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Some Basic HSA Facts

Here is a list of HSA facts that I gathered up. It’s sort of like an FAQ, except that I’m too lazy to write out the questions.

 

HSA Facts: Contribution Limits

  • contributions limits change annually and are set by the IRS
  • 2017$3,400 for single and $6,900 for family
  • $1,000 extra (catch-up) if you are 55+

 

HSA & HDHP

  • you must have a high deductible health plan (HDHP) to qualify for an HSA
  • HDHP’s are offered by HMO’s, PPO’s, and POS’s
  • HDHP’s are identified by their minimum deductible level of at least $1,300 individual or $2,600 family.

 

Contributing To An HSA

  • you can transfer money into the HSA just like any other bank account
  • if you pay with after-tax money, you’ll recoup the taxes once you file your income taxes
  • anyone can contribute to your HSA, your momma, your employer, your drug dealer

 

HSA’s & Other Insurances

  • you cannot have an HSA if you have health insurance also through medicare or tricare or your employer
  • however, you can have an HSA with a HDHP while your partner or dependents have their own insurance plans
  • it’s okay to be covered by your employer’s wellness program (but not health insurance)

 

HSA & FSA and HRA

  • you can’t have an HSA & FSA at the same time
  • however you can have a limited FSA or a limited HRA along with your HSA

 

Deadline For Contributions

  • you can contribute up until April 15th of the following tax year
  • you cannot go back in time to top up or contribute even if you would meet qualifications
  • you can open an HSA anytime in the year but your employer will have an enrollment period

 

HSA Contribution Qualifications

  • must have a HDHP
  • cannot be covered by other health insurance such as work, medicare, etc.
  • you don’t need earned income to have an HSA

 

Qualified Medical Expenses

  • pretty much anything that’s need to manage an illness, including health/dental/vision expenses
  • here is my recent post on all the IRS allowable medical expenses
  • cosmetic or elective medical expenses aren’t included
  • cannot be used for health insurance premiums unless it’s COBRA
  • HSA money can be used for long-term care insurance

 

Rollover

  • you can roll over an old HSA into a new one
  • there is often a fee for rolling money over
  • rollovers are not taxable events

 

Portability of HSA’s

  • the money is yours and you can take it with you as long as it’s kept with an HSA trustee (any HSA trustee)
  • there might be fees when transferring (closing) an account

 

Cashing Out

  • there is a 20% tax penalty for cashing out an HSA and…
  • …there would also be income taxes owed on the early cash-out
  • you can wait until age 65 and there would be no tax penalties nor any income taxes owed

 

Tax Savings

  • HSA contributions are 100% federally tax-deductible
  • all states except for CA/NY/AL will allow for a full HSA tax deduction
  • HSA contributions can be invested in whatever funds are available per the trustee
  • investments grow tax-free much like an IRA or 401k
  • you can withdraw at any time in the future for reimbursements reasons
  • after age 65 there is no 20% tax penalty
  • after age 65 you can “reimburse” yourself for all your healthcare expenses over your lifetime and pay no income taxes

 

Spending From An HSA

  • once you reach the HDHP’s deductible, you can start paying for medical expenses using your HSA account
  • most plans will give you a debit card
  • or you can wait until the end of the year to get reimbursed
  • or you can leave the money in the HSA until you turn 65 (the best way to profit from an HSA)

 

HSA Penalties

  • early distributions are subject to 20% tax penalty if not used to pay for medical expenses
  • if withdrawn early you would also pay income taxes on this withdrawal

 

HSA Fees

  • each HSA account will have its own fees set by the trustee, that’s how they make their money
  • here is a list of possible fees to make your fucking head spin:
    • monthly maintenance fee
    • HSA account transfer fee
    • account closure fee
    • debit card issue fee
    • ATM fees
    • excess contribution fee
    • check fee
    • document fee
    • paper copy fee for statements
    • check processing fee
    • custodial fee

 

An HSA is an Account

  • each account has a routing number and account number
  • each individual would need their own account, even married couples
  • anyone can contribute to your HSA account (family, employer)

 

HSA Trustee

  • your HSA is held by a trustee, that’s the company you have your HSA with (HSABank, Optum, BofA, etc.)
  • they set the terms, fees, penalties of the account
  • it’s up to them as to what investments you are able to make

 

HSA & Disability

  • you can use your HSA balance in case of disability and forgo the 20% tax penalty
  • you would still pay income taxes on the distributions

 

HSA & Death

  • the HSA would go to your next-of-kin or your assigned beneficiary
  • if your beneficiary isn’t your partner then the money stops being an HSA and would be part of your taxable estate

 

HSA & Investing

  • healthcare professionals will benefit from an HSA by using it as an investment account
  • start contributing to an HSA throughout your life and use the investment as income after age 65
  • this method allows for completely tax-free money income

 

HSA’s & RMD’s

  • as of 2017 there are no required minimum distributions (RMD’s) on an HSA

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