Glossary - F
Flexible Spending Accounts
The ability to make a one-time transfer (or rollover) of funds from a Flexible Spending Account (FSA) to a Health Savings Account (HSA). The maximum amount that may be rolled over is the lesser of (i) the balance in the health FSA/HRA as of September 21, 2006, or (ii) the balance in the health FSA/HRA as of the date of the rollover. These balances are determined on a cash basis, meaning that expenses not yet submitted for reimbursement are not taken into account. One rollover is permitted per health FSA or HRA, and the employer must transfer the funds directly to an individual's HSA before January 1, 2012. If an individual who makes a rollover contribution ceases to be an HSA-eligible individual during the 12-month period starting with the month of the rollover contribution and ending 12 months later, the amount rolled over is includible in the individual's gross income and subject to a 10 percent additional tax (however, no amount is included in the income if the individual dies or becomes disabled). The amount rolled over does not count toward the annual HSA contribution limit.
Note: These same rules apply to rollovers from Health Reimbursement Arrangements to HSAs.