Reimbursement Accounts

Health Savings Accounts


An individual is eligible to contribute to an HSA if the following conditions are met:

  • Covered under a qualifying High Deductible Health Plan (HDHP)
  • Not covered under any impermissible health coverage

What is a qualifying HDHP?

A qualifying HDHP is a health plan that meets the annual limitations regulated by the Internal Revenue Service (IRS). Limitations include a minimum deductible and out-of-pocket maximum. To review the current limitations, please see the Annual Limits document linked below in the Additional Resources section.

Additionally, an HDHP must not provide benefits for any service, except preventive care, until the individual has met the HDHP deductible limit set by the IRS.

What is impermissible health coverage?

In general, an individual who is covered under a health plan that does not meet the definition of a qualifying HDHP would have impermissible health coverage and would be ineligible to contribute to an HSA. Examples of impermissible coverage include:

  • Medical plan with co-payment arrangement after $250 deductible is met
  • Health Flexible Spending Arrangement (FSA)- This would include a spouse's FSA
  • Health Reimbursement Arrangement (HRA)- This would include a spouse's HRA
  • Medicare
  • Medicaid

An individual may participate in a specially designed FSA or HRA and remain HSA-eligible. HSA compatible designs include a limited purpose FSA or HRA that reimburses expenses only for dental care, vision care, and preventive care. A post-deductible arrangement reimburses participants for any qualified medical expense only after the statutory HDHP deductible has been met. The two types could also be combined so that prior to a participant reaching the statutory HDHP deductible, the FSA or HRA reimburses preventive care, vision, or dental expenses. Once an individual has met the deductible, any qualified medical expenses may be reimbursed.



The IRS limits the amount that can be contributed to an individual's HSA in a calendar year. The maximum contribution limit is based on whether the individual has single or family HDHP coverage. To review the current limitations, please see the Annual Limits document linked below in the Additional Resources section.

An individual who becomes HSA-eligible in the middle of a calendar year may contribute up to the annual maximum, but must remain HSA eligible until December 31st of the following year to avoid tax penalties.



Individuals are permitted to make a one-time transfer of funds from a health FSA or HRA to an HSA. The transferred funds would not be counted against the individual's HSA annual contribution limit. The following requirements must be met for a qualified rollover:

  • The individual must have had an FSA or HRA balance on September 21, 2006.
  • The amount to be rolled over is the lesser of the balance on September 21, 2006 or the balance on the rollover date. The rollover must zero out the FSA or HRA account.
  • If the transfer is from a health FSA, the FSA must have a grace period.
  • The individual must elect the rollover by the last day of the plan year.
  • Before the end of the plan year, the plan documents must be amended to allow for the rollover.
  • The trustee must complete the rollover by the 15th day of the third month following the end of the plan year. The employee's remaining FSA or HRA balance should be frozen on the last day of the plan year until the transfer is complete.
  • The individual must be HSA eligible and enrolled in an HDHP on the first day of the month of the rollover.
  • A participant is only allowed one rollover per FSA or HRA account up until December 31, 2011.



If an employee has single HDHP coverage and an HSA, can the employee use the funds from the HSA to reimburse medical expenses for the spouse who is not covered under the HDHP?

Yes, an individual with single HDHP coverage and an HSA is permitted to use funds in the HSA to pay for expenses for spouses or tax dependents even if those individuals are not on the HDHP. This is because an eligible expense under an HSA is defined as a) a qualified medical expense under 26 USC 213(d) or certain over-the-counter medications; b) that is incurred by the account holder, the spouse, or dependents, and c) is not reimbursed by insurance or otherwise.

If the HSA is offered under a Section 125 Cafeteria Plan, is the employee limited as to when or how often election changes may be made to his/her HSA contributions?

An HSA offered under a Section 125 Cafeteria Plan means that the employee is permitted to contribute to the HSA with pre-tax salary deductions. Typically, a cafeteria plan limits an employee's ability to change pre-tax elections to certain qualifying events. However, there is an exception for HSA contributions under a cafeteria plan. The employee may change his/her HSA contribution as often as the employer's pay schedule and policy permit.


Additional Resources

The above links are provided for your information only. NFP does not endorse, nor accept any responsibility for the content, products and/or services provided at non-NFP sites. Some information contained in the NFP site is provided by third parties. We do not independently verify this information, nor do we guarantee its accuracy or completeness. Information provided from governmental agencies is subject to change.

This material was created by NFP, its subsidiaries, or affiliates for distribution by their Registered Representatives, Investment Advisor Representatives, and/or Agents. This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Neither NFP Securities, Inc. nor NFP Benefits offer legal or tax services.

Securities offered through Registered Representatives of NFP Securities, Inc., a Broker/Dealer and Member FINRA/SIPC. Investment Advisory Services offered through Investment Advisory Representatives of NFP Securities, Inc. a Federally Registered Investment Adviser. NFP Benefits Partners is a division of NFP Insurance Services, Inc., which is a subsidiary of National Financial Partners Corp, the parent company of NFP Securities, Inc. NFP Securities, Inc. is not affiliated with any other entities listed on this document.

Not all of the individuals using this material are registered to offer Securities or Investment Advisory services through NFP Securities, Inc.