How Can an Employee Have BOTH an FSA and an HSA?
Both the Flexible Spending Account (FSA) and Health Savings Account (HSA) are health benefit accounts that are popular because they help employers maximize tax savings and help employees pay for their qualified health care costs. But many times, we hear the question…
“How can an employee have BOTH an FSA and an HSA?”
The Flexible Spending Account (FSA) is a health benefit that allows employees to set aside money on a pre-tax basis to pay for health care expenses that are not covered by insurance. FSAs help employees reduce their out-of-pocket health care costs.
The Health Savings Account (HSA) is a triple tax advantage account that allows employees in a high deductible health plan to save and pay on a pre-tax basis for qualified health care expenses. HSAs help employees save for the future to build wealth and to diversify their retirement portfolio.
To answer the question, how can an employee have an FSA and HSA at the same time? Generally speaking, you cannot have a health FSA and HSA at the same time. However, there are 2 exceptions: an employee can have an HSA and a Limited Purpose FSA and the Dependent Care FSA.
The Limited Purpose FSA (LPFSA) is a health benefit that allows employees enrolled in a Health Savings Account (HSA) to set aside money on a pre-tax basis to pay for strictly dental and vision expenses not covered by insurance. LPFSAs help employees pay for their eligible dental and vision expenses, while saving their HSA funds for future health care expenses and/or invest and save for the future.
The Dependent Care FSA or the Dependent Care Assistance Plan (DCAP) is a benefit that allows employees to set aside money on a pre-tax basis to pay for the care of a qualifying dependent. Since these funds are transferred from the employee’s wages on a pre-tax basis, employees can increase their take-home pay.
An employer may not be able to offer their employees BOTH the HSA and health FSA, but there are other FSA options available to maximize tax savings and to help their employees pay for other common out-of-pocket expenses on a pre-tax basis to increase take-home pay. Please Contact BASE® at 888.386.9680 or visit www.BASEonline.com to see what options available.