Does a 2017 FSA Account Have to be Empty to Start a 2018 HSA Account?

One common question many individuals have is whether a 2017 Flexible Spending Account (FSA) must be empty before starting a 2018 Health Savings Account (HSA). The transition from an FSA to an HSA can be confusing, but we're here to help clarify.

Firstly, you need to understand the key differences between an FSA and an HSA:

• FSAs are 'use it or lose it,' meaning you typically forfeit any remaining funds at the end of the plan year.
• HSAs rollover funds from year to year, allowing you to build a savings cushion for future healthcare expenses.

Now, let's address the question:

Financially, you do not need to exhaust your 2017 FSA before opening an HSA in 2018, but there are some important considerations:

• If you plan to contribute to an HSA in 2018, you cannot continue using your FSA for medical expenses.
• You must have a High Deductible Health Plan (HDHP) to qualify for an HSA.
• If you no longer have an HDHP, you are ineligible to contribute to an HSA but can still use existing HSA funds for qualified expenses.
• You can use FSA funds to pay for eligible healthcare expenses not covered by insurance before switching to an HSA.
• If your employer allows, you may carry over up to $500 of unused FSA funds into the next plan year, though this amount may vary depending on your plan.

In conclusion, while you don't need to empty your 2017 FSA to open a 2018 HSA, it's essential to understand the implications of transitioning between these accounts. Consult with your employer's benefits administrator or a financial advisor for personalized guidance.

When considering the transition from a 2017 Flexible Spending Account (FSA) to a 2018 Health Savings Account (HSA), it's important to know that you don’t have to completely empty your FSA before starting your HSA.