Non fishing… HSA / FSA Question – PM

Looking for non-fishing advice. Just realized that between my spouse (on my insurance plan, medical/full FSA through employer) and I (high deductable, entire family on insurance plan, HSA) we each signed up for one for 2022. Lack of communication on our part as you cannot have both an FSA and HSA. I do not see anyway out of the FSA, so it’ll be a loss of $2,500 for us this year. Please PM me if you have a bit of insight or a way out of an FSA, or a way of spending an FSA while having an HSA? I see no solution, but want to make sure.. If it was a limited FSA, then we could at least spend it on vision/dental.

You need to find a health care plan professional

I will preface this by saying I am not a tax professional and it would probably be wise to speak with a CPA.

It may be helpful to look at the situation the other way around (as I believe that is how the IRS rules work). Because your spouse is contributing to an FSA, that means you are NOT eligible to contribute to an HSA this year. Or said another way, your HSA contribution limit in 2022 is $0 due to your spouse’s FSA. Further, any ‘excess’ contributions you make to your HSA would be taxed at 6% penalty per year until they are removed.

Solution 1: Withdraw this year’s HSA contribution (and any investment earnings on that contribution) before the end of the calendar year to avoid the 6% penalty. This results in the HSA contribution being included in your taxable income (as if you had never contributed to HSA in the first place). You may be able to do this all the way up until you file your taxes, but doing so before the end of the calendar year would be safest.

Solution 2: ‘Rollover’ the excess HSA contribution to next year. You will pay the 6% penalty this year and the rollover will count towards your 2023 HSA contributions. So long as you factor this into your 2023 contributions and don’t contribute too much, you will not pay the penalty in any future years.

In both solutions 1 and 2 you should use your FSA this year. I suggest you do some research on ‘excess HSA contributions’ there are a lot of articles out there which might help. Good luck!

I have a fsa and hsa. The fsa I have can only be used for dental and vision since I have a hsa as well. We used the fsa in the past for one of our kids braces and for my wife’s lasik this year. There are different kinds of fsa’s you would need to see which one you signed up for since some are not compatible with a hsa

Stanley wrote:

I have a fsa and hsa. The fsa I have can only be used for dental and vision since I have a hsa as well. We used the fsa in the past for one of our kids braces and for my wife’s lasik this year. There are different kinds of fsa’s you would need to see which one you signed up for since some are not compatible with a hsa

We have a full, not limited. If it was the limited, then we’d be okay on dental and vision.

This doesn’t help your situation at all so I apologize, but rather I’m just venting on the whole benefit coverage process in general. I don’t know about the rest of you but at my employer it’s basically “alright, it’s open enrollment season, go ahead and sign up for stuff you want.”

I am very grateful to have good coverage and decent prices. I’ll never not be thankful for that. But it’s frustrating every time to make such MAJOR life decisions with no assistance. Our company just recently got bought out by another and very little has changed but we had to go in and elect knew coverage plans from the insurance companies our new employer uses. I sat for a very long time comparing critical illness, critical injury, ambulance insurance, hospital stay insurance, etc. After awhile I noticed that some had overlapping coverages so I was able to eliminate a few. I was working a night shift at the time and I told my wife how frustrating it was to make such major life-impacting decisions literally in the middle of the night.

If your fsa is compatible with the hsa as far as being able to cover the same expenses just use the fsa until you hit the max then use the hsa. You can roll over up to $500 a year on the fsa and you never loose on the hsa if you don’t use it. You can also invest with the hsa after you have more than $1000 in the account. I haven’t touched my hsa in 3yrs and I max it out each year. I look at it as another investment. Due to my hsa I am only allowed to do the limited fsa maybe you signed up for the wrong one and can correct it?

Stanley wrote:

If your fsa is compatible with the hsa as far as being able to cover the same expenses just use the fsa until you hit the max then use the hsa. You can roll over up to $500 a year on the fsa and you never loose on the hsa if you don’t use it. You can also invest with the hsa after you have more than $1000 in the account. I haven’t touched my hsa in 3yrs and I max it out each year. I look at it as another investment. Due to my hsa I am only allowed to do the limited fsa maybe you signed up for the wrong one and can correct it?

It’s not compatible since it’s not a limited FSA.

Already do invest our HSA, and I agree that they are very overlooked account and everybody should max out their HSA each year.

We did sign up for the wrong FSA, I don’t believe there is a way to correct it but that’s what I’m looking into.

I am someone that thoroughly researches things, especially when they involve money, I’m pretty upset with myself on how I messed up with this one…

I have no idea what I am talking about, but could this at all be solved if you don’t file your taxes jointly next year? That way neither of you have both an FSA and HSA?

Bogleheads is an extremely knowledgeable financial forum, bet they can provide you guidance. Based on John Bogle, Vanguards founder.

Any ineligible HSA contributions are subject to a 6% excise tax penalty every year that they remain in the account. You would need to contact the HSA provider and process a withdrawal of excess/ineligible contributions.

We got out of our HDHP at one gig and forced back into a standard plan at a new gig with FSA access. I basically turned 100% of our HSA contributions into investments (it had a full year deductible in money market fund) and I forwent the FSA account because they kind of suck unless you know you have some procedure coming.