HSA's- tell me the good and bad..

[Shelly F - Ohio]

I don't know of anything to watch out for but I can say we have had ours for 5 yrs and LOVE it. We hardly get sick so it is a great plan for us. I can't see why people want to pay a month payment for their share for a traditional plan. That money is just going to fill someone elses pocket. If you are paying say $300 a month just to have coverage x 12 months that is $3600 you are throwing away. with a HSA acct that is money you get to keep and use as you need. The money rolls over year to year. Its tax deductible. Yes you pay 100% till you hit you max spending but if you are rarely sick it is a great plan and if you are one who has lots of medical needs then you know all you ever have to shell out is the max spending amount and then everything is covered 100%.

 

[tvguy]

We just signed up for one beginning January 1, 2017. Had it available last year, but didn't sign up, my CPA said "do it, no reason not to since you don't itemize". So I am not aware of anything bad, just an extra step to spend that money, and it rolls over year to year.

 

[lanejudy]

Havenslover, how are you able to use your HSA funds if your kids are not on the plan? My agent said that I can't.

She also said I am not allowed to pay for something on Jan1 personally and then reimburse myself once I have funds in the acct.

How about using my cc to pay so I get the points and then reimbursing myself, regardless of if the funds are in the acct? Again, she says no but I read online lots od people do this.

My reg agent is out until tomorrow, or so I am told, and I am not crazy about the one currently helping me.

Any advise on setting up accts for ourselves? Where? Fees? I have been playing phone tag with my acct today to try and ask these things.

As the owner of the HSA account, YOU must have a qualifying HDHP, however I believe once you have the account the funds can be used for medical expenses of any dependent, not just those expenses that pass through your HDHP. It can also be used for dental and vision expenses, which for most of us are not part of our standard healthcare insurance plan.

As long as the expense occurred after you opened the account, it doesn't matter when you deposited the funds into the account. And yes, you can reimburse yourself. Mine has a checkbook (which I rarely use) so I could write myself a check, or I think there is a way to made a withdrawal. Just be sure you have the paperwork to show 1) the original expense, 2) you paid the expense, and 3) the reimbursement amount matches the expense; if you are audited and can't provide that paper-trail, you could be hit with penalties for improper use since the HSA must be used for healthcare-related expenses. An FSA allows one to be reimbursed even if the funds aren't in the account yet, but an HSA requires the funds to be in the account before withdrawing. So if you can float the funds from another savings account or on your credit card, yes you can use the credit card to pay an expense early in the year and then reimburse yourself later; you cannot reimburse for any interest that may be incurred on the credit card. Another option is to set-up a payment plan if you have a large expense early in the year before fully-funding your HSA account.

Hopefully your regular agent will be available to answer your questions soon. I don't trust the info you've received.

 

[havaneselover]

As the owner of the HSA account, YOU must have a qualifying HDHP, however I believe once you have the account the funds can be used for medical expenses of any dependent, not just those expenses that pass through your HDHP. It can also be used for dental and vision expenses, which for most of us are not part of our standard healthcare insurance plan.

As long as the expense occurred after you opened the account, it doesn't matter when you deposited the funds into the account. And yes, you can reimburse yourself. Mine has a checkbook (which I rarely use) so I could write myself a check, or I think there is a way to made a withdrawal. Just be sure you have the paperwork to show 1) the original expense, 2) you paid the expense, and 3) the reimbursement amount matches the expense; if you are audited and can't provide that paper-trail, you could be hit with penalties for improper use since the HSA must be used for healthcare-related expenses. An FSA allows one to be reimbursed even if the funds aren't in the account yet, but an HSA requires the funds to be in the account before withdrawing. So if you can float the funds from another savings account or on your credit card, yes you can use the credit card to pay an expense early in the year and then reimburse yourself later; you cannot reimburse for any interest that may be incurred on the credit card. Another option is to set-up a payment plan if you have a large expense early in the year before fully-funding your HSA account.

Hopefully your regular agent will be available to answer your questions soon. I don't trust the info you've received.

As long as the dependent is on your tax return. My ex cannot use an HSA to pay for our kids' medical expenses because I claim them on my taxes.

