Can you have an HSA and an FSA at the same time?
Medical bills can be burdensome and it is important to have money saved to cover them. But putting money in the bank to cover health care costs is by no means your only option. There are various tax-advantaged accounts that you can open to save for medical expenses.
One such account is a flexible spending account, or FSA. With an FSA, you're generally required to use up the plan balance each year or else risk forfeiting your money. However, the benefit is that the contributions are tax-free.
You can also, if your health plan qualifies, save for medical expenses in a Health Savings Account or HSA, which also allows for tax-free contributions. And HSAs don't require you to deplete your plan balance each year. In fact, it is recommended that you don't, as you can invest the remaining funds to increase your balance to a larger amount.HSAs are harder to qualify for than FSAs. Anyone can participate with an FSA. For an HSA, your health plan must meet certain requirements
For example, this year, your health plan must have a minimum deductible of $1,500 for self-only coverage and $3,000 for family coverage. Your plan must also have an out-of-pocket maximum of $7,500 for self-only coverage and $15,000 for family coverage.You may be interested in opening an FSA and HSA. You can usually only have one at a time - but there is an exception to this rule.
You may qualify for a limited purpose FSA
Although you generally can't save in an FSA and an HSA at the same time, you may be eligible for what's known as a limited-purpose FSA if you have an HSA. A limited purpose FSA allows you to set aside money to cover dental and vision expenses specifically. And in some cases, you may be able to use a limited-purpose FSA to cover general medical expenses once your deductible is met.
However, this depends on the rules of your plan, as well as whether your employer allows it. If you are interested in having an FSA and an HSA at the same time, you will need to check your options with your benefits department.
Is a limited purpose FSA even worth it?
A limited-purpose FSA could be worthwhile for one big reason: It gives you the opportunity to leave the HSA alone when dental and vision expenses arise. Remember, one of the benefits of saving in an HSA is that you can invest funds you don't use, so your balance can grow to a larger amount over time. And any investment gains you capture in your HSA will also be tax-free.
So let's say you open a limited-purpose FSA that only allows you to spend on dental and vision expenses, and you run into a $500 dental bill. If you have this account so you don't have to withdraw $500 from the HSA, that's another $500 you can have invested.
Now, unless you anticipate having a lot of dental and vision expenses, then a limited purpose FSA won't make sense because that money will have to be used up during the year or otherwise forfeit. But if you have reason to believe you might be spending money on dental and vision expenses, then it might pay to open a limited-purpose FSA and contribute a small amount if you have the option.
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You can also, if your health plan qualifies, save for medical expenses in a Health Savings Account or HSA, which also allows for tax-free contributions. And HSAs don't require you to deplete your plan balance each year. In fact, it is recommended that you don't, as you can invest the remaining funds to increase your balance to a larger amount.HSAs are harder to qualify for than FSAs. Anyone can participate with an FSA. For an HSA, your health plan must meet certain requirements.
For example, this year, your health plan must have a minimum deductible of $1,500 for self-only coverage and $3,000 for family coverage. Your plan must also have an out-of-pocket maximum of $7,500 for self-only coverage and $15,000 for family coverage.You may be interested in opening an FSA and HSA. You can usually only have one at a time - but there is an exception to this rule.
You may qualify for a limited purpose FSA
Although you generally can't save in an FSA and an HSA at the same time, you may be eligible for what's known as a limited-purpose FSA if you have an HSA. A limited purpose FSA allows you to set aside money to cover dental and vision expenses specifically. And in some cases, you may be able to use a limited-purpose FSA to cover general medical expenses once your deductible is met.
However, this depends on the rules of your plan, as well as whether your employer allows it. If you are interested in having an FSA and an HSA at the same time, you will need to check your options with your benefits department.
Is a limited purpose FSA even worth it?
A limited-purpose FSA could be worthwhile for one big reason: It gives you the opportunity to leave the HSA alone when dental and vision expenses arise. Remember, one of the benefits of saving in an HSA is that you can invest funds you don't use, so your balance can grow to a larger amount over time. And any investment gains you capture in your HSA will also be tax-free.
So let's say you open a limited-purpose FSA that only allows you to spend on dental and vision expenses, and you run into a $500 dental bill. If you have this account so you don't have to withdraw $500 from the HSA, that's another $500 you can have invested.
Now, unless you anticipate having a lot of dental and vision expenses, then a limited purpose FSA won't make sense because that money will have to be used up during the year or otherwise forfeit. But if you have reason to believe you might be spending money on dental and vision expenses, then it might pay to open a limited-purpose FSA and contribute a small amount if you have the option.
SPONSORED BY:
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a large bank savings account earning almost no interest. Our pick of the best online savings accounts can earn you 11x the national average savings account rate. Click here to reveal the best picks in your th class
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