An HSA-Compatible FSA is a Flexible Spending Account (FSA) that is compatible with a Health Savings Account (HSA). If you’re enrolled in a qualified high-deductible health plan and have an HSA, you can maximize your savings by pairing your HSA with an HSA-Compatible Flexible Spending Account (FSA). This pre-tax benefit account lets you take advantage of the savings power of an HSA and a Healthcare FSA simultaneously. An HSA-Compatible FSA is sometimes referred to as a “limited purpose” FSA because it is used to pay for eligible dental and vision care expenses only.
You decide how much to contribute to your HSA-Compatible FSA each year, and funds are withdrawn automatically from each paycheck for deposit into your account before taxes are deducted. The total amount you elect to contribute is available on the first day of your plan year. Generally, you need to spend the funds in your HSA-Compatible FSA within the plan year. However, your employer may allow you a grace period of 2½ months after the end of the plan year to spend funds left in your account. Or your employer may allow you to carry over up to $500 left in your account into the next plan year.
You fund your HSA-Compatible FSA through your employer. During your company's Open Enrollment period, you tell your employer how much you would like to contribute to your account for the coming year. The maximum amount you can contribute is determined by the IRS. For 2015, it is $2,550. Your employer then deducts your contribution amount (in equal portions) from your paychecks throughout the plan year.
Good news! You don't have to wait for funds to build up in your HSA-Compatible FSA. Your entire annual election amount is available to you on the first day of your plan year.
It depends on the type of HSA-Compatible FSA program your employer has in place. There are three scenarios for funds that are left unspent in your account at the end of the plan year:
There are three ways to use your HSA-Compatible FSA to pay for dental and vision care expenses: