Can an employee have an FSA and an HSA in the same calendar year?

HSA eligibility is determined on a monthly basis and not on a plan year or calendar year basis. An individual is only allowed to establish and contribute to an HSA if they’re enrolled in a qualified HDHP and have no other disqualifying coverage (e.g., general purpose health FSA or HRA, copay-type medical plan, Medicare, TRICARE, etc.) for that same month. For example, if an employee enrolls in a general purpose FSA or a copay-type medical plan, the individual wouldn’t be eligible to make contributions into an HSA for that same month or for any other months while still enrolled in disqualifying coverage.

However, health FSA elections are generally irrevocable for the full plan year unless there’s a qualifying life event that would allow the employee’s FSA election to be revoked. So, if an employee enrolls in an FSA as of Jan. 1, for example, the individual couldn’t also establish or contribute to an HSA while enrolled in the FSA and couldn’t decide to change their FSA election later without experiencing a qualifying event. However, an employee could wait until open enrollment to waive health FSA participation and contribute to the HSA after the end of the FSA plan year.

Lastly, an individual is generally responsible for IRS compliance with an HSA because they’re the account holder. However, if the employer sponsors an HSA and HDHP, then they also have a responsibility to determine whether individuals’ HSA contributions are excludable from income. IRS guidance says that the employer who sponsors the non-HDHP coverage has the responsibility to confirm that an employee is covered under the HDHP and isn’t covered under any other disqualifying coverage sponsored by that employer if an employee is contributing to an HSA. In other words, if an employer sponsors a health FSA, they have an obligation to make sure employees are actually eligible to make HSA contributions if they offer an HSA and HDHP (including any employer HSA contributions).

Thus, once non-HDHP coverage ends and an individual enrolls in a qualified HDHP, even if it’s in the same calendar year or plan year, they could generally contribute to an HSA for the remaining months. Importantly, though, employers must keep in mind their responsibly to determine whether an employee’s HSA contributions are excludable from income and clearly communicate HSA-eligibility to employees.