Married clergy often have a choice of health options with their spouse. One common question is whether you can contribute to both an HSA and an FSA at the same time. The answer is usually no, but like most tax questions, there are a few exceptions.
IRS publication 969 (https://www.irs.gov/pub/irs-pdf/p969.pdf) answers this question for us: “An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can’t make contributions to an HSA.” Having both types of plans violates the “no other health coverage” requirement of the HSA.
The exceptions are:
- Limited-purpose health FSA or HRA. These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible.
- Suspended HRA. Before the beginning of an HRA coverage period, you can elect to suspend the HRA. The HRA doesn’t pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. When the suspension period ends, you are no longer eligible to make contributions to an HSA.
- Post-deductible health FSA or HRA. These arrangements don’t pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements doesn’t have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met.
- Retirement HRA. This arrangement pays or reimburses only those medical expenses incurred after retirement. After retirement, you are no longer eligible to make contributions to an HSA.”
If your plan is one of the special “HSA-compatible” plans out there, it will be specified in the terms on the plan. In general, if you have to choose between the two, the HSA is better for long-term savings. There is no requirement to use-or-lose with the HSA.
Medical savings plans are just one kind of pre-tax benefit you have to consider when building your compensation package. For more information on building a compensation package, purchase our Clergy Tax Law Short Course at https://www.clergyfinancial.com/store/featured/clergytaxlaw-short-course.html< Back
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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