But if you and your spouse are on different health plans — about 11% of companies do not allow spousal enrollment if they have other coverage — it may cause issues with your FSA and HSA options. That's because, under the current law, if your spouse or partner has a health FSA through their employer, you'll face a tax penalty if you contribute to an HSA.
A new bipartisan bill aims to change that. On Friday, Reps Jennifer Wexton (D-Va.), Earl Blumenauer (D-Ore.) and Mike Kelly (R-Penn.) introduced the Health Savings for Families Act. The bills would allow families to utilize both HSA and FSA accounts without any tax consequences.
"Cost of care is at a record high and my bill will give families more flexibility to save money on their health care," Wexton said in a statement. "Instead of penalizing families for responsibly managing their money — as the existing law does — my bill allows couples to save and spend in the way that's easiest and most affordable for them."
Both HSAs and health FSAs give you the option of putting money directly from your paycheck, tax-free, into an account to be used to pay for medical-related expenses throughout the year. That includes qualified expenses such as medications, over-the-counter drugs, first-aid supplies and dental services, as well as eyeglasses and contacts.
Health savings accounts are the most flexible option, but are only available to those with a high-deductible health plan, which for 2019 is a plan with a minimum deductible of $1,350 for an individual and $2,700 for a family. You can contribute up to $3,500 per year for self coverage and up to $7,000 for family coverage, and those funds will roll over, year after year, if you don't spend them.
A health flexible savings account is a little different. These savings accounts are offered through employer benefits programs and any money you put in this account operates under a "use it or lose it" approach. You're supposed to spend what you put in within the calendar year, although some employers allow you to spend the money through March of the next year or even carry forward up to $500.
If you don't spend your FSA funds, you might have to surrender the cash. Usually employers keep any unused funds and use the money to cover costs associated with the administration of the FSA program. For 2019, individuals can save up to $2,700 in these accounts.
Under the current law, health FSAs follow the same standards as a medical insurance plan. That means if an employee enrolls in an FSA, their spouse and any children up to age 26 can all get their qualified expenses reimbursed from the plan. In other words, the whole family is covered by the FSA, so the other spouse or partner cannot get an HSA.
The Health Savings for Families Act would allow families to have both a health FSA and an HSA, as long as the health FSA is not used to reimburse the expenses of the spouse paying into the HSA. Wexton estimates the bill's elimination of the tax penalty would allow families to set aside up to $7,000 in additional pre-tax funds to help pay for medical funds, which is the maximum family contribution level for 2019.
The number of HSAs topped 25 million at the end of 2018, with about $53.8 billion invested in these type of accounts, according to a survey conducted by Devenir, an investment advisor and consultant in the health savings account industry.
"This bill would fix a flaw and ensure that families are not penalized for investing in their care," Blumenauer says. "Everyone deserves access to quality, affordable health care — period."
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