Flex spending accounts and hsa when changing jobs
"Some of this may depend on how your employer chose to deal with your notice period.  Most employers employ you for the duration (which means you'd be covered for March on your insurance).  They could 'send you home' but pay you (in which case you're an employee for the duration still); or they could terminate you on your notice day, and give you effectively a severance equal to two weeks' pay.  That is what it sounds like they did. They should have made this clear to you when you left (on 2/23).  Assuming you work in an at-will state, there's nothing wrong (legally) with them doing it this way, although it is not something I believe is right morally.  Basically, they're trying to avoid some costs for your last two weeks (if they employ you through 3/6, they pay for another month of insurance, and some other things).  In exchange, you lose some insurance benefits and FSA benefits. Your FSA terminates the day you terminate employment (see this pdf for a good explanation of these issues).  This means that the FSA administrator is correct to reject expenses incurred after 2/23.  The FSA is in no way tied to your insurance plan; you can have one or the other or both.  You still can submit claims for expenses prior to 2/23 during your runout period, which is often 60 or 90 days. In the future, you will want to think ahead when leaving employment, and you may want to time when you give notice carefully to maximize your benefits in the event something like this happens again.  It's a shady business practice in my mind (to terminate you when you give notice), but it's not unknown. As far as the HSA/FSA, you aren't eligible to contribute to an HSA in a year you're also in an FSA, except that they use ""plan year"" in the language (so if your benefits period is 6/1/yy - 5/31/yy, that's the relevant 'year').  I'd be cautious about opening a HSA without advice from a tax professional, or at least a more knowledgeable person here."
Don't panic this happens all the time. I looked online for a form that can be used to redeposit funds back into the HSA. This form can be used to redeposit funds withdrawn in error and cannot   be used to correct an Excess Contribution Return. Funds will be posted   as a correction and not as a contribution. The deposit will be entered   for the year the distribution occurred. It allows you to specify the year the incorrect distribution occurred. I authorize Optum Bank to make the withdrawal correction indicated   above. I have enclosed a check made payable to Optum Bank for the   amount I’d like redeposited to my account. I understand that this can   result in a possible corrected 1099-SA for the tax year indicated   above. Of course you need to get the forms for your account. "Since it's not tagged united-states, I'd like to offer a more general advice. Your emergency fund should match the financial risks that are relevant to you. The two main classes of financial risk are of course a sudden increase in costs or a decrease in income. You'd have to address both independently. First, loss of income. For most, this would simply equate to the loss of a job. How much benefits would you expect to get, and for how long? This is often the most important question; the 6 months advise in the US is based on a lack of benefits.  With two incomes, you're less likely to lose both jobs at the same time. That's a general advise, though. If you both work for the same employer, the risk of losing two jobs at the same time is certainly real. Also, in countries with little protection against dismissal (such as the US), the chance of being layed off at the same time is also higher. On the debit side, there are also two main risks. The first is the loss or failure of an essential possession, i.e. one which requires immediate replacement. This could include a car, or a washing machine. You already paid for one before, so you should have a good idea how much it costs. The second expenditure risk is health-related costs. Those can suddenly crop up, but often you have some kind of insurance. If not, you'd need to account for some costs, but it's hard to come up with an objective number here. The two categories are dependent, of course. Health-related costs may very well coincide with a loss of income, especially if you're self-employed. Now, once you've figured out what the risks are, it's time to figure out how to insure against them. Insurance might be a better choice than an emergency fund, especially for the health costs. You might even discover that you don't need an emergency fund at all. In large parts of Europe, you could establish a credit margin that's not easily revoked (i.e. overdraft agreements), and unemployment benefits are sufficient to cover your regular cost of living. The main risk would then be a sudden lack of liquidity if your employer goes bankrupt and fails to pay the monthly wages, which means your credit should be guaranteed sufficient to borrow one month of expenses. (This of course assumes quite good credit; ""pay off my