HDHP/HSA and FSA

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I am signing up for HSA/HDHP through my employer this year. Wife will be on PPO plan through her employer and will cover our 2 y/o son. Wondering if we can also contribute to a FSA for her? I know that I can't do fsa for myself, but can't seem to find any info on whether my hsa participation limits wife & son from participating in fsa.

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You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met.

http://hsaed.com/who_can_have_an_hsa_

If you are eligible for coverage under your spouse's FSA (regardless of whether you actually use it or not), you can't contribute to a HSA.

Thanks for your responses, sounds like I can't have FSA at all, would need to use my HSA $ to cover the entire family's out of pocket expenses.  This seems a little unfair as we are not on a family HDHP, you would think my wife & son should be able to have FSA $ as long as I don't use it, but that would be a nightmare to track & I'm sure there would be plenty of loopholes to be exploited if it were allowed.

"You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met."
The way I read it, your wife and child can be on your wife's separate PPO+FSA plan and you will be on your own separate HDHP+HSA plan. Your healthcare costs will be your own, you can't have your wife's FSA pay for your costs because you aren't even part of their plan. 

I think the quoted statement above is to prevent double-dipping where you use one plan's FSA to cover expenses under the HDHP plan. But you aren't doing  that anyway because you aren't covered by  your wife/child's plan. So my understanding is your wife and son can contribute to their own FSA, and you will have to contribute to your own HSA, but you can't mix or share the funds for healthcare expenses. So you won't be using your HSA to pay for wife/child's expenses. They will have to use their FSA for that. And you can't use theirs too.

gaffer said:   "You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met."
The way I read it, your wife and child can be on your wife's separate PPO+FSA plan and you will be on your own separate HDHP+HSA plan. Your healthcare costs will be your own, you can't have your wife's FSA pay for your costs because you aren't even part of their plan. 

I think the quoted statement above is to prevent double-dipping where you use one plan's FSA to cover expenses under the HDHP plan. But you aren't doing  that anyway because you aren't covered by  your wife/child's plan. So my understanding is your wife and son can contribute to their own FSA, and you will have to contribute to your own HSA, but you can't mix or share the funds for healthcare expenses. So you won't be using your HSA to pay for wife/child's expenses. They will have to use their FSA for that. And you can't use theirs too.

  I was hoping that would be the case, but if you emphasize the word "can" in the sentence you quoted above, I interpret it as not being an option.  The fact that her FSA "CAN" pay for my medical expenses seems to limit the availability of FSA.  It's not that big of a deal, I don't expect to spend anywhere near the max HSA contribution, I just thought if we could contribute to a FSA for wife & son's known medical expenses we wouldn't have to withdraw anything from my HSA to cover those expenses.

Yeah, that word "can" just muddies the waters. All this time, I thought the FSA can only be used by account owner or dependents on that account owner's medical plan.

This IRS Ruling 2005-25 gives some clarification on families with mixed HDHP and non HDHP coverage. But no mention of FSA.

Rewdog and seawolf21 had it right re: not having an HSA and FSA even if the medical plans (are) kept separate on two different employers. Not unless the FSA specifically states that coverage is for the planholder only and excludes family (and they don't).

I am in the same boat as raringvt now, where my employer has brought back the HSA option, but spouse's plan is non-HDHP + FSA. I also feel that it is unfair to not be able to have both if you are keeping reimbursements strictly separate within each plan.

I'm having some second thoughts about switching to the FSA.  The HDHP my employer offers is $37/mo cheaper than the PPO plan offered.  HSA has $5k deductible (ouch) vs $1k for PPO.  Employer contributes $250/yr to HSA and another $250 after annual wellness visit, so $500/yr.

$37 * 12 = $444 + $500 = $944 (premium savings + employer contribution)--advantage HSA.  I get a check-up each year (covered 100% under HDHP) and get a prescription maybe 2x/yr, probably $100 max without insurance.  I guess it's a simple matter of trade-off between premium paid vs likelihood of having to pay the full deductible.  I'm 35, relatively healthy--borderline high BP & carry a few extra pounds.  Family history of heart disease & diabetes, but I'm nowhere near as heavy as the family members who have had these issues with the exception of one uncle who suffered congestive heart failure who was a MMA fighter and in awesome shape (there may have been drugs involved).

Any thoughts on whether it's worth it to go with HSA/HDHP vs PPO?  I don't max my 401(k), so additional tax advantaged vehicles not really a concern at this point.  I would contribute some of my own $ to the HSA and would possibly max it out the first  year (in case I decide not to stick with HSA in future years).

