Sec. 401 FSA and HRA interaction with HSAs
“(iv) coverage under a health flexible spending arrangement or a health reimbursement arrangement in the plan year a qualified HSA distribution as described in section 106(e) is made on behalf of the individual if, after the qualified HSA distribution is made and for the remaining duration of the plan year, the coverage provided under the arrangement is converted solely to one or more of the following:
“(I) Post-deductible FSA or HRA—A health flexible spending arrangement or a health reimbursement arrangement that does not pay or reimburse any medical expense incurred before the minimum annual deductible under paragraph (2)(A)(i) (prorated for the period occurring after the qualified HSA distribution is made) is satisfied.
“(II) Preventative care—A health flexible spending arrangement or a health reimbursement arrangement that, after the qualified HSA distribution is made, does not pay or reimburse any medical expense incurred after the qualified HSA distribution is made other than preventive care as defined in paragraph (2)(C).
“(III) Limited purpose health FSA—A health flexible spending arrangement that, after the qualified HSA distribution is made, pays or reimburses benefits for coverage described in clause (ii) (but not through insurance or for long-term care services).
“(IV) Limited purpose HRA—A health reimbursement arrangement that, after the qualified HSA distribution is made, pays or reimburses benefits for permitted insurance or coverage described in clause (ii) (but not for long-term care services).
“(V) Retirement HRA—A health reimbursement arrangement that, after the qualified HSA distribution is made, pays or reimburses only those medical expenses incurred after an individual’s retirement (and no expenses incurred before retirement).
“(VI) Suspended HRA—A health reimbursement arrangement that, after the qualified HSA distribution is made, is suspended, pursuant to an election made on or before the date the individual elects a qualified HSA distribution or, if later, on the date of the individual enrolls in an HSA-qualified health plan, that does not pay or reimburse, at any time, any medical expense incurred during the suspension period except as described in the preceding subclauses of this clause.”
“(1) In general—A plan shall not fail to be treated as—
“(A) a health flexible spending arrangement under this section, section 105, or section 125,
“(B) a health reimbursement arrangement under this section or section 105, or
“(C) an accident or health plan,”
“(E) Exception for qualified HSA distributions—Subparagraph (A) shall not apply to the extent that there is an amount remaining in a health flexible spending account at the end of a plan year that an individual elects to contribute to a health savings account pursuant to a qualified HSA distribution (as defined in section 106(e)(2)).”
“(2) Qualified HSA distribution
“(A) In general—The term qualified HSA distribution means a distribution from a health flexible spending arrangement or health reimbursement arrangement directly to a health savings account of the employee to the extent that such distribution does not exceed the lesser of—
“(i) the balance in such arrangement as of the date of such distribution, or
“(ii) the amount determined under subparagraph (B).
“(B) Dollar limitations
“(i) Distributions from a health flexible spending arrangement—A qualified HSA distribution from a health flexible spending arrangement shall not exceed the applicable amount.
“(ii) Distributions from a health reimbursement arrangement—A qualified HSA distribution from a health reimbursement arrangement shall not exceed—
“(I) the applicable amount divided by 12, multiplied by
“(II) the number of months during which the individual is a participant in the health reimbursement arrangement.
“(iii) Applicable amount—For purposes of this subparagraph, the applicable amount is—
“(I) $2,250 in the case of an eligible individual who has self-only coverage under an HSA-qualified health plan at the time of such distribution, and
“(II) $4,500 in the case of an eligible individual who has family coverage under an HSA-qualified health plan at the time of such distribution.”
“(5) Limited purpose FSAs and HRAs—A plan shall not fail to be a health flexible spending arrangement, a health reimbursement arrangement, or an accident or health plan under this section or section 105 merely because the plan converts coverage for individuals who enroll in an HSA-qualified health plan described in section 223(c)(2) to coverage described in subclause (I), (II), (III), (IV), (V), or (VI) of section 223(c)(1)(B)(iv). Coverage for such individuals may be converted as of the date of enrollment in the HSA-qualified health plan, without regard to the period of coverage under the health flexible spending arrangement or health reimbursement arrangement, and without requiring any change in coverage to individuals who do not enroll in an HSA-qualified health plan.”
“(6) Cost-of-living adjustment
“(A) In general—In the case of any taxable year beginning in a calendar year after 2019, each of the dollar amounts in paragraph (2)(B)(iii) shall be increased by an amount equal to such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting “calendar year 2018” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(B) Rounding—If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.”
“(v) any coverage (including prospective coverage) under a health plan that is not an HSA-qualified health plan which is disclaimed in writing, at the time of the creation or organization of the health savings account, including by execution of a trust described in subsection (d)(1) through a governing instrument that includes such a disclaimer, or by acceptance of an amendment to such a trust that includes such a disclaimer.”