The IRS issued new rules allowing FSA participants to carry over (with the permission of the employer) unused amounts up to $500 each plan year. There are considerations with regard to simultaneous HSA participation, however, and the IRS has clarified those rules as well. Now the IRS has made some clarifications:

An individual who is covered by a general purpose medical FSA is ineligible to contribute
to an HSA, even if the individual’s medical FSA balance consists solely of unused amounts
carried over from the prior plan year (even if they are exhausted during the year, the
individual is ineligible to make any HSA contribution for the year

The individual may contribute to a general purpose FSA if they have an unused balance IF

1) The individual waives or declines a carryover of unused amounts from a general purpose
FSA to the subsequent plan year; or

2) The cafeteria plan offers an HSA compatible FSA (limited benefits) and the individual
elects to carry over unused amounts to the HSA compatible FSA for the subsequent
plan year; or

3) The cafeteria plan is designed to automatically enroll those who elect a high
deductible health plan coverage for the following plan year in an HSA compatible
FSA (including carryover amounts)