car"" doesn't suggest that.)" You have several options: If they refuse the second option, and the incident has already happened look on the HSA website for the form and procedure to return a mistaken distribution. I have used the two options with all our medical providers for the last 3 years. Some preferred option1, some preferred option 2, but none refused both. One almost did, but then reconsidered when they realized I was serious. While there is an April 15th deadline to resolve the mistake, I have found that by requesting the provider accept one of the two options the number of mistakes is greatly reduced. Your spouse is eligible for an HSA even if you have one as long as she is covered by a qualified high-deductible plan. In the case that you both had HSAs you would be limited in how much you contribute each year, but both can have accounts. In 2015, you could each contribute $3350 to your separate HSA plans. If you have a combined plan, and even if you switched mid year, you could contribute $6650 during that year total to the two HSAs. That can be divided any way you want as long as the total does not exceed that maximum for the year. You can contribute an extra $1000 if you are over 55 years old.  (I should probably also mention that you can still make contributions for the 2015 year until April 15, 2016, because it's relevant to most who would read this. Also you can only contribute a percentage of that limit matching the percentage of months that you are covered, but if you are covered for the last month of the year, you can contribute the full amount as long as you are covered for the ENTIRE following year.) "I have a couple other important considerations regarding external HSA accounts vs employer sponsored HSA accounts. Depending on your personal financial situation and goals; some people like to use HSA accounts as an extra retirement account (since the money can be withdrawn penalty free in retirement for non-medical expenses, and completely tax & penalty free at any time for medical expenses). If your intended use for the HSA account is an investment vehicle for retirement, then you may find more use/benefit out of an external provider that may provide more or better investment options than your employers HSA investment options. There can be a lot of additional value in those extra investment options over greater periods of time. Another VERY important consideration for FICA taxes (FICA includes Social Security & Medicare) that I don't believe was mentioned before - for those earners who are under the maximum social security wage limit, you are paying 6.2% of each paycheck into social security taxes. As others have mentioned you can ""save"" this tax through your employer’s plan if you set up the account to be funded pre-tax from your paychecks. However, in doing so, you are lowering your overall contributions into social security, which may lower your social security benefits in your retirement years!  If this is ultimately going to lower your SSA benefits in retirement then that is a big future cost that may steer you against the pre-tax employer contributions. Think of social security as part of your retirement plan, not as a tax but instead as an additional check you put away for yourself for retirement every month. Of course, this is only an important consideration if SSA is still going to be around when you retire, but let's assume that it will be. This is not an issue for higher earners, earning well above the max SSA taxable wages. There is no wage limit on the 1.45% Medicare tax withholding's, and there is certainly no harm in saving Medicare taxes because it will not affect future Medicare benefits. So for taxpayers earning well over the max SSA wages, they will just save the 1.45% Medicare taxes without affecting their SSA contributions and resulting retirement benefits.  So again, it all comes down to personal situations. Depending on your earnings and goals, employer plan may or may not be the way to go.  Personally, for my lower earning clients, friends and family, I tend to recommend that they do whatever they can to maximize their social security benefits in retirement. So I would advise them to either use the external provider account, or the employer plan but with post-tax contributions so you don't lower the SSA withholding's but can still claim the income tax deduction on your tax return. YMMV -Dan" If you mistakenly pull money out of the HSA all the ones I have looked at have a mechanism of returning the funds. Sometimes they have a form, other times the doctor or pharmacy can put the money back in. Money put back into the fund doesn't count as a contribution for that year. You shouldn't have to pull money out that you know will just be reimbursed. But there are occasions where there is no other way. Sometimes you are not sure what the exact fee will be when visiting the doctor. In other cases you have a rebate that will only be received weeks later. This will likely cause either (a) running out of funds in HSA #2, as   the aggregate $6500 limit is nearing (b) an over-contribution   situation between HSA #1 and HSA #2. .... 