When people learn about Health Savings Accounts (HSAs), they have a lot of questions. One of the most frequently asked questions (FAQs) about HSAs is, “When can I open an HSA?” I have an answer to this question and other HSA FAQs. Please read below.
The following is list of HSA FAQs and their answers:
In order to open an HSA, you must:
In 2018, the minimum deductible for an HSA qualified HDHP is $1,350 for individual coverage and $2,700 for family coverage.
HSAs have a triple tax advantage:
You can open an HSA at any time AFTER you are enrolled in a qualified HDHP. Generally people enroll during open enrollment season (when they enroll in an HDHP), but that is not required.
No, it is not health insurance. An HSA is a savings account that you can use to pay for out-of-pocket medical expenses. However, you must have health insurance through a qualified HDHP to open an HSA (see above).
I recommend that you max out your HSA each year. However, if you cannot afford to do that, add up all of your recurring medical expenses this year and consider any known upcoming expenses. That should give you a good estimate on how much to contribute for next year. Here’s a guide on how to figure that out.
Your HSA can pay for a wide variety of IRS-approved eligible medical expenses for yourself and your dependents. This includes prescription medications, dental exams and treatments, eye exams, prescription eye wear, insurance co-pays, and a whole lot more.
You can use your HSA to pay for expenses for qualified dependents. That includes your spouse, children, or adult who is listed on your tax documents as dependents.
Investing your HSA funds is a great way to help grow your account. However, some administrators require that you have a minimum balance before you can start investing.
Learn more about the advantages of investing HSA funds.
An HSA is participant-owned. That means you keep your HSA for the life of the account, no matter your job status or if you lose your health insurance.
A couple of things to remember: you can only contribute to your HSA when you’re enrolled in an HDHP. However, you can continue to spend your HSA balance regardless of your healthcare coverage.
You can file for reimbursement for any claim any time after your HSA is established. There is no time limit for filing claims. You cannot file a claim for an expense that occurred prior to opening the HSA.
If you are under age 65 and withdraw HSA funds for non-qualified expenses, you’ll receive a 20 percent penalty in addition to having to pay income tax on the withdrawal.
If you’re 65 or over, you can use your HSA money for any expense without penalty. However, you will still be taxed on withdrawals for non-qualified expenses.
Learn more about HSA distributions and penalties.
HSAs, unlike FSAs, have rollover. Any unused balance at the end of the year rolls over to the next year. You do not have to worry about “use it or lose it.”
Depending on your plan, you may be able to sign up for an HSA debit card. It links right to your account and allows you quick, convenient access to your HSA dollars.
You can also pay for your expenses out of pocket, then file a claim for reimbursement.
You cannot have an HSA and a health Flexible Spending Account (FSA) at the same time. However, depending on your plan setup, you can have a limited purpose FSA. Learn more about this question.
This list of HSA FAQs is not all-inclusive. If you have additional questions, contact your benefits administrator.