HSA Benefits: Portability, Deferred Reimbursement, Catch Up Contributions, and More!

Health Savings Account (HSA) owners – there may be some advantages to your tax-advantaged healthcare benefit account you aren’t aware of. Most people are familiar with the triple tax savings: tax-free contributions, tax-free earnings, and tax-free withdrawals for qualified healthcare expenses. However, while HSAs are designed primarily to help reduce healthcare costs, some benefits of an HSA have ‘hidden gem’ value as well.

Here’s a quick list of lesser known HSA benefits that can help you make the most of your tax-advantaged dollars.

HSA Benefits

Portability: HSA funds are yours, forever

When you have an HSA, you can keep and use those funds for the life of the account. If you are no longer enrolled in a high deductible health plan (HDHP), you keep the HSA funds. If your employment status changes, you still keep the funds. You can continue to spend those dollars on qualified healthcare expenses, or hold onto the account and use it in retirement.

This is significantly different than a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA). If you leave your job for any reason, the FSA and HRA funds stay behind with the employer.

Change Health Insurance Coverage? You can still use those HSA funds

As mentioned above, if your insurance coverage changes and you’re no longer in a qualified HDHP, you can continue to use the money in the account.  If you enroll in a different insurance plan or have a lapse in insurance, that’s okay. Your HSA is still available to use for qualified expenses for yourself and your dependents.

One very important thing to keep in mind is that while you can continue to use the funds, you can only contribute to the HSA while you’re enrolled in an HDHP.

File for reimbursement at any time

Did you know that you can submit a claim for reimbursement ANY time after you establish your account? There are no time limitations. This is especially important because you can only use the available balance in the account (unlike with an FSA). So, if necessary, you can pay out-of-pocket up front and file for reimbursement later.

Consider this example: you established your HSA on January 1, 2013, and the next day you had to cover a qualified expense. You can file today (or next year or years later) with a dated and itemized receipt. You could not, however, receive reimbursement for an expense from 2012, because the HSA had not yet been opened.

Some HSA owners pay out-of-pocket for years and save their receipts to file at a later date. That’s something to keep in mind, if you can afford it. By deferring reimbursement, the HSA grows tax-free, thereby stretching the tax benefits.

You have many funding options

As long as you’re enrolled in an HDHP, anyone can contribute to your HSA account. That includes yourself, a spouse, employer, parent, or whomever, so long as the account owner is enrolled in a qualified HDHP.

Other funding options include transferring or rolling over money from an HSA that you had with a different administrator. Or, if you have an IRA, you could make a one-time transfer from the retirement account to your HSA.

Another thing to note is that you can change your contribution limits at any time during the plan year, whether you want to contribute more (up to the annual limit) or need to cut back.

After age 55, you get a contribution ‘bonus’

The IRS sets annual contribution limits every year for self-only coverage and family coverage. But once account owners reach age 55, they can make ‘catch-up’ contributions up to $1,000 over the annual limit. This extra allowable contribution can help defray medical costs or build up the account for to supplement retirement in the future.

Learn more about 2018 contribution limits, or the newly released 2019 HSA contribution limits.

No tax penalties after age 65

So you’ve reached age 65 and have an active balance in your HSA. Great! People over age 65 can use their HSA as a supplemental retirement account – without penalty.

If you’re under age 65, you’ll be penalized 20 percent for withdrawals for non-eligible expenses, in addition to the money being treated as regular income. After age 65, however, withdrawals are only taxed as income. Of course, if the HSA is used for qualified medical expenses, then those dollars are still tax-free.

This list addresses just a handful of HSA benefits. These can help you make the most of your tax-advantaged benefit account. Contact us today for more information on the benefits of an HSA.