That word does not mean what you think it means...

[KuariKaydrith]

I handled a 'lady' today that simply would not get it through her head that she is not entitled to an HSA due to not being enrolled in a high deductible medical plan.

Oh, she bitched and she argued. Threatened to go to her HR to get this straightened out. Threw a fit when I told her the HSA eligibility comes down from the IRS.

Turns out that once upon a time she was enrolled into a high deductible medical plan and had also enrolled into an HSA (health savings account). Then she changed her medical plan but kept the HSA, and has been putting money into it on her own despite the tax consequences of this.

Because of this, she thought that she could enroll into an HSA through her employer despite not being in the correct medical option for this. And she was pissed off that the online enrollment window would not accept her election. And she demanded that I change it for her, even after I explained to her that she simply cannot do what she wants due to IRS regulations and guidelines, and that our system has been programmed to not let this enrollment go through - if she wants the HSA she MUST also be enrolled in the high deductible medical plan.

Nope, she wasn't having any part of that conversation. She told me again that she was going to her HR and then disconnected. Frankly, I'm surprised that she didn't swear at me and call me an idiot.

But wait until she gets that tax bill at the end of the year. I'll be sitting over here laughing my ass off.

[Raveni]

What are the tax consequences for continuing to put money away into an HSA?

[blas]

Our only options with insurance are HSAs now.

As far as ours go, we can only have so many thousand in there.

[Teskeria]

What are the tax consequences for continuing to put money away into an HSA?

As I recall, you lose every penny that was not spent on medical expenses during the year. The IRS gets it all. You have no appeal.

[VComps]

Sorry, but what's an HSA?

[KuariKaydrith]

An HSA is a Health Savings Account and that is supposed to be a means of having pre-tax funds put away into an account. The funds are to be used for health expenses only, and you can really only contribute to them if you are enrolled into a high deductible medical plan. With the HSA any funds left at the end of the year can be rolled over into the next year.

If you are not in what the IRS deems a high deductible medical plan you can enroll into a Health Care Flexible Spending Account (HCFSA). This still allows the participant to have pre-tax funds put away into an account but the rules are a little different. If there is a balance at the end of the year only up to $500 will be rolled over for the next year. If you are in a high deductible medical plan you cannot enroll into a health care flexible spending account, but you can enroll into a Limited Purpose Flexible Spending Account (LPFSA) instead and those funds can only be used for vision and/or dental expenses.

[earl colby pottinger]

Ouch

See if I got this right: So the IRS makes it possible to buy cheap insurance but not pay taxes on money you put away to pay the deductible if you need to use the medical insurance.

But they also made sure that people with high end insurance that has little or no deductibles can not hide money tax-free by claiming it as a medical issue.

I don't know how you would get the money back tax-free, but I bet if you could save money that way you could then pull the money out at a later date at a lower tax rate if you quit/lose your job or move to a job that pays a lot less and then withdraw the money.

[Lovecats]

I still have my HSA even though I lost my insurance in April. The money in it is mine and when I had insurance it always just rolled over from year to year.

[KuariKaydrith]

With HSA funds, you can keep those accounts but you cannot add funds to it if you are not enrolled into a high deductible medical plan. The eligibility for the different accounts is tied to the medical plan and the deductible for that plan. A plan with a low deductible is eligible for a HCFSA (health care flex spending acount) so people on those plans DO have an option to sock away some money pre-tax for their health expenses, but any balance over $500 will not roll over into the next year.

[Lovecats]

I do have mine set up now that I can add to it. I just use it primarily to pay to see my Dr and my prescriptions.

[otakuneko]

I don't know how you would get the money back tax-free, but I bet if you could save money that way you could then pull the money out at a later date at a lower tax rate if you quit/lose your job or move to a job that pays a lot less and then withdraw the money.

You've just described what happens with traditional IRAs and 401ks: contributions come from your paycheck pre-tax, distributions are taxed, but if you're in a lower tax bracket at retirement, you pay that. That's why you see a lot of investment banks pushing 401ks around the holidays and tax season: 401k contributions are deducted from your taxable income. The max contribution for 2014 is something like $17,000. That's a huge deduction.

Roth IRA/401k plans are the reverse of that. Pay tax now, not later. Get one if you think you're going to move up a bracket.

