Good evening, SF. As usual, I've got questions.

My former employer offered a health savings account (HSA), and I put money into it routinely. I put in more than I spent each year, but that was okay because 1) it can be carried over from year to year, 2) it earns a tiny bit of interest, and 3) it was easy to deal with. There's still money in that account, a year after I changed jobs.

My current employer offers FSA (flexible spending account) instead. What I know about FSA is that dollars contributed there are use-it-or-lose it, so at the end of 2023 I ended up buying a bunch of household stuff (antacids, vitamins, etc) that I didn't really need yet just to keep from losing the money.

This evening I got an email from the HSA company -- essentially, "it's not too late to make contribution for 2023 to reduce taxable income." That led me to thinking... my 2023 tax return is already filed, but can I contribute during the year to that HSA, even though I don't still work for the company that offered it?

I'd much rather put my biweekly FSA dollars into my existing HSA [next year], if that's an option. Is that allowed? Do HSA work that way?

the HSA is yours no matter the custodian. You can add money to it (if not employed there that will be after tax $ which you can then deduct (you can amend your filed return to deal with that up to the filing deadline for the prior year). But you can also easily move the HSA to a new custodian which gets you out from any connection with your prior employer. The key on the situation is what fee's etc. you are being charged under both situations. Employers often cover the account fees for employees but not ex employees. See IRS Pub 969 for all the quirks. Its easy to move these (similar to an IRA).

Once you have an HSA you always have your HSA if you so choose to contribute and not spend the money.

I do not believe that you can contribute to an HSA with FSA funds.

There are also some times where if you have an FSA or Medical Reimbursement program while you can have an HSA you and/or your employer cannot contribute to the HSA.
I don’t know the reason/ruling behind that but our open enrollment tells me that with the plan we have.

With my son’s medical issues we are never able to keep any extra. For us the FSA is more helpful as it ends up cheating cheaper and they front load the account instead of doing a January drop and July drop into the HSA.
We usually hit our deductible in March one time we actually made it to May. This year we blew through our deductible and Maximum out of pocket by February.

I also think that you must be enrolled in a High Deductible Health Plan to be able to contribute into a HSA so if you aren't now then you cant add funds. The money that is there is yours until you spend it.

1. HSA is yours forever whether you work for your old or a new employer
2. You can not contribute new funds to your HSA unless you’re covered by a HSA eligible HDHP (high deductible health plan)
3. FSAs operate under the use it or lose it rule. Provided your employer allows it, up to $500 can roll over to the next calendar year.
4. There are full and limited FSA accounts.
5. You can’t have a full FSA if you have an active HSA account to which you are contributing in the same tax year.
6. You can have a limited FSA (ie dental, vision, but not medical) while you have an active HSA account to which you are contributing in the same tax year.
7. Short story is unless your current employer offers a HSA eligible HDHP, and your enrolled in that plan, you can not contribute new funds to your HSA bank account.

Hope this helps!

If you are young and eligible for an HSA, put money into it, invest it (if your plan allows) and don’t spend it. It’s currently tax free going in and taking it out. Save your medical expense receipts and when you retire submit them for tax free money.

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Originally posted by Black92LX:
I do not believe that you can contribute to an HSA with FSA funds.

Totally a fair statement, in response to my own poorly-worded statement. To be more clear, what I meant was that going forward I'd like to put the dollars that I'm currently putting in FSA into the existing HSA instead.

quote:

Originally posted by triggertreat:
I also think that you must be enrolled in a High Deductible Health Plan to be able to contribute into a HSA so if you aren't now then you cant add funds.

Good to know. I need to look up what my health plan actually is.

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The money that is there is yours until you spend it.

That part, I knew.

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Originally posted by h2oys:
(list)

Thank you for that!

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Originally posted by hrcjon:
IRS Pub 969

Thank you. I'll look that up today.

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Originally posted by mrvmax:
If you are young and eligible for an HSA, put money into it, invest it (if your plan allows) and don’t spend it. It’s currently tax free going in and taking it out. Save your medical expense receipts and when you retire submit them for tax free money.

Good advice for the younger people, for sure!

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Originally posted by vthoky:

quote:

Originally posted by Black92LX:
I do not believe that you can contribute to an HSA with FSA funds.

Totally a fair statement, in response to my own poorly-worded statement. To be more clear, what I meant was that going forward I'd like to put the dollars that I'm currently putting in FSA into the existing HSA instead.

Interesting, 5 employers between my wife and I over the years. Us putting personal funds into a FSA was never an option.

The employer contributed a set amount of funds that was available January 1st. We never had an option to add funds.

The HSA on the other hand the employer dropped half in January 1st and the other half July 1st and we were able to contribute with each paycheck.

^^^Unbelievable. I am an insurance broker that helps set up benefit plans for employers (er).

While I am definitely not a tax expert, there is no reason why an ER shouldn't allow an employee (ee) to contribute to FSA or HSA accounts.

In fact, since these contributions are done on a pre-tax versus post-tax basis by the EE, it would reduce the ER's matching FICA contribution.

