<p>We just opened a HSA with Wells Fargo/Kaiser Permanente and stuck $1,000 in the account. </p>
<p>When we fill out the FAFSA…does that amount go under “net worth of our investments” (i.e. treat it like a money market account) or does it go under Worksheet B “Payment to tax-deferred pension and savings plans (paid directly or withheld from earnings)?”</p>
<p>thanks!</p>
<p>I don’t know if I would put it under either. It’s a very good question. Does having an HSA account effect FAFSA?</p>
<p>I haven’t seen anything either way about it and I can sell HSA’s. The account really isn’t a true “savings or investment” account. It’s designed to pay out of pocket medical expenses only… till retirement. I’ll check and see if I can find anything and get back. </p>
<p>This is one of those ripple effects of finanical planning. Certain types of investments hinder FAFSA and others don’t count at all, no mater how much money is there.</p>
<p>I was told MSA/HSA accounts are like an IRA, so the value in them does not count as an asset, but I think the money you put into it is required on one of the schedules. I’ll see if I can find that info</p>
<p>In googling this, I found several sites like this one:</p>
<p><a href=“http://www.financialaidnews.com/2007/01/02/more-fafsa-tips/[/url]”>http://www.financialaidnews.com/2007/01/02/more-fafsa-tips/</a></p>
<p>It sounds like neither the value in the account nor the contribution counts as a FAFSA asset or income. It makes sense as the deductibility is to help make up for NOT having decent health coverage.</p>
<p>Hi</p>
<p>Thanks for all the input. </p>
<p>I just called FAFSA and the rep said to put it under assets. I am still not 100% sure this is right…I will keep investigating and let you know!</p>
<p>I found this, it is an old date, but from the time when MSAs (the initial form of what is now an HSA) began:</p>
<p>CHANGES TO WORKSHEET #3 AND UNTAXED INCOME</p>
<p>Questions 64 and 76, formerly titled “Total from Worksheet #3,”
have been renamed “1996 Amount from Line 5, Worksheet #3.”
This issue is discussed further in the “Central Processing System”
section.</p>
<p>The Untaxed Income items collected on Worksheet #2 include two
clarifications: FAFSA filers are instructed to include VA
Educational Work-Study Allowances in the amount reported as
other untaxed income (questions 63 and 75). This income was
previously treated as a resource in determining loan amounts.
Applicants are also instructed not to include contributions to, and
payments from, flexible spending arrangements (e.g., cafeteria plans,
medical savings accounts) as other untaxed income.</p>
<p><a href=“http://ifap.ed.gov/dpcletters/doc0085_bodyoftext.htm[/url]”>http://ifap.ed.gov/dpcletters/doc0085_bodyoftext.htm</a></p>
<p>That seems to cover the actual contribution portion, not certain on the asset side yet ;)</p>
<p>on the assets, see this link:</p>
<p><a href=“http://ifap.ed.gov/FSACounselors/clcf/attachments/2007-08%20FAFSA%20Final%20Do%20Not%20Submit.pdf[/url]”>http://ifap.ed.gov/FSACounselors/clcf/attachments/2007-08%20FAFSA%20Final%20Do%20Not%20Submit.pdf</a></p>
<p>I read the part about assets in two sections, as saying it should NOT be included:</p>
<p>Investments include real estate (do not include the home
you live in), trust funds, UGMA and UTMA accounts, money
market funds, mutual funds, certificates of deposit, stocks,
stock options, bonds, other securities, Coverdell savings
accounts, 529 college savings plans, the refund value of 529
state prepaid tuition plans, installment and land sale
contracts (including mortgages held), commodities, etc. For
more information about reporting education savings plans,
call 1-800-433-3243. Investment value means the current
balance or market value of these investments as of today.
Investment debt means only those debts that are related to
the investments.</p>
<p>IN THE INCLUDED PART (ABOVE) IT IS NOT SPECIFICED TO INCLUDE AN MSA/HAS, WHILE OTHER EXAMPLES ARE DETAILED</p>
<p>Investments do not include the home you live in, the value
of life insurance, retirement plans (pension funds, annuities,
non-education IRAs, Keogh plans, etc.) or cash, savings, and
checking accounts already reported in 43 and 87.</p>
<p>AN MSA/HSA IS A NON-EDUCATION IRA</p>
<p>Somemom</p>
<p>Wow! Great research!</p>
<p>Is that true…a HSA is considered a noneducation IRA???</p>
<p>I cannot find a precise quote, but the MSA account I have has all those restrictions and limitations and has been referred to as an IRA…I think whatever money is not spent and accumulates for the future (haha!) turns into an IRA at retirement age.</p>
<p>I agree with somemom – I have an HSA and I do NOT report it. The reason is that it is NOT an “asset” that you can use to pay for college – once the money is in the HSA you can’t touch it except for qualified medical expenses. It really is there to cover the portion of expense not covered by the deductible, as it goes hand-in-hand with having a high-deductible policy. </p>
<p>An “asset” is something that you could liquidate, sell, or borrow against for purposes of financing your kid’s education. If you have $15,000 in the HSA, that money isn’t there for college-- it’s there to pay whatever medical expenses you have that aren’t covered by your insurance. </p>
<p>I also don’t add it back in as “untaxed income” – however, I know my daughter’s college will have a copy of my tax returns, so they are going to see whatever it is that I take as a deduction. </p>
<p>Anyway, the way I see it is that I could pay a huge premium to have health insurance with a low deductible, or I could get the HSA, pay a smaller premium and bank the difference. But it’s still all “health insurance” dollars in my mind.</p>
<p>OK, I emailed <a href="mailto:studentaid@ed.gov">studentaid@ed.gov</a> and this is their response:</p>
<p>Thank you for your inquiry about federal student aid.</p>
<p>Payments to tax-deferred savings plans should be reported as untaxed income
