HSA - anyone understand how contributions work?

[cjzimmer1]

DH's former employer had a high deductible plan and offered a partially funded HSA to go with it.  We added additional funds but ended up using all but $28 of it. But it's ours to keep and use whenever for medical expenses. DH has a new job that offers two plans.  One is for singles and their children dependents (in other words not a spouse) and it is clearly labeled as non-HSA compliant.  The second choice is a family plan (and the one we would choose)and has no such disclaimer (so I'm assuming it is HSA-compliant although I'm not sure what that means either).  The company offers flex spending accounts but not HSA accounts.

 

So I would prefer to save money in the HSA account since it will roll over from year to year and I don't have to worry about guessing wrong and losing money if I don't spend everything in the flexible spending plan(has happened in the past and it irks me to have lost that much).

 

So here is where I'm stuck, can we add money to the HSA and have it be tax deductible?  If so how do we do that?  Or is it only tax deductible if the employer is controlling the account and withdrawals it from paychecks.  HR wasn't helpful since they don't have an HSA, she couldn't answer any of my questions.

 

Edited January 7, 2016 by cjzimmer1

[Jane in NC]

Is the minimum deductible $2600 or more for the family plan?  If so, it is a high deductible plan by definition (I believe).

 

You can set up your HSA and then the amount will be deducted on your 1040 before determining your AGI.  You'll still get the tax benefit even if your employer is not withholding the money.

[StephanieZ]

The health plan MUST be HSA-compliant to add more funds. Call the insurer directly, and they will be able to answer this. Not only must it have a high deductible, but also have a few other rules met (can't cover anything other than preventive care before the deductible, so no DR visits with just a co-pay, etc.)

 

If you have an HSA compliant insurance plan, then your family can contribute up to 6650 this year. Then, as before, the HSA is yours to keep forever. It is a GREAT savings vehicle. It is better than any other (non matched) retirement savings, as it is "triple tax advantaged" meaning you contribute $ pre-tax, earnings are not taxed, and once you hit retirement age, you can withdraw it pre-tax, too! Woot!! So, if you have spare $ for retirement savings, max out your HSA before putting $$ elsewhere (unless you'd get a match, etc, elsewhere)

 

BTW, lots of different banks/investment houses/etc can manage your HSA. You can move yours if you like if your employer isn't controlling/matching it. Health Care Administrators uses Vanguard funds. So, money you aren't using right now can be stashed in a good investment account at Vanguard, and you can move it to your cash/debit account whenever you need it. I've been really happy with them. 

 

 

[cjzimmer1]

The deductible is $3600.  We already have an account set up from the previous employer so I was planning to continue using that one.  So if I understand what you are saying, we can add money to it but we will get the tax deduction at the end of the year when we file our taxes verses when the employer withheld and the tax savings was immediate?

[cjzimmer1]

The health plan MUST be HSA-compliant to add more funds. Call the insurer directly, and they will be able to answer this. Not only must it have a high deductible, but also have a few other rules met (can't cover anything other than preventive care before the deductible, so no DR visits with just a co-pay, etc.)

 

If you have an HSA compliant insurance plan, then your family can contribute up to 6650 this year. Then, as before, the HSA is yours to keep forever. It is a GREAT savings vehicle. It is better than any other (non matched) retirement savings, as it is "triple tax advantaged" meaning you contribute $ pre-tax, earnings are not taxed, and once you hit retirement age, you can withdraw it pre-tax, too! Woot!! So, if you have spare $ for retirement savings, max out your HSA before putting $$ elsewhere (unless you'd get a match, etc, elsewhere)

 

BTW, lots of different banks/investment houses/etc can manage your HSA. You can move yours if you like if your employer isn't controlling/matching it. Health Care Administrators uses Vanguard funds. So, money you aren't using right now can be stashed in a good investment account at Vanguard, and you can move it to your cash/debit account whenever you need it. I've been really happy with them. 

 

Thank you for this helpful information.  I will have to find time to call about the HSA status but from what you and the PP posted said, it looks like this plan is compliant.  Right now I'm filling out DH's paperwork and was trying to access if I need use the flex plan or if there was another way to do this.  I will keep in mind your suggestion of companies.  At the moment I will leave it as is because we are buried with finishing college apps and essays and FAFSA.  If I survive this month I can think about money management but I have to fill out DH's forms before I will get time to really think about what I'm doing.

 

Thanks again.

[plansrme]

You still have to participate in an eligible HDHP to contribute even to an existing HSA left over from the previous employer.  It doesn't sound like the current employer's plan is a HDHP if the deductible is only $600, so you would not be eligible to contribute to an HSA this year.  You can still use your old HSA money (the $28), but you can't make new pre-tax contributions to it if you aren't covered by a HDHP and ONLY a HDHP.  The flexible spending account, unless it is a limited purpose spending account, i.e., one that covers only dental and vision, counts as "other coverage" for this purpose, so even if you are otherwise eligible for an HSA because your main coverage is a HDHP, if your husband contributes to the FSA, he can't also contribute to an HSA.

 

If you are eligible to make pre-tax HSA contributions but do not make payroll contributions to an HSA through your current employer, you can deduct the non-payroll contributions from your income tax when you file (even if you do not itemize), BUT you do not get the benefit of the payroll tax savings, so you lose that 7%'ish for FICA and Medicare tax.

 

(I am an employee benefits attorney in my spare time.  Holler if you have other questions.)

 

ETA:  The deductible is $3600?  I read $600.  It may be a HDHP, then, so that would be good, but you need confirmation from the provider.  It can have a $3600 deductible and still not be a qualified plan.  BUT, if you think it is a HDHP, do not contribute to the FSA!  That disqualifies you from the HSA unless it is the (relatively rare) special purpose FSA.)

Edited January 7, 2016 by plansrme

[cjzimmer1]

You still have to participate in an eligible HDHP to contribute even to an existing HSA left over from the previous employer.  It doesn't sound like the current employer's plan is a HDHP if the deductible is only $600, so you would not be eligible to contribute to an HSA this year.  You can still use your old HSA money (the $28), but you can't make new pre-tax contributions to it if you aren't covered by a HDHP and ONLY a HDHP.  The flexible spending account, unless it is a limited purpose spending account, i.e., one that covers only dental and vision, counts as "other coverage" for this purpose, so even if you are otherwise eligible for an HSA because your main coverage is a HDHP, if your husband contributes to the FSA, he can't also contribute to an HSA.

 

If you are eligible to make pre-tax HSA contributions but do not make payroll contributions to an HSA through your current employer, you can deduct the non-payroll contributions from your income tax when you file (even if you do not itemize), BUT you do not get the benefit of the payroll tax savings, so you lose that 7%'ish for FICA and Medicare tax.

 

(I am an employee benefits attorney in my spare time.  Holler if you have other questions.)

 

The deductible is 3600.

 

I was wondering about savings from SS and Medicare so thank yo for clearing up that part.

 

Generally speaking in this care do you think it's better to use flex spending and get full tax savings or the HSA where you are sure to keep your money?  I realize this is completely individual but curious if you have thoughts on the matter for a family who has a hard time predicting expenses.

 

 

So I called and the administrator says the family plan is non-compliant as well.  Something about there being a individual deductible built into the family deductible.  The rep admitted he didn't fully understand it either.  So I guess I'm stuck with the flex spending and trying to guess a number which is wildly wrong every year.

Edited January 7, 2016 by cjzimmer1