 

[tvguy]

As the owner of the HSA account, YOU must have a qualifying HDHP,.

Correct. Not sure how you could even open a HSA by itself since they are linked to your health insurance.

 

[supersnoop]

If you are able to take advantage of the HSA, while still paying your expenses out of pocket, it is pretty awesome. I have had an HSA for maybe 8 years. I used a bit of the HSA $ to pay for the birth of the kids, but for the most part we try to leave the HSA money alone. I keep a full years deductible in cash, and invest the rest. It is pre tax money, growing tax free, and is tax free on withdrawal for future medical expenses so we use it as an IRA. We have saved up around 25K. It is a rare tax advantage.

Be sure you save all your receipts. In 30 years (or whenever you retire), you can submit them for reimbursement from the account and get a tax-free disbursement. There's no time limit on the expenses.

 

[havaneselover]

Correct. Not sure how you could even open a HSA by itself since they are linked to your health insurance.

That's not really true. You can go online and open one and mine is linked to nothing. I just had to check that I have a hdhp.

 

[wilkeliza]

That's not really true. You can go online and open one and mine is linked to nothing. I just had to check that I have an hdhp.

It isn't linked to your HSA per sea but if you are audited and have opened an HSA with out having a HDHP you will be on the hook for all those back taxes plus probably have a few extra charges tacked on as well. So the point still stands that you do need an HDHP in order to have an HSA some banks just don't necessarily make you prove it.

 

[havaneselover]

It isn't linked to your HSA per sea but if you are audited and have opened an HSA with out having a HDHP you will be on the hook for all those back taxes plus probably have a few extra charges tacked on as well. So the point still stands that you do need an HDHP in order to have an HSA some banks just don't necessarily make you prove it.

I understand that. Just responding to the comment that you couldn't open one without a hdhp because it was somehow linked to the plan. It's basically on the honor system.

 

[4HOLIDAYS]

Once again, this is one of the questions I was asking my agent. I have looked at several plans with a 3000 deductable. They show plans at this level as both HDHP as well as regular-non HSA. I asked why can't I get a reg non hsa plan (because the $3000 deductable is still considered a HDHP) and then open my own HSA to pay for the copays and such and was told that you can not UNLESS the plan you are on is written-as in coded,identified as an HSA. Thoughts?

 

[wilkeliza]

Once again, this is one of the questions I was asking my agent. I have looked at several plans with a 3000 deductable. They show plans at this level as both HDHP as well as regular-non HSA. I asked why can't I get a reg non hsa plan (because the $3000 deductable is still considered a HDHP) and then open my own HSA to pay for the copays and such and was told that you can not UNLESS the plan you are on is written-as in coded,identified as an HSA. Thoughts?

That is true. My plan is a PPO but still has a deductible of 3,000. The HDHP that is cheaper has a deductible of only 2,500 and qualifies for a HSA. Even though my PPO plan is considered a high deductible because it is a PPO I do not qualify for an HSA and can not open one even on my own.

 

[lanejudy]

Once again, this is one of the questions I was asking my agent. I have looked at several plans with a 3000 deductable. They show plans at this level as both HDHP as well as regular-non HSA. I asked why can't I get a reg non hsa plan (because the $3000 deductable is still considered a HDHP) and then open my own HSA to pay for the copays and such and was told that you can not UNLESS the plan you are on is written-as in coded,identified as an HSA. Thoughts?

The terminology is confusing you -- the term "high deductible" is somewhat subjective. It's actually not the amount of the deductible that makes it a HDHP, it's the structure of the plan. HDHP plans have a wide range of deductibles -- I know of HDHP plans with deductibles as low as $1500 and as high as $12000. I am also aware of more traditional plans with deductibles that range from $0 to $5000. There are official regulations about the structuring of medical insurance plans, what is covered, etc. so if the plan is not designed with an HDHP format, the owner won't qualify to associate an HSA with it. You may be able to do an FSA with a non-HDHP, which provides some of the same tax-savings but is limited to the one-year time period.