Maybe the ER's you both have worked for were worried about the FSA "use it or lose it" rule and didn't want any backlash if you lost your own funds.

I originally started with an FSA that was pre-loaded with an employer contribution and I always thought the rush at the end of the year to "use it or lose it" was silly and stupid. We got switched to an HSA a few years back and I prefer that much more and like how the money carries over and no dumb games at year's end.

There's a surprising amount of things you can pay for with the HSA past routine doctor visit bills and prescriptions.

quote:

Originally posted by mrvmax:
If you are young and eligible for an HSA, put money into it, invest it (if your plan allows) and don’t spend it. It’s currently tax free going in and taking it out. Save your medical expense receipts and when you retire submit them for tax free money.

I really don't get this mentality. The whole concept of an HSA is for you to USE IT to pay bills with a HDHP like what I have. It's a health savings and spending account, not a retirement savings account.

^^ Totally agree because if you have a HSA medical plan, and money in your HSA bank account, why not use those pre-tax dollars to pay your claims? It doesn't make sense to let your HSA funds "sit" and use after tax dollars to pay your claims. That is unless you are wealthy and are using the HSA bank account as an alternative to your maxed out 401k/retirement plan.

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Originally posted by h2oys:
^^^Unbelievable. I am an insurance broker that helps set up benefit plans for employers (er).

While I am definitely not a tax expert, there is no reason why an ER shouldn't allow an employee (ee) to contribute to FSA or HSA accounts.

In fact, since these contributions are done on a pre-tax versus post-tax basis by the EE, it would reduce the ER's matching FICA contribution.

Maybe the ER's you both have worked for were worried about the FSA "use it or lose it" rule and didn't want any backlash if you lost your own funds.

If I was guessing, I'd say the plan Black described was actually the third common option, an HRA (Health Reimbursement Account), sometimes referred to in old slang as a MERP (Medical Expense Reimbursement Account). Those are almost always funded 100% by employer. Good news is those plans are required to allow for carryover from year to year. Bad news is you can't take the balance with you when you leave.

Depending on the amounts contributed, this is a huge benefit to have the employer fund the amounts for you rather than it coming out of your wages. Of course if they are only kicking in $500, that's not terribly helpful. I'm fortunate to be working for a firm now that funds $5,000 per year, we have people with cumulative balances from $0 to $22,000.

I've had clients with HRAs that had annual amounts from $2,500 to $20,000. The latter is only in cases where there are zero non-owner employees and they are making adjustments to bonuses for amounts contributed and used. Adjustments which we advised against for a variety of reasons, BTW.....

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Originally posted by Georgeair:

quote:

Originally posted by h2oys:
^^^Unbelievable. I am an insurance broker that helps set up benefit plans for employers (er).

While I am definitely not a tax expert, there is no reason why an ER shouldn't allow an employee (ee) to contribute to FSA or HSA accounts.

In fact, since these contributions are done on a pre-tax versus post-tax basis by the EE, it would reduce the ER's matching FICA contribution.

Maybe the ER's you both have worked for were worried about the FSA "use it or lose it" rule and didn't want any backlash if you lost your own funds.

If I was guessing, I'd say the plan Black described was actually the third common option, an HRA (Health Reimbursement Account), sometimes referred to in old slang as a MERP (Medical Expense Reimbursement Account). Those are almost always funded 100% by employer. Good news is those plans are required to allow for carryover from year to year. Bad news is you can't take the balance with you when you leave.

So this is what we have now. There is no balance or carry over.
I get a bill, I pay it, I provide the EOB to the reimbursement company, they provide me with a check.
I take that check and put in the visor of my truck then head to the bank, it’s a nice day so I roll down the window doing 55, and the check gets sucked out the window, I do a few loops around trying to find the check with no luck, I call the reimbursement company and ask that they cancel the check and issue a replacement, the gentleman on the phone laughs at me hysterically for a few minutes, apologizes for laughing at me, I have a new check 3 days later.

The FSA we had in the past we got a debit card with $2100 balance on January 1 and when that was gone rest was out of pocket until we hit our max out of pocket.
There was no was way for me to add to that card or at least was never told about an avenue to add to the card balance.

Georgair...

Your description of a HRA is quite interesting to me.

We have many clients with Health Reimbursement Accounts (HRAs) and they only reimburse claims which have been incurred.

By way of example an ER purchases a $5000 deductible from UHC, the ER provides a $4000 HRA, and the EE has a claim for $5000.

In that situation the EE gives a copy of the EOB from UHC to the ER (or the TPA that handles the HRA for the ER) and the EE will get reimbursed for $4k of the $5k deductible. Thus, the EE is out of pocket $1k.

There are no rollovers nor requirements to do so because the HRA only reimburses the EE IF they have a claim. It seems an ER who prefunds HRA claims should they happen is defeating the purpose. They'd probably be better off funding a HSA plan instead.

At least that is how they are set up in my neck of the woods and it sounds like for black92 as well. Albeit not sure about the reissue of checks flying out of the convertible top lol.