Setting Up an Individual (non-employer sponsored) HSA

[Deleted]

Since my ACA thread morphed into a discussion about HSA (Health Savings Account) I thought I would start a new thread.

Who has set up an individual HSA? What are the pros and cons? What to look out for?

I had one many years ago when you couldn't roll over the balance and lost out on some money because I didn't have enough health expenses. That was a good thing!  

I never thought about them for the last 10 years since I didn't have much "earned" income. But thanks to Great 's post on the ACA thread and link to the IRS website, I learned that I could shelter investment income.


And an ETA from my husband: If your expenses are greater than the maximum sheltered amount that you can put into an account can you pay health expenses from both sheltered and unsheltered funds?

[Great]

 just wanted to say 'Thank you' for starting this thread (and   for taking the ACA off track). I was almost going to suggest a thread over in the tax corner but wasn't sure where it would be best.
One of the approved insurance companies for my state is Blue Cross/BS and they have a specific product called Blue & U Saver that meets the guidelines of an HSA.

It comes in the Silver level offered on the exchange, so purchasing on the exchange it would possibly qualify for the subsidies. I really don't know much about the exchange and subsidies and the different metal plans, there is also a Bronze level product.

eta.. I'm anxious to learn more from YM'ers too

[The Captain]

Ding Ding Ding!  You beat me to it @bonnap!  I'd never even heard of these before!

Thanks!

[Rocky Mtn Saver]

I love my HSA, mostly because it has finally gotten me to save a sinking fund for medical expenses.  Now that I'm over 40, that is becoming something that I need to think about.  I opened my HSA through my CU, and it operates much like a free checking account but with better interest rates.  I can use a debit card, although I choose to usually run my expenses through my mileage card and reimburse myself. 

Keep all your reciepts!  I go through my receipts late in the year against my bank statement to make sure that I have receipts enough to cover all my withdrawals from that HSA for the year.  And I attach them all to my statement with my taxes annually.  As far as I know, there's no reason you can't pay a portion of health expenses from other accounts.  Just make sure you have receipts to cover what you DID take from your HSA. 

HSA's are not use-it-or-lose it, so you can allow the money to build up tax-free (as long as you only take from it for eligible expenses).  You can contribute to it up to the cap annually as long as you are covered by the HDHP, but you can spend it on medical expenses even once you leave the HDHP.  I liked that flexibility, and I know some people use it as part of their retirement planning system too. 

The only 'cons' I can think of are keeping the receipts, and the HDHP itself.  If you take the medical deduction on your taxes, you may want to make sure which type of tax-advantaged method is best for you (the deduct vs the HSA, you can't do both).


ETA: to highlight the above portion, because this is a common misconception when people confuse HSA's with FSA's. 

[justme]

The only 'cons' I can think of are keeping the receipts, and the HDHP itself.

It can be a big pro too. There's no limit on when you have reimburse yourself by. As long as the medical expense was incurred after the HSA opened, you can reimburse yourself 50 years from now as long as you kept the receipt. Hmmm...though I wonder if the age of the account stays with it if you transfer it to a different bank at some point?

[Deleted]

Oct 9, 2013 12:03:51 GMT -5 justme said:

The only 'cons' I can think of are keeping the receipts, and the HDHP itself.

It can be a big pro too. There's no limit on when you have reimburse yourself by. As long as the medical expense was incurred after the HSA opened, you can reimburse yourself 50 years from now as long as you kept the receipt. Hmmm...though I wonder if the age of the account stays with it if you transfer it to a different bank at some point?

I checked, it does.  Just need to provide proof.

[sesfw]

I opened one 10+ years ago at age 61-62, can't really remember.  I contributed to it as long as I could (earned income) before becoming eligible for Medicare (age 65).  I didn't have health issues so didn't need to use the funds.

After a couple of years of not contributing nor withdrawing they started charging an annual service charge of $25.  So I started using it for an eye exam, chiropractor ...... and lately for major medical after insurance payments.

Because an HSA is before tax dollars, you can't have a medical deduction on your taxes if you use the account to pay the medical bills.

A definite balancing act on your own particular tax situation.

[workpublic]

i thought HSAs were going away due to the ACA? I must have been mistaken.

[Rocky Mtn Saver]

Yes, you are mistaken. 

[skubikky]

 I've had an HSA for a few years now.  It was my understanding that in order to have an HSA you would have to have a HDHP?  As stated already, you have to keep all receipts for withdrawals that are made.  You can use the IRS guidelines to find out what are qualified expenses.

Found this:   "Making contributions through your employer’s payroll can provide added tax benefits — HSA contributions are
not subject to the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA)
taxes, which amounts to a typical savings of 7.65% (subject to limits of the Social Security Wage Base)"
This is in addition to not being subject to Federal and State tax as well. 

Not sure how it works when the deposits are not being made through an employer.
The maximum one can deposit for a family is $6550 and another $1000 catch up for those over 50.

