Can someone explain a HSA to me?

[HappyGilmore]

My company recently changed to a High Deductible Health Insurance program which allowes for a HSA. I set up an HSA back in May2010 when we had to switch from DH's health insurance to the one offered by my company. At the time the HR person that assited me was quite short with her explainations and has since departed from my company. I sent an email for info to the head of HR to see if I could get access to a supposed power point presentation but I never got a response and quite frankly I don't have time to pester HR while I am swamped at work. I started putting in $50.00 a paycheck but haven't used any of the funds yet. I have to purchase some contact lenses and wonder if they are covered and if I use the funds how it works when it comes time to do my taxes do I have to keep track of purchases and balances etc.

 

[cassiez76]

with my HSA, anytime i go to the dr, blood tests, buying medicine i pull out my HSA debit card. idk how much goes in the acct since it's my husbands work that takes out the money.

last year it covered my contacts, but i think some of the rules have changed, so i don't know about it this year.

i have psoriasis and occasionally have to use the pretty blue plastic gloves to keep the ointment on my hands and those were covered (OTC). also the finger cots were covered, but i think he said those weren't anymore.

i've also used the HSA to buy over the counter meds. not sure if that's still covered with the new changes.

it's pretty easy to get use to using!

 

[jlima]

As I understand it, money is withheld from your paycheck and placed in an account that you can use when you have medical expenses - deductibles, co-pays, - anything you are responsible for per the terms of your health insurance, and, this money isn't taxed.

For instance, if you are paid every other week, (26 times a year) and you have $100 per pay period withheld into a HSA, you have a "bank" of $2,600 a year to use for health care expenses, and you pay no tax on this money. If you were in, for instance, a 28% tax bracket, this is a savings of $728 on your federal taxes.

If you are fairly certain you will have some medical expenses for you and your family, this is an easy way to save $$ on your taxes. Look at your health insurance and what you are responsible for. Maybe divide your annual deductible by how many pay periods you have per year, and that could be a starting point for how much per week you should have withheld. It's hard; you have to estimate what you think your out of pocket medical expenses are going to be and have something close to that deducted from your paycheck.

However, this can, in the long run, reduce the amount of Social Security you collect. Since your annual income is lowered, the amount of money both you and your employer send to Social Security is lowered by a comparable percentage. And in the long run (and it's as a REALLY long run), the amount you would potentially collect in Social Security will be lower, because you are lowering your annual income and technically, are making less.

For tax purposes, you have to keep track of what you spend & get reimbursed for. And, at the end of the year, if there's still money in the HSA, find something that your insurance covers (vision exam, glasses, etc) so you don't forfeit any money.

Hope this helps!!

 

[simba20]

Can you set up an HSA along with having insurance. Every year at open enrollment my husband's employer makes it seem like a separate thing. Also if I got a job and stayed on my husband's insurance could I set up an HSA with my job for entire family expense use?

 

[NCRedding]

Talk to HR. Make sure whether you have an FSA or an HSA.

If you have an FSA, then jlima is correct. Any money in the account may be forfeited at the end of the year.

If you have an HSA, that is money IS NOT forfeited. You can retain a certain amount in the account. In my case, it is the amount equal to my deductible. I have a debit card tied to my HSA which I use when I purchase medicine, etc. On my receipt at the pharmacy, it prints whether the item is HSA approved. The changes last year mainly made over the counter items non-HSA approved. Contacts, glasses, braces, etc. should be covered.

 

[golfgal]

Can you set up an HSA along with having insurance. Every year at open enrollment my husband's employer makes it seem like a separate thing. Also if I got a job and stayed on my husband's insurance could I set up an HSA with my job for entire family expense use?

To qualify for a HSA you have to have a qualified high deductible health plan. That plan has to have certain features to be "qualified" and it should be called that in your plan documents. "High Deductible" is somewhat misleading because your deductible could be as low as $1100.

For the HSA account you, or your company, can contribute money into this plan. Anything you contribute goes in tax free, grows tax free and can be used tax free. There is a line on the tax form asking for how much you contributed and you will see the credit for that amount.

Contacts are a covered expense under an HSA plan-as is contact solution.

IDEALLY, you would just put money into that account and not touch it until you are over 65 where you can then use that money to pay for insurance premiums when you retire. You can't use that money for insurance premiums until then. You CAN use that money to pay for Long Term Care Insurance premiums so if you have a plan like that, put the money for that into your HSA and pay the premiums from the HSA.

Most HSA accounts will give you an accounting at the end of the year of what you spent on what so ask at your bank if they do that. If not, find one that does-it is VERY handy.

It doesn't matter where you work, it just matters if you have that health insurance plan for you and your family or not. If you have insurance through your job that isn't a qualified HSA account, you can't have an HSA but if the rest of your family is on your DH's plan, THEY can have an HSA. You only need to set up one account for your family. You can contribute up to $6150/year for a family or $3050 for an individual. It isn't like a Flex Spend account where you lose the money if you don't use it so you don't have to "plan out" your medical expenses like you do with a Flex Spend account.

