Benefits Buzz

Health FSA Rollovers and HSA Eligibility

Posted on April 4th, 2014

The Internal Revenue Service (IRS) recently issued long awaited guidance that details how someone can be Health Savings Account (HSA)-eligible the following plan year if they have access to funds that rollover from a Healthcare Flexible Spending Account (FSA) from the previous plan year. 

As of last year, FSA participants can rollover up to $500 from their FSA if the employer plan allows. However, enrollment in a general purpose FSA, which includes funds from rollover balances, will make a person ineligible for a HSA

The IRS has now issued formal rules about the FSA rollover that give options so HSA-eligibility remains intact:

  1. Employee participants can elect to rollover funds to a limited scope FSA.
  2. Employers can design their plans so that funds automatically rollover to a limited scope FSA the following plan year.
  3. Employees can decline or waive the rollover balance.

This information mostly confirms informal comments that IRS officials had previously sated, but we now have guidance that makes this official.

View the official guidance >>

As a benefits administrator of both these types of tax-advantaged plans, Flexible Benefit Service LLC (Flex) wants to share this information along to those who may find it helpful for their business practices, as well. 

Join our mailing list or click here to stay updated on the latest healthcare reform and employee benefit news with Flex.

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.

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