2014 HSA contributions are under the limit by $3000. 2015 expenses currently sit at about $3000. The solution is to stop putting money into HSA #2 so that you don't go over the aggregate limit for this tax year; But then using the money in HSA #1 to pay the medical costs. If the person making the contribution had the ability to put money into either HSA then they should have the ability to spend that money from either account. I realize the goal of the April transaction was to be able to effectively put $9500 into the HSA system in CY 2015. With the transaction that missed the deadline by seconds that opportunity is lost. But any medical costs that can be paid with money in HSA #1 should be paid for with money from that account. You don't have to keep funds in HSA #1, while worrying about HSA# 2 running out of funds. The beauty of an HSA is that you can continue to pay medical expenses out of an account for years after you no longer have a High deductible insurance plan. It can even be used in retirement. When you take any money out of an HSA, you'll get a 1099-SA. HSAs work a little differently than a 401(k).  With a 401(k), you aren't supposed to take any money out until retirement.  HSAs, however, are spending accounts.  I take money out of my HSA every year. As long as you spend the money you take out of your HSA on qualified medical expenses, there are no taxes or penalties due.  The bank that holds your HSA doesn't know or care what you spend the money on; they will certainly allow you to empty your HSA account.  Anything you take out will be reported to the IRS (and to you) on a 1099-SA.  At tax time, along with your tax return, you send in a form 8889, on which you report to the IRS what you took out of HSA, and you also certify how much of that money was spent on medical expenses.  If any of it was spent on something else, taxes and penalties are due. Yes, you will need to deposit the funds into your HSA, then withdraw them to reimburse yourself for the expenses. The tax deduction comes when you contribute (deposit) to your HSA.  If you do not deposit the money there, you will not be able to claim the deduction.  Your HSA provider reports the amount of your contributions to the IRS, so the amount you say you contribute to your HSA on your tax return has to match what your HSA provider reports. When you deposit the money to your HSA, you need to explicitly tell your provider that the contribution is for tax year 2014.  The reason is that you want to make sure that they report the amount of your 2014 contributions to the IRS correctly. After you've deposited the amount into your HSA, you can withdraw it to reimburse yourself for an eligible medical expense.  In order to be eligible, it needs to be an expense that was incurred while you had the HSA in place.  If you had your HSA account in place before you paid the expense, no problem.  But if you set up the HSA account after you paid for the expense, you might be out of luck. The distribution (withdrawal) will be a part of tax year 2015, and you'll see this amount included as part of the gross distributions on your 1099-SA form next year. When I first set up my HSA, I didn't have any extra money to fund the HSA, so I handled it just like you are talking about.  I would wait until I had a medical bill, then deposit the amount I needed into my HSA and withdraw it back out to pay the bill. With only $2000 in the account, I wouldn't worry about investing it.  Instead, I would roll this over into a new HSA account with a different provider.  Find a provider that doesn't charge ongoing fees, perhaps with a local credit union or bank.  Although you won't be able to add money to it, you can withdraw as you have eligible medical expenses, until it is gone. "Based on the updated information  ""I'm able to get my health insurance in full from my old job which is   why still have it(ABC). Anthem Blue cross only costs me about 15   dollars a month. At my new job I work full time so I took up the   healthcare because eventually I will more than likely get rid of my   old one(or loose it)."" There are a couple of issues:  The old company will no longer be paying for the ABC policy, you will have to cover the entire cost. The cost could be significantly m ore than $15 a month. One will be primary and one will be secondary. You will have to tell them about each other. How they will interact when one is a percentage and the other a copay will have to be investigated. Look back at all your procedures from last year, and ask how they would cover them. You will also need to see if your doctors and specialists are in both networks. This could create situations where the 2nd policy provides no coverage because you went out of their network. You could also require multiple referrals." Contributing the $150 to put you over the $3k mark is somewhat pointless. The reason is that, although you won't be accumulating any fees, you won't be able to use the money, either, because as soon as you take a distribution, you'll be back under $3k.  