Its kinda hard to decide these things, since 'stuff happens' in life all the time. It looks like in your case, you are better off with an HSA but who really knows? You might get run over by a jealous neighbor on day one of your HSA plan (there goes the deductible), or go 5 years straight relatively healthy (value in HSA shoots up).
One factor that would sway towards HSA is if you intend to treat it as a long term, tax-free investment vehicle. If you will just contribute enough to pay a prescription or two then it is less valuable, especially if your HSA custodian charges lots of fees. In my company, most employees declined to invest the money and just kept the funds in the bank where it was eaten away by fees (HDHP was discontinued, so no one could add more funds to go into the fee-free tier. Its being brought back now with a different custodian)
Does your state offer tax favorable treatment for HSA? Some don't (I'm looking at you California).
The IRS has also stated that now you could carryover up to $500.00 in the FSA, instead of the typical use it or lose rule
I have around a week to think my situation over, but I am leaning towards family HDHP for me and non HDHP for spouse. 

raringvt said:   Any thoughts on whether it's worth it to go with HSA/HDHP vs PPO?  I don't max my 401(k), so additional tax advantaged vehicles not really a concern at this point.  I would contribute some of my own $ to the HSA and would possibly max it out the first  year (in case I decide not to stick with HSA in future years).
 

It's insurance, and just like any other insurance decision, it comes down to your personal risk aversion.

In your situation, it looks like you're taking on $4,000 more risk (deductible) in exchange for $1,000 in money now.  If you look at co-pays, co-insurance, and out-of-pocket maximums, the risk profile shifts a little, but which way depends on your specific plan.

So, the first question you need to ask yourself is, if you have to pay the whole deductible one year, will you be able to come up with the funds to do so?  In other words, can you afford to take on the risk?  The second question is, what is the likelihood of hitting the deductible?  Will it happen every two years, every four years, or maybe only every ten years?  Or, to put it another way, is the risk of hitting the deductible each year 10%, 25%, 50%, or somewhere in between?

If you can afford the risk, and if your saving from accepting that risk is less than the expected cost of taking on the risk, then it makes sense to go with the HDHP with HSA.

Personally, I'm a big fan of being involved in the cost and decisions associated with my medical care, and of using insurance to protect from catastrophic risk, so I'll stick with a HDHP.

 

What about a limited vision / dental FSA (though unlikely under spouse's PPO plan)?

Not available through my employer & even if it was I pay $5 dental copay for my 6 month cleaning/checkups & no vision issues, so no value to me there.  I believe I am going to go wtih the HDHP/HSA and if any expenses arise during the year for my family I will just pay for it out of the HSA.  Same bottom-line tax effect as the HSA.  Worst case scenario I have a high expense event & have to swallow the $5k deductible...actuarially speaking, I think the odds are far lower than the benefits of being able to save on premium & set aside (and carry over year-to-year) tax deferred $.

I really appreciate all of your answers.

My cousin just showed me an offer letter from a new small IT startup he's going to work for. They offer the following:

1) Regular health insurance, they pay 80%
2) HDHP Health Insurance, HSA Compatible, they pay 80% of premium (premium is obviously cheaper)
3) FSA

The paperwork is confusing because the implication is:

1) You can opt for the HSA compatible plan, and open an HSA, they won't fund any of the HSA, but you can have pre-tax deductions taken out to fund an HSA.

2) You can also have an FSA at the same time.

It's my understanding you can't have both. In fact, it's my understanding, as mentioned earlier in this thread, that even if you're offered an FSA, but decline it, you can't have an HSA. My guess is that this is a small IT startup that doesn't know they aren't allowed to do this.

I can speak from personal experience that in the past, while partially employed by a company that offered an FSA (during a calendar year) and partially 1099ed under an HDHP, I contributed to an HSA in the same calendar year that I had an FSA, because the FSA eligibility didn't overlap the HSA contribution period. I wasn't 100% sure if that was legit, but it seemed reasonable based on my reading of IRS paperwork, and I wasn't audited. That obviously doesn't mean I won't ever get audited for it.

What's the worse that can happen if my cousin signs up for an HSA and FSA by the same company that offers it? The IRS finds out within 7 years and makes him pay back FICA and Federal taxes? Or if they don't realize it within 7 years, he's A-O-Kay?

You can have an HSA along with a limited FSA that may cover vision and dental expenses.

Rather than start a new thread..... Let's say the wife has PPO and the husband has a HSA/HDHP which was previously used for the whole family therefore the HSA max was put in. If the wife forgoes the FSA, can the husband put in the family max ($6450) to the HSA and use it for the wife's expenses and deductibles?

It sounds to me like if yo have a combination of individual plans you are limited to the individual HSA total of $3250 while eliminating the FSA unless the FSA specifically excludes the spouse thus getting screwed in pretax contributions.

supersnoop00 said:   
If you can afford the risk, and if your saving from accepting that risk is less than the expected cost of taking on the risk, then it makes sense to go with the HDHP with HSA.
 

  The expected cost of the risk is exceedingly hard to calculate though, because it's impossible to tell how likely you are as an individual to get injured/sick in a way that costs x dollars.  Insurance companies can use aggregate data to calculate this for large numbers of people, but it is basically an impossible problem for an individual to precisely narrow down their expected costs.



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