HSA and Limited-Purpose FSA FAQs

If I enroll in the CDHP and open an HSA, can I participate in other tax-saving accounts, like a Health Care Flexible Spending Account (FSA)?

You are eligible to participate in a Limited-Purpose Health Care FSA, which will only reimburse for certain expenses like dental and vision. With the CDHP, the IRS does not permit participation in a regular Health Care FSA or regular health reimbursement account for medical expenses, even through your spouse or another job.
If you currently participate in a regular FSA that operates on a calendar-year basis and allows for a grace period, your FSA account balance must be zero as of December 31 of the current year to contribute to an HSA on January 1, of the following year. Otherwise, you are not eligible to make HSA contributions (or receive company contributions) until the grace period is over.
Also, if your spouse has a regular FSA that is not based on a calendar-year plan, your participation in an HSA may be limited. Even if all of the funds in your spouse’s regular FSA are used by December 31, you are not eligible to make HSA contributions (or receive company contributions) until the end of his or her plan year.

What is a Limited-Purpose FSA?

A Limited-Purpose FSA is available if you are enrolled in the CDHP. It can be used to pay for qualifying dental and vision expenses. While these expenses can also be paid from an HSA, using a Limited-Purpose FSA offers you an additional tax-saving opportunity and allows for immediate access to your total annual contribution. HSA reimbursements are limited to your current account balance.

Can I use payroll deduction to fund my HSA and Limited-Purpose FSA?

Yes, DallasNews Corporation offers an easy payroll deduction option that allows you to defer money from each paycheck into an HSA at Fidelity and a Limited-Purpose Health Care FSA managed at TaxSaver Plan. You contribute the money to these accounts each pay period before taxes are calculated on your earnings, which lowers your tax bill to the IRS. Remember, however, you must elect the CDHP to participate in the HSA and meet other qualifying conditions for both accounts.

Are there limits to what expenses I can use my HSA and FSA for?

Eligible health care expenses are payable from funds accumulated in either an HSA or FSA. Examples of eligible expenses for the HSA include deductibles, coinsurance, dental and vision expenses, prescription drug expenses and over-the-counter qualifying medical expenses not covered by another plan. For the Limited-Purpose FSA, examples include dental and vision expenses. You can find more information on eligible expenses in IRS Publication 969 or by calling 1-800-TAXFORM (1-800-829-3676).

What’s the difference between an HSA and Limited-Purpose Health Care FSA?

Feature
Health Savings Account (HSA)
Limited-Purpose Health Care FSA
Carry over unused funds to future years
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The company makes contributions
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Your contributions are tax-free
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Your contributions may be invested and earnings grow tax-free
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Distributions to pay for eligible health care expenses are tax-free
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Must have high-deductible coverage, no other health coverage
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Account is yours to keep, even if you leave the company
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Distributions for expenses that are not health-care related are taxed at regular income tax rates, like an IRA or 401(k), if made after retirement (age 65 or older)
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Why offer a Limited-Purpose Health Care FSA?

By law, you may not participate in a regular Health Care FSA (one that reimburses medical expenses) if you participate in the CDHP. If you elect the CDHP, you will be eligible to participate in the Limited-Purpose Health Care FSA — one that only reimburses eligible dental and vision expenses.

Why does an FSA have to be “use it or lose it”?

Because FSAs are designated as tax-preferred, certain IRS guidelines must be met to maintain the preferred tax treatment. One of the rules is that any money remaining in your FSA beyond the designated plan year must be forfeited.
DallasNews Corporation’s FSA plan year begins on January 1 and ends on March 15 of the following year. This means that for 2022, you may make claims for expenses incurred as late as March 15, 2023, as long as they are submitted for reimbursement by April 30, 2023. Any amount remaining in your FSA after the submission deadline is forfeited.
Need to use the remaining funds fast? Eligible expenses include qualifying over-the-counter items such as bandages, sunscreen, lip balm, shoe insoles, hearing aid batteries, reading glasses and contact lens solution. Go to IRS Publication 502 to find out more.