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  • HSA question

    Hi all,

    Have a question on my HSA account I'm hoping to get some guidance on.

    I just started my first real job in September and chose a Silver PPO plan with an Optum Bank HSA for my wife and I. I am on track to max the HSA out for the year and was planning on doing so each year from now on. The issue is that A) we are now expecting our first child and B) the practice is switching it's health plans over to a new insurance carrier and we all need to pick new plans. My thought is to go for a higher premium, lower deductible PPO plan since I know we will be actually using our insurance this year. The problem is that I no longer will have a plan with an HSA account. My question is, can I still contribute money to the HSA from my own, post-tax funds? I asked our HR person who said I would no longer be able to contribute pre-tax money from my paycheck to the old HSA.

    As a side note, I get paid by my job on a W-2, but I also get paid on-call stipends separately by the local hospital directly on a 1099. Can I use 1099 money to fund the HSA that I already have?

  • #2
    You are only an HSA eligible individual for a given month if on the 1st of that month you have an HSA qualifying HDHP plan and are not an otherwise disqualified individual. If you switch to a PPO plan, you will fail on both counts.

    Once this happens you will be ineligible to make HSA contributions either by payroll deduction or directly. The source of any income is not relevant.

    Also, if you have used the "last month rule" to make the full 2017 HSA contribution limit and you do not maintain HSA eligibility for all of 2018, then the amount contributed under the last month rule will be subject to a 10% excise tax.

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    • #3
      I have an HSA question from your 12/19/2017 newsletter .  If after age 65, I withdraw assets from my HSA account , can it be applied to medical expenses that were documented prior to my turning 65yo?  If so, how many years of records prior to age 65 could be offset by this HSA withdrawal?  Also, is there an IRS bulletin that explains this particular point?

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      • #4
        Have you run the numbers on the various plans, premiums, out of pocket maxes, any HSA employer contrib, and money saved in the form of taxes not paid on employee HSA contribs? You may be surprised at what comes out ahead. For my wife and I, both of us individually signing up for our respective HDPs with HSAs was overwhelmingly the best option in terms of max we would pay even in a year we had a child.

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        • #5




          I have an HSA question from your 12/19/2017 newsletter .  If after age 65, I withdraw assets from my HSA account , can it be applied to medical expenses that were documented prior to my turning 65yo?  If so, how many years of records prior to age 65 could be offset by this HSA withdrawal?  Also, is there an IRS bulletin that explains this particular point?
          Click to expand...


          Yes, you can use the $$ in the HSA account for any documented, qualified medical expenses incurred while you were covered by an HSA-qualified HDHP. Sorry, I don't have time to Google that right now but it's what I'm doing with my HSA - I'm 60 and have had it about 10 years. Used to spend it but now I just let it grow.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            thank you for your reply but that was not the question I was asking.   What I want to know is if I can withdraw money from my HSA account at age 65 on a tax free basis and claim that the money was covering documented medical expenses that occurred several years earlier that I paid for without HSA money.  .    Example- lets say I spent $10K on medical expenses at age 62 and paid for this out of pocket.    Then at age 65, I decide I want to withdraw some HSA money tax free and claim that it was to cover documented medical expenses when I was 62 years old.   is this legitimate?

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            • #7




              thank you for your reply but that was not the question I was asking.   What I want to know is if I can withdraw money from my HSA account at age 65 on a tax free basis and claim that the money was covering documented medical expenses that occurred several years earlier that I paid for without HSA money.  .    Example- lets say I spent $10K on medical expenses at age 62 and paid for this out of pocket.    Then at age 65, I decide I want to withdraw some HSA money tax free and claim that it was to cover documented medical expenses when I was 62 years old.   is this legitimate?
              Click to expand...


              Yes, this is exactly what I was talking about. I will use my HSA after age 65 for medical expenses I have paid OOP for the last 10 years. There will be no taxes. I've just saved receipts for 10 years (i.e. "documented"). Is there something else that I am missing?
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                thank you very much for your reply.

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                • #9
                  There is no restriction on the number of years. The only timing requirements are that qualified withdrawals can only be taken for qualified medical expense for dates of service on or after the first establishment date of the first HSA provided you have no period where you had no balance in any HSA > 18 months

                  IRS guidance for this is Q&A 39 in IRS Notice 2004-50 and IRS Notice 2008-59 Q&A 41.

                  Q-39. When must a distribution from an HSA be taken to pay or reimburse, on a tax-free basis, qualified medical expenses incurred in the current year?

                  A-39. An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established. Similarly, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Thus, there is no time limit on when the distribution must occur. However, to be excludable from the account beneficiary’s gross income, he or she must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses, that the qualified medical expenses have not been previously paid or reimbursed from another source and that the medical expenses have not been taken as an itemized deduction in any prior taxable year.

                  Q-41. On what date is an HSA established if the account beneficiary had previously established an HSA?

                  A-41. If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at any time during the 18-month period ending on the date the later HSA is established.

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