in items 41 and 85 on the 2007-2008 Free Application for Federal Student Aid
(FAFSA).</p>
<p>If you have additional questions about financial aid, application
procedures, eligibility formulas or other student aid topics, you can
contact our Federal Student Aid Information Center (FSAIC) at
1-800-4-FED-AID (1-800-433-3243) or 319-337-5665. One of our customer
service representatives will gladly assist you.</p>
<p>Hmm, all different answers…kinda like calling the IRS :eek:</p>
<p>One good resource would be the finaid office of the school. I know I always have to send in the tax return for verification and they could adjust/add back in those items. I know they add in some schedule C business expenses, but I have not heard any one mention the MSA $</p>
<p>Ok, forgive my ignorance but I am really trying to understand this…</p>
<p>So if I made the contribution to our HSA in 2007, it seems like I wouldn’t include the amount in this year’s FAFSA as the top of the page says “FAFSA WORKSHEET - CALENDAR YEAR 2006” and my contribution affects our 2007 taxes, right?</p>
<p>Secondly, every year when I fill out the FAFSA, do I include our HSA contribution for the year, but not the amount that already is IN the HSA account (because it will accumulate from year to year)?</p>
<p>Fresno Mom: I am in agreement with CalMom and based upon info such as the IAFP letter above have never included MSA/HSA monies in any of the schedules, either as an asset or income. </p>
<p>I have shown IRA contributions, that would NOT include the value of the account but would include the actual contribuation, per the line on the tax return. That may be the key to the answer, as you go through the FAFSA they ask about line by line info…for instance one year we had a big discussion about income tax paid v self-employment tax. Since SE tax is really FICA and every one pays FICA, it is not taken back out, but it feels like it should be, until you read the FAFSA carefully and follow the specific instructions, line by line, as the FAFSA refers to individual lines on the 1040 form! When you are filling it out, check out what the help section says or what the question says about which line to use, because the MSA/HSA $ are a front page line item.</p>
<p>PS: I wish the account $ would accumulate, we keep using it all, as intended, for medical expenses!</p>
<p>"MSA/HSA monies in any of the schedules, either as an asset or income. "</p>
<p>I don’t think it’s considered either until after age 65. The money in these are basically prepaid medical expenses. </p>
<p>They cannot prior to age 65 be used for anything else without federal penalty.</p>
<p>Fresnomom – I think you are right – since you did not contribute in 2006, there is nothing you need to enter on this year’s FAFSA.</p>
<p>For next year – you will have an advantage. You will know what college your kid is attending, and you will be able to ask them their financial aid practices – or observe what they did in the past.</p>
<p>For example, as I noted, I didn’t list my HSA contribution as “untaxed income” last year. After I sent my tax return to my daughter’s college, they went online and made some changes to the FAFSA amount based on what was in the tax return – but they didn’t add back that HSA contribution. Since I know that they went over my returns carefully and made adjustments on their own, I can take that as a good indication that college is o.k. with my leaving it off. In any case, I know for a fact that they will insist on seeing my tax returns again this year. So I’m just going to go right ahead and do things this year the way I did last year. But another college might take a different view – so my “advice” might not apply across the board.</p>
<p>You aren’t going to get in trouble for what you do in good faith, based on a reasonable understanding of the instructions you are given. If FAFSA wants everyone to report their HSA’s, they can amend the instructions to say so – HSA’s have been around long enough for them to figure out that people have them.</p>
<p>Somemom and Calmom</p>
<p>I think you are right. I found this link (and it is current information…instructions for last year’s FAFSA) and it says don’t include contributions to flexible spending arrangements (e.g. medical savings accounts).</p>
<p><a href=“http://www.gcc.edu/UserFiles/File/Admissions/financial/FINANCIAL-AID-APP-FOR-ACADEMIC-YEAR-2006-07.pdf[/url]”>http://www.gcc.edu/UserFiles/File/Admissions/financial/FINANCIAL-AID-APP-FOR-ACADEMIC-YEAR-2006-07.pdf</a></p>
<p>Ok, this is the official word from UC Berkeley…</p>
<p>I wrote:</p>
<p>“My son is a freshman at UCB, and I am filling out the 2007-2008 FAFSA. Am I supposed to include the value of my HSA contribution and/or the value of the account on the form?”</p>
<p>UCB Financial Aid Office response:</p>
<p>“You do not need to account for that health savings account on your FAFSA.”</p>
<p>So, if I understand the consensus correctly, contributions to HSA get deducted from total income, so they reduce the AGI (like IRA’s). But unlike IRA’s, they don’t need to be added back in as untaxed income on the FAFSA?</p>
<p>If so, this is a great deal-- a way to lower AGI, lower EFC, increase potential aid, and allow the asset to appreciate tax free (and to use it later for medical expenses tax free as well, if I understand it correctly).</p>
<p>Is that rght?</p>
<p>I had wondered about Health Savings Accounts and sent the question we have been considering on this thread to the “Ask the Aid Advisor” link of <a href=“http://www.finaid.org%5B/url%5D”>www.finaid.org</a>. This is the response I got:</p>
<p>Health Savings Accounts must be reported as an asset on the FAFSA. Only retirement assets and your home are excluded from the asset section of the FAFSA. Hope this helps… </p>
<p>J. Ritchie Morrow
Financial Aid Coordinator
Coordinating Commission for Postsecondary Education
140 N 8th St Suite 300
PO Box 95005
Lincoln NE 68509-5005
402.471.0032
402.471.2886 fax</p>