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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 23 attorneys engaged exclusively in employee benefits, estate planning and employment law. Seven of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.






Contact Info

The Wagner Law Group


  Integrity | Excellence


Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418


San Francisco Office

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104


Illinois Office

Tel: (847) 250-1365

Fax: (847) 250-1367

414 West Deerpath Road
Lake Forest, IL  60045  







April 10, 2014


 State and Federal Law Alert




IRS Provides Guidance on Health Flexible Spending Accounts





The IRS has released guidance addressing two issues concerning the operation of health flexible spending account plans ("health FSAs"). The first issue is whether an employee with a health FSA account that consists solely of carryovers from prior years is eligible to contribute to a health savings account ("HSA"). (See the 11/7/13 Alert for more information on the carryover rules issued by the IRS last fall.) The second concerns permissible correction methods for improper health FSA payments.


Health FSA Carryovers and HSA Eligibility. In general, individuals are prohibited from contributing to an HSA unless they participate in a high deductible health plan and do not participate in any other health plan that provides coverage for deductibles, copayments, and most other health care expenses. General purpose health FSAs provide coverage for these expenses, and, therefore, an individual with a balance in his account may not contribute to an HSA. However, an individual who participates in a limited purpose health FSA (i.e., generally limited to vision, dental and certain preventive expenses) may contribute to an HSA.


The recent IRS guidance confirms that an employee is ineligible to contribute to an HSA if he or she is covered under a general purpose health FSA, even when that employee's health FSA contains only amounts that were carried forward from the prior year. The guidance also provides options to employers that sponsor health FSAs with a carry forward provision and who are concerned about the impact this may have on employees who wish to contribute to an HSA in the following year. These options include: 

  • placing the carry forward amount in a limited purpose health FSA; and
  • allowing employees to elect not to carry forward any unused amounts from their health FSA if they intend to contribute to an HSA.

Correction of Improper Health FSA Payments. The IRS guidance confirms that employers may correct improper health FSA payments by using the same correction procedures that can be used for unsubstantiated payments involving the use of a health FSA debit card. Specifically, these correction principles include: 

  • demanding repayment;
  • withholding amounts from the employee's pay, to the extent permitted under applicable law; and
  • offsetting the amounts owed by the employee against other health FSA payments. 

Employers may apply these remedies in any order as long as the order is followed consistently. If the employer tries all of these recovery methods and still does not successfully recover all of the improper payments, the employer may treat the amount of the improper payment as business indebtedness and report them as taxable income to the employee on Form W-2.





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Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.


This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.