Mid-year switch from HSA to FSA during employer's February open enrollment - contribution timing question

You're absolutely right to question this. When switching between HSA and FSA, the timing is crucial for tax compliance. Here's what you need to know: You cannot contribute to both an HSA and an FSA in the same month (with very limited exceptions for "limited purpose" FSAs). Since your last January paycheck would be processed on February 6th, but would count as a contribution for January, you technically could make that contribution since you're still HSA-eligible for all of January. However, there's a potential issue - if your FSA coverage begins on February 1st, you will be covered by the FSA on the date that HSA contribution is actually made (Feb 6th). This creates a gray area that could cause headaches. The safest approach is to stop that final HSA contribution to avoid any potential compliance issues. While technically the contribution is for January when you were eligible, the physical timing of the contribution occurring in February when you have active FSA coverage could create confusion during tax filing.

I went through the same situation last year and found taxr.ai really helpful for figuring out the HSA/FSA transition rules. Their system analyzed my specific benefit enrollment dates and payroll schedule, then gave me a customized report explaining exactly what I needed to do to avoid issues. Check out https://taxr.ai if you want a definitive answer based on IRS rules instead of trusting HR. The tool flagged that my HR's advice would have created a tax violation because of the timing of my contributions - sounds similar to your situation. It also explained how to document everything properly in case of questions from the IRS later. Saved me from making a mistake that would've been hard to fix.

Thanks for recommending taxr.ai! I was skeptical at first but decided to give it a try since my situation was similar. Uploaded my benefit enrollment details and pay schedule info, and within a day I got a detailed analysis explaining exactly how to handle the transition. The report showed that I needed to stop my HSA contributions completely before my FSA became active, and included the specific IRS regulations that applied to my situation. The tool also generated a letter I could give to my payroll department explaining why the change was necessary. My HR initially pushed back but stopped when I showed them the documented IRS rules! Definitely worth it for the peace of mind and avoiding potential tax headaches down the road.

If you're having trouble getting through to your HR or payroll department on this, I'd recommend using Claimyr to get an IRS agent on the phone directly. I had a similar HSA/FSA issue last year that my company messed up, and I couldn't get a straight answer from anyone. Used https://claimyr.com to get through to the IRS (the video at https://youtu.be/_kiP6q8DX5c shows how it works) and got clarification directly from them. Instead of waiting on hold for hours, Claimyr got me connected with an IRS agent in about 20 minutes who confirmed exactly how to handle the transition timing and documentation requirements. The agent even emailed me the relevant tax code sections that I forwarded to my HR department to get them to stop the incorrect contribution.

OK I need to eat some crow here. After posting my skeptical comment, I decided to try Claimyr myself since I've been trying to reach the IRS about an issue with my HSA contributions from last year. The service actually worked exactly as advertised. I got a call back in about 25 minutes and was connected with an IRS representative who was super helpful. They walked me through the exact rules for HSA/FSA timing and even put notes in my file about the conversation in case there were any questions about my tax return. The representative confirmed that you cannot have both an HSA contribution and FSA coverage active on the same day - so that last contribution on Feb 6th would indeed be problematic even if it's for January. Seriously worth the money to get a definitive answer directly from the source instead of playing tax roulette based on HR's bad advice.

Former benefits administrator here. Your instincts are right - you absolutely need to stop that last HSA contribution. The problem is that FSA eligibility makes you HSA-ineligible, regardless of whether you actually use the FSA or not. Since that contribution would physically happen on 2/6, when you're already FSA eligible, it creates a compliance issue. Your HR department is confusing two different scenarios. They're thinking about the rule that lets you make prior-year HSA contributions until April 15th, but that only applies if you remained HSA-eligible. Once you have FSA coverage, you can't make any HSA contributions, even for periods when you were previously eligible.

I work in benefits administration and deal with this every year. Here's a simple rule: NEVER have overlapping HSA and FSA coverage, even for a single day. The safest approach is to: 1) Terminate HSA contributions with your last January paycheck (the one paid on/before Jan 31) 2) Start FSA with your first February paycheck Technically, your HSA contribution limit for 2025 will be prorated for just January, so you're only eligible for 1/12 of the annual limit anyway during this year of transition. If you've already maxed out January's prorated amount with your first two January paychecks, you're already at your limit.

This is a great example of why you can't trust HR departments with complex tax rules! I had a similar situation two years ago where my company's benefits team gave me completely wrong information about HSA/FSA transitions. The key issue here is that once you have FSA coverage starting February 1st, you become HSA-ineligible immediately. This means any HSA contribution made after that date - even if it's coded for January - creates a compliance problem because the physical contribution occurs when you're no longer eligible. Plus, as others have mentioned, since you're losing HSA eligibility before December 1st, your 2025 contribution limit will be prorated to just 1/12 of the annual maximum (since you're only eligible for January). If you've already contributed more than that amount in your first two January paychecks, you'll need to request a return of excess contributions anyway. My advice: Stop that final HSA contribution immediately, and double-check that your January contributions don't exceed the prorated limit. It's much easier to prevent these issues than to fix them after the fact on your tax return.