 

[golfgal]

Talk to HR. Make sure whether you have an FSA or an HSA.

If you have an FSA, then jlima is correct. Any money in the account may be forfeited at the end of the year.

If you have an HSA, that is money IS NOT forfeited. You can retain a certain amount in the account. In my case, it is the amount equal to my deductible. I have a debit card tied to my HSA which I use when I purchase medicine, etc. On my receipt at the pharmacy, it prints whether the item is HSA approved. The changes last year mainly made over the counter items non-HSA approved. Contacts, glasses, braces, etc. should be covered.

If you have an HSA that is NOT true. There is no limit on how much you can carry in that account from year to year as long as you haven't contributed more than the annual limits. Many banks have options to move anything over $1000 into mutual funds and if those perform well, you could have a significant balance over time. The idea behind these accounts is really to have money set aside in retirement to pay for health insurance premiums/costs and to help pay for long term care. If your bank is putting a limit on your carry over they are doing something wrong and I would switch banks.

 

[NCRedding]

If you have an HSA that is NOT true. There is no limit on how much you can carry in that account from year to year as long as you haven't contributed more than the annual limits. Many banks have options to move anything over $1000 into mutual funds and if those perform well, you could have a significant balance over time. The idea behind these accounts is really to have money set aside in retirement to pay for health insurance premiums/costs and to help pay for long term care. If your bank is putting a limit on your carry over they are doing something wrong and I would switch banks.

You are right. I was confusing the amount I could contribute each year with the amount I could carry over.

 

[golfgal]

You are right. I was confusing the amount I could contribute each year with the amount I could carry over.

Even that isn't limited by your deductible-it is a set number by the federal government-$6150 family/$3050 individual. If your bank is telling you differently, find another bank.

 

[Shmily1]

We have the option of an HSA and HDPlan also but I chose to go the other way. The new rules for what you can purchase eliminate most over the counter items now, however, contact solution is still covered and other items like that. Your glasses and contacts would be covered by your HSA and if you have a credity-type card with it, just use that to pay for your glasses.

You can keep as much money as is not used in your HSA unlike and FSA that is forfeited every year, according to Federal guidelines. HSAs do roll over thus making it a much better option for most families. If you are young and are contributing while not using much, you would amass quite a bit when you get older and would probably need it more.

HTH

 

[bicker]

This is all great information, but I wouldn't let HR off the hook. This is a fundamentally important part of their job, and getting the relevant information from them is something you're entitled to as part of your job, regardless of your workload.

 

[golfgal]

This is all great information, but I wouldn't let HR off the hook. This is a fundamentally important part of their job, and getting the relevant information from them is something you're entitled to as part of your job, regardless of your workload.

Well, the issue is that some HR departments are better than others. Some HR departments really only deal with employment issues (hiring/firing, etc.) but do insurance because that is part of their job but they don't always know the ins and outs of how these things work-which is what it sounds like the OP's case it.

 

[bicker]

I'd complain. And you know me and my perspectives on complaining... I complain about a lot less than the average American, and I would complain about HR giving inadequate responses and not responding to inquiries.

 

[BuzzBiteyear]

And, at the end of the year, if there's still money in the HSA, find something that your insurance covers (vision exam, glasses, etc) so you don't forfeit any money.

HSA don't work that way, you can build up your account value and don't have to spend a penny of it and it will be there the following year, it's not a "use it or lose it" account.

HSA's are in essence more akin to a 401(K) or similar tax-deferred retirement accounts. However, with retirement accounts you do pay FICA taxes, and when the money is withdrawn possibly pay Federal and State & Local taxes. With HSA contributions, they are done pre-any-tax: FICA; Federal; State and Local. Also, if you withdraw funds from the account and use them for qualified medical expenses, even upon withdrawal you will not pay FICA, Federal, State, or Local taxes on the distributions. You will however receive a tax document in January/early February indicating how much you withdrew from the account the previous year, and this is reported on your tax return. And assuming you used it for qualified medical expenses, you will record an amount that will offset that reported amount, causing no taxes to be paid on the distribution.

Before 1/1/11 you could use HSAs for visiting the doctor, dentist, hospital, eye doctor, prescriptions, and many over-the-counter drugs, supplements, and medical supplies (such as bandages, etc.). However, starting 1/1/11, expenses are now lined up with how the IRS views medical expenses. The basic rule now is, in order for an expense to be a qualified medical expense, it must be allowed as a medical expense by the IRS. This will still cover your doctor, dentist, hospital, eye doctor visits, and prescriptions. But things like OTC medicenes, supplements, medical supplies, etc. will not be allowed. However, you can get prescriptions for most of these and then those would be allowed. I myself will be obtaining a letter from my doctor so that I can reimburse myself through my wife's HSA for my OTC allergy medications.

One qualified expense very few take advantage of is reimbursing yourself for medical mileage.


HSA's can be an effective way to save for retirement as well. Build that balance up and use it in retirement to pay health premiums, etc.