Submitted by miscshsf t3_ygjn2a in personalfinance
My wife and I both work for the same employer. For 2023, she will be a dependent on my Medical. Can I continue to contribute to an HSA and can she open up and contribute to a Healthcare FSA?
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wanttostayhidden t1_iu8tvjc wrote
No. The FSA counts as other coverage making you ineligible to contribute to an HSA.
1hotjava t1_iu8uikr wrote
Generally this is correct but there are some qualified “limited purpose” FSAs or post-tax FSA that you can have. These are not common and your employers plan summaries should spell that out clearly as to how they comply.
Technical_Quiet_5687 t1_iu8u6dy wrote
Only if the FSA is a limited purpose (usually only covering dental/vision). So ask your employer if they offer that. You won’t be able to use it for medical. But there’s no need for you to do an FSA, your better option is to do the family HSA anyways.
AgentMonkey t1_iu9fgi4 wrote
What would be the reason for the FSA in this scenario?
As others have noted, unless it is a limited-purpose FSA, then it would make you both ineligible to contribute to an HSA, thus negating the main benefit of the HDHP.
Unless there is a compelling reason to have a limited-purpose FSA, there's no reason to have one. Anything that you can do with an FSA, you can do with the HSA. The only difference would be that the FSA is fully funded at the start of the year. But, if you already have an HSA balance, it's irrelevant. And, in any case, nearly every medical provider would be happy to setup a payment plan for large expenses if you happen to incur that at the start of the year before the HSA has enough funds.
So yeah...what's your reasoning for wanting an FSA on top of the HSA?
kaprin_02 t1_iuatgpd wrote
Not OP, but I am considering doing a limited purpose FSA in addition to maxing my HSA for the coming year (it’s open enrollment time). I need an eye exam, and need a bit of dental work done, which I could use the FSA for. It will allow me to use pre-tax dollars to pay for that, while still allowing me to take advantage of maxing my HSA. Basically, it just provides me additional pre-tax space to save money. Since I know I will spend those dollars regardless (with no FSA, I would pay out of pocket, and leave my HSA invested), it makes sense to contribute to a pre-tax account for those expenses.
I do agree that an HSA is “better” in general, so if you’re not able to max your HSA and pay expenses out of pocket, there’s no need to do the limited purpose FSA.
AgentMonkey t1_iubbzzt wrote
Yeah, in that case, it makes sense. If you're maxing out the HSA with no intention of touching it, and still have funds to contribute to the limited purpose FSA that you know you will use during the year, then it's worth getting the tax savings.
miscshsf OP t1_iud8kk6 wrote
Let me clarify, I would continue to contribute to and max out my HSA in 2023 as I've always done. Since my wife would be a dependent on my Medical next year (and cannot contribute to her own HSA) and we're bound to have medical expenses, I thought we could use those FSA contributions to pay for expenses. I think u/kaprin_02 and I are trying to do the same thing?!?
AgentMonkey t1_iud9xdx wrote
Yeah, sounds like that makes sense. Keep the HSA for investing, and use the FSA for known expenses. Just be aware that if your wife has a regular FSA, then neither of you can contribute to an HSA. The FSA counts as other coverage and disqualifies both of you from HSA eligibility. On the other hand, a Limited Purpose FSA would be compatible with the HSA, but would only cover Vision and Dental (and, I believe, medical expenses after you've hit your deductible). So, be aware of the limitations there.
With the two of you on a plan together, you'll qualify for the family HSA contribution limit, if you're not already (I don't know if you have any kids covered on the plan currently). So, that may increase your limit.
> Since my wife would be a dependent on my Medical next year (and cannot contribute to her own HSA)
Sure she can. Since she would be covered by an eligible plan, she absolutely can contribute to her own HSA (keeping in mind the FSA note, above). She may not be able to do it through payroll deductions, but she can contribute. It's largely a matter of how you divide your finances, though, since either HSA can be used for expenses either of you incur. The two of you together cannot contribute more than the family limit, but how you divide up those contributions is up to you.
miscshsf OP t1_iueow8u wrote
> The FSA counts as other coverage and disqualifies both of you from HSA eligibility. On the other hand, a Limited Purpose FSA would be compatible with the HSA
How do we know if the FSA is a Limited Purpose FSA?
AgentMonkey t1_iuepsv9 wrote
It should be specified when you sign up for it. Talk with your HR to get the details.
miscshsf OP t1_iuet2wb wrote
Will do, thanks for all your help these past 2 days!
miscshsf OP t1_iud88c5 wrote
Let me clarify, I would continue to contribute to and max out my HSA in 2023 as I've always done. Since my wife would be a dependent on my Medical next year (and cannot contribute to her own HSA) and we're bound to have medical expenses, I thought we could use those FSA contributions to pay for expenses.
Bad_DNA t1_iu9c4eu wrote
FSAs are almost always a losing device. Stick with the HSA - family, with full contributions to a diverse investment every year.