Many of the people I work with are now on the HDHP plan with the HSA and like it.
Our employer makes contributions to it as well.





.

[skubikky]

Oct 9, 2013 10:30:23 GMT -5 @bonnap said:

 If your expenses are greater than the maximum sheltered amount that you can put into an account can you pay health expenses from both sheltered and unsheltered funds?

Not sure what you mean by   "sheltered" vs "unsheltered" funds.

Once the money is in there, you can use as much of it as you want to.

The scenario that could be very costlywhen you're in the first few years of using an HDHP with an HSA is to have an event at the end of the calendar year that maxes your HDHP deductible and then continue to incur care and have the deductible restart again on Jan. 1.   You might certainly be taking out what you put in the previous 2 years from the HSA and then have to start funding it all over again.  Not sure if that helps.

[Deleted]

Oct 9, 2013 14:14:21 GMT -5 skubikky said:

 I've had an HSA for a few years now.  It was my understanding that in order to have an HSA you would have to have a HDHP?  As stated already, you have to keep all receipts for withdrawals that are made.  You can use the IRS guidelines to find out what are qualified expenses.

Found this:   "Making contributions through your employer’s payroll can provide added tax benefits — HSA contributions are
not subject to the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA)
taxes, which amounts to a typical savings of 7.65% (subject to limits of the Social Security Wage Base)"
This is in addition to not being subject to Federal and State tax as well. 

Not sure how it works when the deposits are not being made through an employer.
The maximum one can deposit for a family is $6550 and another $1000 catch up for those over 50.

Many of the people I work with are now on the HDHP plan with the HSA and like it.
Our employer makes contributions to it as well.





.

In a personally HSA, you don't get the FICA cash back.

[bean29]

I agree that I like having a "sinking fund" for medical expenses. I probably learned it here but you want to contribute to your 401k to get the match, then fund your HSA as much as possible. HSA is tax free when you take $ out as long as you use it for medical expenses. You have to have an HDHP when you put the $ in but not when you take it out.

I put $2500 in a limited FSA (Vision and Dental) and about $4,000 in a HSA. Next year I am only doing HSA.

Sent from my MB855 using proboards

[plugginaway22]

2014 limit for individual HSA account is $3300

[Deleted]

You need to be insured through a HDHP to qualify for a HSA

Check out what the MONTHLY fees are on your own HSA account.  I just left an employer that I had an HSA with.  Now they are going to charge me $4 per month FOREVER on that bloody account.  I was originally going to just leave it intact for post retirement use, but now I think I will roll it to a Vanguard plan and see if there is any way to avoid a monthly fee (since I have other accounts with them).  Otherwise I will burn it down on dental costs and junk like that over the next two years.

Best laid plans and all . . . 

[skubikky]

Oct 10, 2013 5:23:51 GMT -5 @daphne87 said:

My sister and her husband have an HSA. They max it every year but pay all medical expenses from their taxable accounts. She treats it as an additional retirement account, figuring they will likely need it down the road.

Ah...I think this is what Bonny meant by sheltered and unsheltered.   That's a good strategy if you can swing it.


HSA at max(over 50) being                        $ 7550/year   Fed/State/FICA free
401(k) max(over 50)                                 $23000/yr
                                                  Total   $30550/yr

[Deleted]

Oct 10, 2013 3:39:17 GMT -5 @rockit said:

You need to be insured through a HDHP to qualify for a HSA

Check out what the MONTHLY fees are on your own HSA account.  I just left an employer that I had an HSA with.  Now they are going to charge me $4 per month FOREVER on that bloody account.  I was originally going to just leave it intact for post retirement use, but now I think I will roll it to a Vanguard plan and see if there is any way to avoid a monthly fee (since I have other accounts with them).  Otherwise I will burn it down on dental costs and junk like that over the next two years.

Best laid plans and all . . . 

Rock it, check other companies, vanguard may not be your best bet if you don't have a lot in the HSA.

[bcdfgh]

Are you referring to this Health Savings Administrators (hsaadministrators.info)?   This Vanguard has $45 annual fee and $25 closing fee.  I'm also looking to move my HSA to a new bank.

[Sam_2.0]

DH is paid on commissions and taxes are not withheld for him. Does anyone know if we use his $$ to pay into the HSA if we still have to pay FICA?

[Baby Fawkes]

Oct 10, 2013 6:01:36 GMT -5 skubikky said:

HSA at max(over 50) being                        $ 7550/year   Fed/State/FICA free

Just be aware that HSA contributions are not deductible on all state taxes. CA does not allow you to deduct the HSA contributions, so if you file there you only get the money sheltered from the federal level

[Great]

Oct 10, 2013 5:23:51 GMT -5 @daphne87 said:

My sister and her husband have an HSA. They max it every year but pay all medical expenses from their taxable accounts. She treats it as an additional retirement account, figuring they will likely need it down the road.

This what I am attempting to do, more for the down the road expenses.

