Why does the employee have to wait until April to receive the health savings account (HSA) Employer Contribution Deposit when the employee has an flexible spending account (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 2020 has a balance of $125. The employee is awaiting the deposit of their 2021 HSA Employer Contribution into their HSA account. The HSA deposit will not be generated until the 2020 FSA Medical spending account balance is zero.
If a general purpose health FSA allows reimbursements for expenses that occured 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 15th day of the third month following the end of a plan year.