[HawaiianShirts]

My employer offers one of those HSA things, but it's a use-it-or-lose-it deal. I don't know where the money goes, but at the end of the year, you don't get any leftovers back. And there's a minimum contribution level. I don't care how useful these accounts are--if I've got to try to estimate my medical expenses at the beginning of the year and hope I'm accurate enough that I won't be scrambling to find medical expenses at the end of the year just to get that money back, I'm not interested.

My employer also has lots of programs at the workplace to encourage employee health and keep us from going to see doctors more often that absolutely necessary, thus spending less on health care. Almost seems like a scam to me.

[mhkohne]

My employer offers one of those HSA things, but it's a use-it-or-lose-it deal. I don't know where the money goes, but at the end of the year, you don't get any leftovers back. And there's a minimum contribution level. I don't care how useful these accounts are--if I've got to try to estimate my medical expenses at the beginning of the year and hope I'm accurate enough that I won't be scrambling to find medical expenses at the end of the year just to get that money back, I'm not interested.

My employer also has lots of programs at the workplace to encourage employee health and keep us from going to see doctors more often that absolutely necessary, thus spending less on health care. Almost seems like a scam to me.

If you don't have a chronic condition that you take drugs for or something, then it's really hard to estimate. For us, we add up the little bit for my drugs, plus the glasses/contacts we'll be getting over the year and a bit for office co-pays and we use it all.

[Catwoman2965]

My employer offers one of those HSA things, but it's a use-it-or-lose-it deal. I don't know where the money goes, but at the end of the year, you don't get any leftovers back. And there's a minimum contribution level. I don't care how useful these accounts are--if I've got to try to estimate my medical expenses at the beginning of the year and hope I'm accurate enough that I won't be scrambling to find medical expenses at the end of the year just to get that money back, I'm not interested.

My employer also has lots of programs at the workplace to encourage employee health and keep us from going to see doctors more often that absolutely necessary, thus spending less on health care. Almost seems like a scam to me.

Not necessarily a scam, but maybe not for everyone. For some, those who may require regular dr. visits, or maybe take meds say for BP, diabetes, or something along those lines, every day, it may be easier to estimate. Esp if you have a prescription plan, where a 90 supply costs x, and you know you will refill x times over the course of a year. And if you know you see your dr. so many times, and you have a co-pay, you can use it for that as well.

For someone who is fairly healthy, doesn't go to the dr. that often, and doesn't really take any meds. Or as you say, works in a place where they have programs etc in place to encourage wellness, and you don't go that often to the dr., maybe not as helpful or useful.

My employer offers one, which I contribute to, but over the years, I managed to figure out how much I'm likely to use, and I contribute accordingly. For example, I have a PPO. So I have a co-pay, and no deductible, However, the years I need an eye exam, due to the choice i make, its subject to the deductible, and I know I'll need glasses, which are only covered up to a certain amount, also subject to the deductible, so I add a bit more in. I don't think in the 15 years I've been doing it, I've ever had money left over. I can also use it for any uncovered dental expenses, which I also have a deductible for.

[bankworking]

My employer offers one of those HSA things, but it's a use-it-or-lose-it deal. I don't know where the money goes, but at the end of the year, you don't get any leftovers back. And there's a minimum contribution level. I don't care how useful these accounts are--if I've got to try to estimate my medical expenses at the beginning of the year and hope I'm accurate enough that I won't be scrambling to find medical expenses at the end of the year just to get that money back, I'm not interested.

My employer also has lots of programs at the workplace to encourage employee health and keep us from going to see doctors more often that absolutely necessary, thus spending less on health care. Almost seems like a scam to me.

Shouldn't be an HSA if it's use or lose. The whole thing that makes an HSA different is that it you can roll it over from year to year. I even read up on it and found out that if you have money left in it when you hit age 65, you can start withdrawing for non-medical expenses, just those withdraws are taxable (but no penalties).

There is another type of health account called normally a FSA (flexible spending account) that is use or lose. I'm not a big fan of that one for the reasons you explained.

If you have a high deductible health insurance, you can get an HSA from pretty much any bank and many credit unions and contribute to it on your own. Don't have to go through your work for that; just need an insurance policy that's eligible. If the contributions don't come from your paycheck, it just means you have to claim the tax break when you do your taxes instead of getting to contribute pre-tax right away. Can look up the rules on www.irs.gov