It’s new for us and we have it through a small start up and it’s new for the start up so getting questions answered has been hit or miss. Google hasn’t been helpful for my specific questions either. I know HSAs have been discussed in the retirement thread so I’m hoping someone knowledgable can help me understand some of the rules.
Our D will be getting lasik, which I’ve confirmed is an acceptable expense. The cost will be about $5,000. Here are my questions:
Dh will have payroll deductions evenly spaced throughout the year to get to the max he's permitted to contribute ($6,750). If D has lasik early in the year, when not enough has been accrued in the account, I assume we can just pay out of pocket and then submit the expense toward the end of the year? I'm not concerned about cash flow; just hoping to pay with tax free dollars. Or can he request more of his income go in earlier in the year? Seems like there must be some consideration for someone who needs health care/has an emergency early in the year...for us, it would not be a problem to pay the bill and then submit the expense to the HSA later. I just want to understand how it works.
Dh will turn 55 during the year. Can he add $1,000 to his contributions at that time?
Do I have to use my insurance to have something eligible under an HSA? For example, if my out of pocket for a prescription under our new insurer (Cigna) is more expensive than an alternative I have access to, can I use the alternative? I assume I can but I want to make sure I don't make a naive mistake.
We were sent a credit card to use for expenses. Related to #1, I assume I have to monitor the balance and never charge more than what's been accrued?
If dh leaves the company during the year, does he have the option of directing more of his last few paychecks to the HSA if we believe that will be beneficial to us?
Thanks in advance to anyone who can help me navigate this new savings account!
Not about the account per se, but if your D has not had an appointment with her surgeon’s office yet to confirm that she is a good candidate for the surgery, hold off on putting that money into any kind of tax deferred health care vehicle where you can’t use it for other things.
HSA can be used for any medical, and the account belongs to the owner (not the employer). Not a use it or lose it situation.
OP,
Yes, you can pay out of pocket and reimburse yourself, even if the reimbursement comes in a later year. Any expenses after the HSA is established count.
1a) Up to the employer whether they’ll accommodate front-loading, but you don’t have to fund HSAs via payroll deduction; you get the same tax answer if you fund it yourself with outside funds.
Yes
No
It’s a debit card, and normal debit card rules apply.
Maybe, but because of 1a, not relevant. There is an issue if you don’t have HDHP all year.
A clarification on #2 – If he turns 55 during the year, he can add the $1,000 is equal pay period amounts during the year. He doesn’t have to wait for his birthday to start the catch-up contribution.
Regarding #3 – you can’t have additional insurance beyond the High Deductible Health Plan that your husband has. The HSA is supposed to be used only with an HDHP. You will need to drop your other coverage from, I assume, your employer.
ETA: HSAs are a fabulous invention, especially if you can afford to contribute the max. The funds roll over year to year and accumulate. At any age, you can use your HSA funds tax-free for health care expenses. And after age 65, you can use your HSA funds for any expense, and you’ll only owe regular income tax – just like the treatment of funds in your 401(k).
OP - for our account at least, it’s just like a checking/debit account in that you are the one controlling it. You don’t “submit” things, you just go online into the account and set up payments from it like you would with your checking account. Any payee which accepts a debit card can use your card - just make sure the patient is authorized on the card. That happened to me earlier this year when I went for a procedure, wasn’t authorized to use the card, and had to charge the $500 bill on my credit card! The stupid burns, so check in advance to be sure before you try using it for something.
If you have the funds available, you can make a lump sum contribution to the HSA from your bank account and report it on the front page of your 1040 return. We do this every year so that the funds are available at the beginning of the year. We do not have any HSA contribution withheld from DH payroll checks. You can also do a hybrid of both.
A few notes: D has already had a consult and is a good candidate for lasik so that’s not at issue. The “other coverage” I have is not through another employer’s coverage. I’ve just found a prescription coverage (available to everyone) that provides me with surprisingly low out of pocket costs which just may be lower than what I have through our new Cigna coverage.
Sounds like it may make everything easier if we just make a lump sum contribution + the $1000 for Dh turning 55 this year and stop having DH’s company take money out of his paycheck each month. Will have to see if dh’s employer permits that as @allyphoe indicates it’s at their discretion.
I guess the only question will be if Dh switches jobs this year and has coverage that isn’t high deductible, meaning he then becomes ineligible for an HSA. Not sure if he’s funded at the max for the year but isn’t really eligible for part of the year. Unless anyone knows the answer here, I can just wait to see if that becomes an issue.
@Sylvan8798, I’m not sure if I know what you mean about making sure the patient is authorized on the card…so, I’m guessing the card may only be in DH’s name right now. We currently have 4 on his health plan (2 daughters). So we have to make sure the three of us are “registered” so health care provided to the three of us is covered? Thanks for the heads up. I would have had no idea!
@allyphoe, I just reread your response above and want to clarify: is it up to dh’s employer if we can self fund or just if he can front load from his paycheck? In other words, they may say ‘no’ to front loading via paycheck but we could still just self fund and stop the deductions like @MereMom? If we’re allowed, honestly, that just sounds easiest.
I really like having an HSA. I actually use it as an investment vehicle. Unlike an FSA, it’s not a use-it-this-year-or-lose-it thing. We don’t reimburse ourselves for our current health care expenses - we let the money accumulate. We plan to use our HSA to pay for health care costs in retirement.