HSA Account Funds Deposit and FSA Previous Year Balance

Why does the employee have to wait until April to receive the HSA Employer Contribution Deposit when the employee has an FSA Medical balance in the prior year account? (Refer to IRS-Notice 2007-22 pages 1-2 titled Administrative, Procedural, and Miscellaneous Health Savings Accounts )

 

Example:     FSA Medical Spending Account for 2016 has a balance of $125.00.  The employee is awaiting the deposit of their 2017 HSA Employer Contribution into their HSA account.  The HSA deposit will not be generated until the 2016 FSA Medical spending account balance is zero.

 

Why?

“If a general purpose health FSA allows reimbursements for expenses incurred during a grace period following the end of the plan year, an otherwise eligible individual participating in the health FSA is generally not eligible to make contributions to an HSA until the first day of the first month following the end of the grace period.  The maximum duration of a grace period is until the fifteenth day of the third month following the end of a plan year.”

For the 2016 general purpose FSA  and limited purpose FSA (L-FSA) that Treasury is administering, state employees have until March 15, 2017 to incur expenses and until March 31, 2017 to file with Treasury for reimbursement.  March 15, 2017 is the fifteenth day of the third month following the end of the plan year, and the first day of first month following the end of the grace period is April 1, 2017.  

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