HSA FAQ

HSA's have been around for a while and the normal user of FWF is aware of the HSA is. Reading this thread I feel it is important that this thread evole from a basic FAQ (You can read by clicking here) thread to a more advanced FAQ and current deal thread.

Basic Background:

HSAs are designed somewhat like an IRA. I think of it as a Health Roth IRA. Accordingly, the ideal way to take advantage of this is to max out the HSA (up to your deductible) when you are young, and not use it. You want to pay out-of-pocket now, and leave the HSA money in some mutual funds to compound away until retirement.

In effect, you can put away tax-sheltered dollars that can be used to pay out-of-pocket medical expenses, such as your doctor co-pays or any other medical expenses not otherwise covered by your insurance. HSAs primarily help those who have high-deductible medical insurance policies. When the medical bills that aren't covered by your insurance come due, you remove funds from your HSA until your medical insurance finally kicks in. The great thing is that contributions to an HSA are tax deductible, and distributions taken to pay qualified medical bills aren't taxed to you either.

Read More about what a HSA is here directly from the US Dept. of Treasury

The maximum contributions that can be made to health savings accounts in 2011 will be the same as this year due to the cost of living remaining flat.

Under Internal Revenue Service Revenue Procedure 2010-22, which was issued Monday, May 24, the maximum HSA contribution that can be made next year is $3,050 for employee-only coverage and $6,150 for family coverage—the same as this year.

In addition, the minimum deductible will stay at $1,200 for single coverage and $2,400 for family coverage.

The maximum out-of-pocket employee expense, including deductibles, will stay at $5,950 for single coverage and $11,900 for family coverage.

The HSA limits are tied to change in the cost of living, which essentially was flat

That's interesting. I've never seen a HSA offered through anybody except an employer. It says you deduct your contributions on your tax return. I'm interested to see what others think about this.

juniorjam said: That's interesting. I've never seen a HSA offered through anybody except an employer.

Unless you work for a bank or investment firm, I don't think you've ever seen an HSA offered through an employer. The employer offers the HDHP, not the HSA. The HSA is owned and controlled by the employee.

Are you thinking of a flexible spending account? If so, that is not the same thing.

they say "we pay competitive rates on your HSA account".
But their rate for MMA is only 0.4%, so I wonder what they mean by competitive

fotomaniak said: they say "we pay competitive rates on your HSA account".
But their rate for MMA is only 0.4%, so I wonder what they mean by competitive

You can view the rates for your zip by clicking on your desired option
Mine:
Minimum Opening Balance $0.00
Set Up Fee $15.00
Monthly Maintenance Fee $3.50
Requirement to Waive Monthly Maintenance Fee $1,500 minimum daily ledger balance
Interest Tiers Tier Interest Rate APY
$0 - $999 2.96% 3.00%
$1,000 - $1,999 2.96% 3.00%
$2,000 - $4,999 2.96% 3.00%
$5,000 - $9,999 3.20% 3.25%
$10,000 - $24,999 3.44% 3.50%
$25,000 - $49,999 3.68% 3.75%
$50,000 and Above 3.92% 4.00%

Check Writing Unlimited
Check Order $7.95 for 25 checks
Check Return Free check safekeeping1
U.S. Bank Check Card Free2
Other Free Internet Banking
Free Online Statements
Designate a Power of Attorney3

WhiteGuy said: I think you can have $0.00 in the account and get the $3.50 fee waived for life with this promo

That's the way I understood it.

Monthly Maintenance Fee $3.50
Requirement to Waive Monthly Maintenance Fee $1,500 minimum daily ledger balance

hsabank.com has a decent HSA

Rates (APR/APY)
$15,000 or more: 4.12% 4.20%
greater than $4,999.99 and less than $15,000: 3.00% 3.05%
greater than $2,499.99 and less than $5,000: 1.98% 2.00%
greater than $499.99 and less than $2,500.00: 1.63% 1.65%
less than $500.00: 0% 0%

Fees
Monthly Bank Account Fee (Waived on balances of $3,000 or more) $2.25
Monthly Brokerage Account Fee (Balances greater than $500) $1.25
Monthly Brokerage Account Fee (Balances less than $500) $2.00

HSA Bank provides you with an alternative investment option that offers a wide range of stocks, bonds and over 9,500 mutual funds, including a supermarket of over 850 popular no-load, NTF (non-transaction fee) funds.
Self-directed Brokerage, Brokerage Partner: Harrisdirect™
Fee structure: $20 annually + trading fees Standard banking fees apply
Investment Options: Over 8,000 stocks, Bonds, over 9,500 mutual funds, including nearly 850 no-load, NTF funds.

thejerseydevil said: goldsheet said: hsabank.com has a decent HSA
Yeah, that's who I've used for the past year. So far, so good.

Good to hear, I am thinking of switching to them, which is why I had info to post.
I started out with an MSA at USAA, but they decided not to offer HSAs so I transferred
to State Farm Bank. Their rates have stayed at 2.5%, so 4.20%APY sounds great

I think we should make a guidelnie post about Health Savings Accounts. These type of accounts really do have the potential to address some problems with the current way we manage our health care today. I in particular have a question - can we invest in stocks with the HSA account, or just specific mutual funds narrowed down to a few different issuers?