Bonny 
In my online research for a HSA administrator I did find where Howard Clark has a link to an option with Vanguard no load funds ... that probably has a fee schedule you could look into.
www.clarkhoward.com/news/clark-howard/insurance/how-invest-your-health-savings-account/nFbp/

I checked with a local credit union and the teller gave me a name of a bank she 'thought' they used for their employee HSA's. I found that to be a confusing answer, but thought I would check with a different credit union in a few days to see if that is standard practice to me locally.

[teen persuasion]

Oct 10, 2013 5:23:51 GMT -5 @daphne87 said:

My sister and her husband have an HSA. They max it every year but pay all medical expenses from their taxable accounts. She treats it as an additional retirement account, figuring they will likely need it down the road.

This is what I've been doing (well, not maxing, but paying from taxable accounts and not reimbursing) but this year some high bills mean that I need to reimburse us to stay in budget.  Everyone's comments about keeping receipts have me wondering : What counts as a receipt?  

I generally run things thru our rewards CC whenever possible, but many places require checks or payment online.  The only things I have actual receipts for are Rx from the local pharmacy (which don't get tagged medical on the CC .)

[Great]

teen
I'm wondering about the 'keep your receipts' thing and stockpiling them for a later date to remove funds from an HSA to somewhere else.
This is another thing I'll start researching and consult with my CPA next week after I gather all the questions I have about HSA's.

This whole thing keeps getting better to me. I found that I can pay my insurance premiums with a credit card and nowhere it did it say there were convenience fees (YAY! reward points  )

[Great]

teen
I just went to the IRS website, it has about when paying with a credit card on page 2, under the heading What Expenses Can You Include This Year?  Check publication #502.

eta, the link that was here did not work for some reason, sorry   so I deleted it.

There is a  publication 969 (2012 Health Savings Account and other tax favored health plans) as well. I do wonder if there is a 2013 publication that's been updated or if any changes have been made?

I wonder if some of this needs to be asked over on the Tax Talk board?

[bean29]

Oct 11, 2013 8:42:10 GMT -5 Great said:

teen
I just went to the IRS website, it has about when paying with a credit card on page 2, under the heading What Expenses Can You Include This Year?
www.irs.gov/pub/irs-pdf/p502.pdf 
It's publication 969 (2012 Health Savings Account and other tax favored health plans) I do wonder if there is a 2013 publication that's been updated or if any changes have been made?

I wonder if some of this needs to be asked over on the Tax Talk board?

www.irs.gov/pub/irs-pdf/p969.pdf

Great's link did not work for me hopefully the above will work.

[Great]

yep bean you are right that link didn't work for me just now when I doubled checked it.  I'll see if I can delete that link from the post, thanks!

I did go back to look around at the IRS again and found ...  Publication 502 (Cat. No. 15002Q) Medical and DentalExpenses (Including the Health Coverage Tax Credit) For use in preparing 2012 Returns. 
It listed the the HSA publication 969 as another useful publication.  

I've added running by the local IRS office today to see if I can get the actual printed publication of both these to start reading and try to figure this out for my own better understanding of the laws.

[bean29]

Great, why would you drive to the IRS office when you can get the forms off the internet.

I have their site bookmarked.

www.irs.gov/

I would especially not want to go there today, b/c I think they may be closed due to the shut down.

[Great]

bean  I don't have the patience to sit at my computer reading the publications and forms.  I ran out of printer ink as well so can't even print them out  .

Good point that the office may be closed today, thank you for reminding me. The IRS office is really close to where I live and I pass by it to get the office supply store for ink cartridges.

I  also have questions about naming a beneficiary, if it has to be an individual or can it be a trust and if any advantages one way or the other. Can it be rolled over to another family member upon death for their medical/health needs and continue tax free?  
Do you know anything about those type of details?

[Deleted]

Oct 10, 2013 6:01:36 GMT -5 skubikky said:

Oct 10, 2013 5:23:51 GMT -5 @daphne87 said:

My sister and her husband have an HSA. They max it every year but pay all medical expenses from their taxable accounts. She treats it as an additional retirement account, figuring they will likely need it down the road.

Ah...I think this is what Bonny meant by sheltered and unsheltered.   That's a good strategy if you can swing it.


HSA at max(over 50) being                        $ 7550/year   Fed/State/FICA free
401(k) max(over 50)                                 $23000/yr
                                                  Total   $30550/yr

skubikky,

Can you show me where you found the above figure for $7550? Is that for a family? The most I'm seeing for an individual 55 and over for 2013 is $4250
at www.irs.gov/pub/irs-prior/p969--2012.pdf p5.

[Rocky Mtn Saver]

Bonny,

According to this from the IRS, the family limit for 2013 is $6450 with an additional $1000 catchup contribution allowed if you're over 55.  So the total for a family would be $7450, and for an individual $4250 with catchup.

www.irs.gov/pub/irs-drop/rp-12-26.pdf