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Funding an HSA when spouse has FSA

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  • Funding an HSA when spouse has FSA

    I'm looking for some advice, after I think I've messed up my HSA. I have an HDHP through my employer, spouse has PPO through their employer. I funded an HSA this year, and they have an FSA - now I think it looks like we shouldn't have done that and we can't have both within our household even though our insurances are separate. It appears the IRS considers the FSA to be additional insurance for me, as the spouse, so I wasn't eligible to fund an HSA.

    So next year, I guess no FSA and we'll just fund the HSA - fine. But for this year, how do I fix the problem? There are funds in the HSA that I added, and also funds that my employer put in as employer contribution.


  • #2
    You are correct; this is not allowed. Her FSA can cover your expenses and Your HSA can cover her expenses. IRS says that's double-dipping on tax-advantaged space.

    1) you can work with your employer and HSA vendor to back out the contributions, but could be messy.
    2) you can pay the income taxes on HSA contributions next April.

    Paging spiritrider for extra info.


    • #3
      tylerjw12 is correct. You were not eligible to make or receive any HSA contributions for any months your wife was enrolled in an FSA on the 1st. All employee and employer contributions during that period were excess contributions. You have two choices:
      1. You have until your tax filing deadline (4/15) including extensions (10/15) to remove the excess contributions and earnings. Your current year taxable income will be higher by the excess contribution amount and the earnings will be taxable in the year returned. How you tax software will deadline with this will depend on the circumstances.
      2. If you don't remove the excess contributions and earnings, the excess contributions* will be subject to a 6% excise tax until removed or reconciled with future HSA contribution space.
      Option 2 is usually only useful if the excess contribution is < $500 and you will have available HSA contribution space the next year.


      • #4
        Thanks. Any idea what happens with the employer contribution? Would that typically go back to them or to me? I don’t remember ever having the discrete option to have them NOT put it in - obviously I could have spoken to HR about it but there wasn’t any info about what happens with their contribution if you’re on the HDHP but not HSA-eligible.


        • #5
          Technically, an employer can themselves remove an excess employer contribution you were never eligible for. However, it is rarely done in your circumstances. You should just wait until you receive your W-2 and remove all excess contributions and earnings.