Instead, I would look at two things: First, are you considering all the ways you can spend this money? Doctor visits, dentist, prescriptions, eyeglasses, chiropractic, and more: there are lots of ways to spend this money, and if you can spend it all in a relatively short amount of time, your problem is solved. The full list of things you can spend it on is in IRS Publication 502.  Second, have you talked to a local credit union? Credit unions often offer an HSA account with only a small setup fee and no ongoing monthly fee or minimum balance. If you roll your current HSA money over into your new account, you can then take your time spending the money until it is gone.  If you are having trouble locating a good HSA, there is a large list at hsarates.com. Look for one that is available in your state (or nationwide) and has low/no fees. "The FSA, in contrast to the HSA, is not an ""account"" that you put money in.  FSA stands for ""Flexible Spending Arrangement,"" not ""Account.""  Technically, it is a defined-benefit plan.  Here is the difference: With an account such as an HSA, you put money into the account, and you get that same money out.  You can't take money out unless you first put money in. The FSA doesn't work that way.  Instead, you pick an annual amount that your FSA will cover, and work out a monthly fee to pay for it.  For example, you might decide on a $1800 FSA, which will cost you $150 per month.  However, the $150 you pay each month does not go into an account for you; instead, it goes to your employer, who is managing the plan. Let's say that in January, at the beginning of the plan year, you have a large medical expense of $1000.  You've only had $150 taken out of your paycheck so far this year, but you are covered for $1800, so you get reimbursed the full $1000.  This is referred to as ""uniform coverage"", meaning that you get the full $1800 of coverage on day 1 of the year. Now let's say that you leave your job in March.  You've only paid $450, and you've received $1000 in benefit.  You do not owe your employer the rest of the money; your employer eats this cost.  This is the trade-off that the FSA offers over other types of accounts: depending on an employee's circumstances, an employer might make money (use-it-or-lose-it) or might lose money (uniform coverage) on an individual employee. The idea behind the use-it-or-lose-it provision of the FSA is to help the employer pay for the uniform coverage provision. The details behind the FSA (and other types of health plans) are outlined in IRS Publication 969. I'm sure that a secondary reason behind the use-it-or-lose-it provision is that it encourages an employee to keep his FSA plan small, so he can use it all up and not have to lose too much of it at the end of the year.  And a smaller FSA contribution means more tax money for the government. To address your point that it shouldn't be this way: I'm personally not a fan of the FSA because of the use-it-or-lose-it provision.  But participation is voluntary, for both employers and employees.  You proposed an alternative set of rules for the FSA, but you are basically describing an HSA, in which you cannot spend more than you have, and you get to keep whatever is left over.  The recent rules changes that allow plans to feature a grace period or a small carryover balance were an attempt to make the FSA a little more attractive/useful, but if you want the ability to keep your money and not have to spend it at all, use an HSA instead." "I also talked to the IRS yesterday to get a few of my own questions answered, and I asked a few of these while I was at it (as I didn't know the answers for sure either, even after reading IRS pub 969). To answer your specific questions: I would, however, like to confirm a few things: You are allowed to have multiple HSA accounts. My company forces me to   use a specific bank if they are going to be make contributions.   However, I would like to move this money to a higher-risk/higher-yield   account. You are allowed to withdraw money to reimburse any past payments that   were made after the HSA is opened – perhaps years later. This would   allow me to accumulate interest on the money and then get reimbursed   later. You can transfer money between HSAs, etc. and the money will still   cover any payments since the first HSA was opened? I am currently unmarried and without children. An HSA can be made to   pay for any dependent or spouse medical bills as well. I am currently   signed up with an HSA that is marked as ""individual"" or something. I   assume that once I get married, I should have no issues using this   money from the past on my wife and kids? Note that I am not a certified tax professional and you should not rely on this information for your own tax decisions, but should investigate or contact the IRS yourself." No. An HSA is similar to an IRA, in that it's an individual account. I'd suggest you use hers for all expenses and make new deposits to yours until your wife's HSA is depleted.