 

[tvguy]

I understand that. Just responding to the comment that you couldn't open one without a hdhp because it was somehow linked to the plan. It's basically on the honor system.

As are most taxes. On the honor system. Practically speaking, you can't legally have one without the other.

 

[havaneselover]

As are most taxes. On the honor system. Practically speaking, you can't legally have one without the other.

I guess my point is as there is clearly confusion as to what a hdhp is (see comments above) one could open an account that was not technically qualified to do so--either intentionally or unintentionally. There is nothing preventing it.

You said you were not sure how you could do so. That was my clarification.

 

[4HOLIDAYS]

Thank you sooo much. This is all very helpful info. I think I get it now. We will be making 2 options avail for our employees-1 being an hsa and 1 being a traditional open access/hmo plan. I will select the HSA for my family.

Now, onto figuring out which bank/ acct set up...I will cover the set up and monthly fees for employees but unsure how much of a match we will do.

Thanks again, you guys are the best!

 

[supersnoop]

As are most taxes. On the honor system. Practically speaking, you can't legally have one without the other.

False.

It isn't linked to your HSA per sea but if you are audited and have opened an HSA with out having a HDHP you will be on the hook for all those back taxes plus probably have a few extra charges tacked on as well. So the point still stands that you do need an HDHP in order to have an HSA some banks just don't necessarily make you prove it.

We're getting into government regulations at this point. It gets complicated.

You can have an HSA without an HDHP. However, you can only contribute (that is, deposit funds) into an HSA while you are covered by an HDHP.

There are plenty of people who had an HDHP and contributed to an HSA and then later switched to a non-compatible plan. They're still allowed to have, and use, the funds in the HSA. They're only restricted from putting more money into the account.

 

[Grace&Carolinesmom]

I understand that. Just responding to the comment that you couldn't open one without a hdhp because it was somehow linked to the plan. It's basically on the honor system.

This is so true. I work at a bank and it is just a "check the box" that you are on a HDHP. The only thing the bank monitors is the contribution limits for the year based on current Fed guidelines for individual/family accounts and age. We do not monitor how the funds are being spent either. There are so many customers I see spending on purchases unrelated to medical.....SO wish they would get audited. I despise seeing people cheating without consequences. Sigh.....but this is life

For those of you with HSA accounts and monthly fees, definitely shop around. Check the smaller banks that don't have monthly minimums or fees.

 

[wendow]

You are getting bad advice I believe. If your kids are on your income tax return, then you can pay for their medical expenses with your HSA regardless of whether they are on your insurance plan.

Just now reading your comment here. We were told the same ...that the HSA could only cover those on the health insurance plan. Of course we are too late to change anything for next year but I will have to look into this more.

 

[tvguy]

False.

We're getting into government regulations at this point. It gets complicated.

You can have an HSA without an HDHP. However, you can only contribute (that is, deposit funds) into an HSA while you are covered by an HDHP.

There are plenty of people who had an HDHP and contributed to an HSA and then later switched to a non-compatible plan. They're still allowed to have, and use, the funds in the HSA. They're only restricted from putting more money into the account.

Okay, I'm confused. False? But True? You HAVE to have a HDHP to open an HSA. But HSA can live forever once that requirement is met. In my case the primary reason my CPA recommends an HSA is not to pay medical expenses now. We hope to retire in 3 years or so, which will be 3 years before we qualify for Medicare. We should have very little tax liability in those years if any......unlike now, so we are saving money today to spend then. When we get on Medicare, if things remain the way they are now, I plan to assign my benefit to an HMO like my mom did, and the coverage has zero deductible.

 

[AlohaNow]

Correct. Not sure how you could even open a HSA by itself since they are linked to your health insurance.

We have purchased our health insurance directly from the insurer for the past ten years. We have switched jobs, moved twice, and as long as we pay the monthly premium we have health insurance. It's pretty sweet. We will never obtain health insurance through an employer, as that no longer makes sense to us. We are also free to shop around for any HSA that we would like to open as we are covered by a HDHP. I think most folks think of these two items being tied together because they obtain both through their employer. For those of us out there on our own, we are free to choose any insurer and any HSA.