A CU that comes up here occasionally is offering a interesting HSA:

http://www.patelco.org/accounts/hsa.aspx

EDIT: Worth noting patelco is NOT NCUA insured - not sure how this affects a HSA. They have private insurance. I have banked with them for 20+ years but this give me pause on large CDS, etc.

manuel said: A CU that comes up here occasionally is offering a interesting HSA:

http://www.patelco.org/accounts/hsa.aspx

patelco's 5.12% APY is undoubtedly the best in the nation. but they don't offer HSAs until 1/3/06. good news here is that 4/15/06 is the deadline for a 2005 coded transaction... I am thinking of writing and mailing a check 12/31/05 which wouldn't post until 1/3/06. that way I could use pretax $$ to fund the 2005 portion and wouldn't have to bother setting up an account somewhere else and a 2nd account (or move it to patelco if a 2nd account isn't allowed) in early '06

hmm. patelco membership is going to be required though....

nice...looks like I will be visiting my local PATELCO

km said: I carry a individual BCBS policy with a high deductible ($2500.00).

Can I set up a HSA?

well, it only really makes sense if you are earning an income (a question I raise becuase you say you carry an individual policy)
and you can only make pre-tax income contributions up to the amount of your deductible of your HSA compatible Health care policy.

do some research on your plan to see if it qualifies. HSA is a big selling point so they will proclaim it loudly if it is!
and good luck, I am joining an HSA compatible Jan 1, 2006

km said: Kind of like how some people have 401k's AND somehow manage to fund IRA's as well. Looking for possible loopholes.Everyone can have both a 401k and can also fund their IRA. Tax-deductability of the IRA will vary with income as well as other factors.

expert5186 said: patelco's 5.12% APY is undoubtedly the best in the nation.

Although it says "new" on the website, they've been advertising this for awhile, First Federal offers 6%apy Health Savings Accounts.

Can I claim both the “above-the-line” deduction for an HSA and the itemized deduction for medical expenses?
You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.

That's an OFFICIALresponse from the IRS. The question is what does it mean?

As I read it, it says you don't include any distribution from the HSA in your calculations for itemizing medical expenses. It does NOT say that you can't deduct the expenses that you paid for with those distributions. It DOES say you ignore the distributions if you itemize your medical expenses. Right?

ciba said: Unless you work for a bank or investment firm, I don't think you've ever seen an HSA offered through an employer. The employer offers the HDHP, not the HSA. The HSA is owned and controlled by the employee.

Actually most HSA's are sponsored by an employer looking to save money on health costs. While the HSA is owned by the individual there is nothing to stop an employer from bringing in an HSA administrator to administrate the deductions through payroll deductions.

where is the best place to buy a HDHP ?

<<patelco's 5.12% APY is undoubtedly the best in the nation. but they don't offer hsas until 1/3/06. good news here is that 4/15/06 is the deadline for a 2005 coded transaction... I am thinking of writing and mailing a check 12/31/05 which wouldn't post until 1/3/06. that way I could use pretax $$ to fund the 2005 portion and wouldn't have to bother setting up an account somewhere else and a 2nd account (or move it to patelco if a 2nd account isn't allowed) in early '06>>

they only accept contributions for 2006

goldsheet said: HSA Bank raised rates on 2/28
$15,000 or more 4.41% 4.50%
$4,999.99 and less than $15,000.00 3.15% 3.20%
$2,499.99 and less than $5,000 2.13% 2.15%
$500.00 and less than $2,500.00 1.73% 1.75%
less than $500.00, 1.00% 1.00%

oh nice. I just pushed $550 into hsabank a couple days ago so that my balance would earn interest. Prior to this boost, no interest was paid on accounts with less than $500. Still, it is a painfully low APR. The more important place to get to is $3K (balances above 3000 have no monthly fee).

uscfsmitty said:   Not sure if anyone knows the answer to this but thought it was worth asking here anyway. My employer is little. We do not have a 125 plan. Several of us elected have money pulled out of our paycheck and put into our HSA. The HR person counted the money as tax exempt and put it all in box 12 of our W2. I originally thought this was correct but the more I read I believe this may be wrong since we do not have a 125 plan. Since the company does not have a 125 plan the employee elected amount must be taxed and then deducted later as an after tax contribution. Is this correct? If so that really sucks!
You are referring to Cafeteria 125 plans that allow employees to direct part of their pay to a HSA account tax free. The employer's payroll office does not take out the Federal and State income (as well as FICA and Medicare) taxes for the amount that you designate to go to the HSA. Any amounts taken out of your paycheck tax free will show up in Box 12W on the W2 that you get at the end of the year. The 125 plan, as I know it, applies to any situation where HSA contributions are treated pre-tax by the payroll office. In other words, you cannot arrange for pre-tax contributions from your own money sources (via direct contributions outside of payroll). The employer could also send money to the HSA out of your paycheck as a post-tax transaction which can be deducted on your income tax return (this amount will NOT be included in Box 12W of W2).
The best way to determine if any income tax was withheld or not for the HSA contributions is to look at two pay stubs. One where no HSA contribution was made and one where it began. If the Federal and State withheld amounts (as well as the FICA/Medicare taxes) are exactly the same between the two stubs, then your contribution was post-tax (not reported on W2). If it actually dropped, then it was pre-tax (reported on W2).

Edit - If you were taxed on the HSA contributions when you did not expect them to, you will have to work it out with the payroll office. If the amount shown on the Box 12-W is not correct, you should request that an amended W-2 be issued for you. Otherwise, that reported amount will be compared to your Form 8889 that you file and if they don't match (to compute how much you can deduct from your return), you could receive an adjustment notice later.