This question was submitted by HSA Edge reader Eugenia. Feel free to submit your question today to evan@hsaedge.com.
My husband and I have different employers, and we would like to use an HSA and FSA. This November is an open enrollment for Health Insurance for 2018 and my husband plans to enroll in an HDHP Plan with self only coverage. Since my employer does not offer an HDHP, I will enroll myself and my son a PPO plan. Can we have both FSA medical and HSA? Since my husband’s insurance is self only coverage and my insurance is self and child only coverage. And how can my husband open the Health Savings Account?
You are correct in questioning the same year FSA and HSA contribution. Unfortunately, the IRS has deemed that FSA coverage extends tax benefits to family members as well. This is because an FSA holder can deduct medical expenses that occur for themselves, their spouse, and their dependents. This also applies inversely for HSA’s since they can deduct expenses for their family. This combination of two tax advantaged programs is a no-no as it violates the “No Other Health Coverage” clause of the HSA. (see Qualifying for an HSA).
Do note that there are some types of Flexible Spending Accounts that are compatible with HSA’s, such as Limited Purpose FSA’s and Post Deductible FSA’s. However, these are not as common as your regular FSA’s and they must be explicitly stated as such. Thus, it is up to the family to choose the HSA or FSA to avoid double coverage. You cannot have both. In making a decision, see this article regarding Choosing between an HSA and FSA.
As for opening an HSA, as long as your husband has a qualifying High Deductible Health Plan, he can open an HSA at whatever financial institution he wants. Here is a similar situation involving Opening an HSA when Your Employer does not Offer One. It is pretty easy. I suggest comparing banks that offer the lowest fees and best investment options to make a choice.
When it comes to contributing to the HSA, your husband can directly contribute to his HSA instead of taking salary deductions. This will be done with post-tax dollars, so he just writes a check to the Health Savings Account. Come tax time, when you file Form 8889, it will reduce your taxable income by the contribution amount, making those contributions tax free. However, do note that there is one disadvantage of contributing directly to the HSA, which is additional Social Security / Medicare taxes are paid. If you withhold the contributions from your paycheck, you never pay those extra taxes. If you contribute the post-tax money, you will have paid those taxes, but only get back the federal income tax you paid. It might not matter.
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