will his/her enrolment into Medicare becomes automatic - please understand that this is just Part A - one will need to physically enroll for Part B and D Medicare.

Jim Edholm is President of Business Benefits Insurance (BBI), an employee benefits planning firm in Andover, MA. He has worked with employers for more than 25 years and can be contacted at (978) 474-4730, via his website (www.bbibenefits.com), or via e-mail (jedholm@bbibenefits.com

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