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| HCSP/HSA Compatibility | ||||||||||||||
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The Health Care Savings Plan (HCSP) and a Health Savings Account (HSA) are both tax-advantaged savings accounts that allow individuals to accumulate funds to pay for eligible medical expenses. Participation in the HCSP does not limit your ability to have another type of tax-advantaged medical savings plan; however, there are compatibility issues you should be aware of if you have both an HCSP and an HSA. Suspending your reinbursements You may not request reimbursement of medical expenses (including insurance premiums) from HCSP if both of the following conditions apply:
The IRS considers having access to your HCSP account while also contributing to an HSA "conflicting coverage"; therefore, you must suspend your ability to request reimbursements of medical expenses from the HCSP during the current calendar year. The suspension does not impact your ability to request reimbursement of vision or dental expenses. The Reimbursement Suspension form To suspend your reimbursements, please complete a Reimbursement Suspension Election form, which is available on this website under Online Forms or contact MSRS. You may not modify or revoke the suspension during the calendar year. A new Reimbursement Suspension form should be completed each calendar year that you have "conflicting coverage" (see previous section). |
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| Frequently Asked Questions Q. Is the HCSP considered a Health Savings Account (HSA)? A. No. Although both are tax-advantaged plans to be used for eligible health care expenses, the HCSP is not a Health Savings Account (HSA). An HSA is a medical savings plan available to taxpayers who are enrolled in a High Deductible Health Plan (HDHP). The HCSP, administered by Minnesota State Retirement, is an individual, tax-free account to be used for reimbursement of post-employment medical expenses for you, your spouse, and your legal tax dependents. Q. Am I allowed to have multiple tax-advantaged health savings plans? A. Yes, you may have multiple tax-advantaged health savings plans; however, you should be aware of the special concerns regarding the compatibility of the HCSP and HSA. Consider the following statements:
Q. What is the significance of "conflicting coverage"? A. If you have determined that you have conflicting coverage (see previous question), then you should not request reimbursement of health care expenses from your HCSP in the calendar year in which both conditions exists. Exception: You may continue to request reimbursements of dental and vision expenses. Q. What can be done if I have conflicting coverage? A. You must suspend your ability to request reimbursement of health care expenses (including insurance premiums) from the HCSP during the current calendar year. To suspend your reimbursements, please complete a Reimbursement Suspension Election form, which is available on this website under Online Forms or contact MSRS. Upon completion of the Reimbursement Suspension Election form, your HCSP will become a "limited use" account, as you can request reimbursement of dental and vision expenses. You may not modify or revoke the suspension during the calendar year. Q. What is the source of the guidance for the HCSP suspension? A. IRS Revenue Ruling 2004-45 clarifies how HSAs interact with other tax-advantaged health savings accounts. The ruling states that individuals may contribute to an HSA while also covered by other types of plans that reimburse medical expenses (such as the HCSP), if that plan is:
Q. Who does the suspension apply to?
Reimbursement of vision & dental expenses are always allowable. Q. How long will the suspension of my HCSP account last? A. Suspension elections are January 1 through December 31. The suspension is lifted January 1 of the year following the last contribution to you or your spouse's HRA. You may not modify or revoke the suspension during the calendar year. Q. Once my suspension is lifted, can I request reimbursements for expenses incurred during the suspension period? A. No. Reimbursements may be requested for expenses incurred starting January 1 of the year following the end of the HCSP reimbursement suspension election. Q. I already contributed to an HSA this calendar year. Can I "spend down" the HSA so I am able to access my HCSP for reimbursements? A. No. Once you have contributed to an HSA this calendar year, you should suspend your HCSP for the current calendar year. Q. I contributed to an HSA this calendar year. I'm still working for the public employer who sponsored my HCSP and therefore, not eligible to request reimbursements from the Plan. Do I have to complete the Reimbursement Suspension Election form? A. No. You do not have conflicting coverage this calendar year. Conflicting coverage only applies if you were eligible to request reimbursements from you HCSP and contributed to an HSA in the same calendar year. Q. I will have no further contributions to my HSA this calendar year. Do I have to complete a Reimbursement Suspension Election form? A. Yes. Once you have contributed to the HSA in a calendar year in which you are eligible to request reimbursements from your HCSP, you have conflicting coverage and should complete the Reimbursement Suspension Election form. Q. I contributed to my HSA before I retired, but will have no further contributions after retirement. Do I have to sign the Reimbursement Suspension Election form? A. Yes. Once you have contributed to the HSA in a calendar year in which you are eligible to request reimbursements from your HCSP, you have conflicting coverage and should complete the Reimbursement Suspension Election form. Q. I completed a Reimbursement Suspension Election form this calendar year because I have conflicting coverage, but will have no further contributions to my HSA this year. Can I revoke my election? A. You may not modify or revoke the suspension during the calendar year. If no further HSA contributions will be made, the suspension is lifted January 1 of the year following the last contribution. Q. I don't believe I have conflicting coverage. Do I have to suspend my reimbursements? A. This is MSRS' interpretation of the guidance provided by the IRS, which may be more conservative than other interpretations. We strongly advise you to sign the Reimbursement Suspension Election, as we believe the suspension is in your best interest. It allows you protection from any future tax issues that may arise. In the event you are audited, the burden of proof is on you, not MSRS. Q. When can I start using my HCSP for reimbursement of health care expenses? A. You may request reimbursements from your HCSP starting January 1 of the year following the last contribution to the HSA. A suspension may not be modified or revoked during the plan year indicated on the form. (Plan year is a calendar year running from January 1 through December 31.) |
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