HSA question

[bignateyk]

I just signed up for a new high deductible health plan at work, so I am eligible to open an HSA.

My wife is still using the low deductible health plan, so she is not.

Can I use my HSA to pay for medical expenses for my spouse (like contact lenses and other things that aren't covered by her insurance) even though she isn't eligible to open her own?

 

[sactoking]

No.

 

[IronWing]

Yes.

Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage.

http://www.irs.gov/publications/p969/ar02.html#en_US_2012_publink1000204081

 

[bignateyk]

Yes.


http://www.irs.gov/publications/p969/ar02.html#en_US_2012_publink1000204081

Neither one of us has family coverage. We each have individual coverage through our respective employers. Mine is HDHP, her's is not.

 

[IronWing]

Okay, sactoking is correct and I was wr...wro..

http://www.irs.gov/pub/irs-drop/rr-05-25.pdf

 

[bignateyk]

Okay, sactoking is correct and I was wr...wro..

http://www.irs.gov/pub/irs-drop/rr-05-25.pdf

Everything in there is about contributing to an HSA. My question is about using funds that are already in the HSA. Everything in there is also about family coverage. We both have single coverage.

I know she isn't eligible to contribute to the HSA. I'm trying to figure out whether she can draw funds from MY account to pay for her expenses.

 

[highland145]

Okay, sactoking is correct and I was wr...wro..

http://www.irs.gov/pub/irs-drop/rr-05-25.pdf

You should never question the king of this subject.

 

[Scarpozzi]

Because you get the benefit through your employer, the funding has to come through your earnings (on behalf of you by your employer). That's why she can't contribute....

You can pay expenses for her out of that account without any problems....the only issue is contribution because of the tax write-off on the front end. Just be sure to keep receipts for documentation's sake. Some of those companies are picky when it comes to who they allow to use the accounts and require paperwork if they are reimbursing payments made without the checkcard they provide...

 

[IronWing]

It's a bit confusing. In the first link I provided it states....

Qualified medical expenses are those incurred by the following persons.

1. You and your spouse.
2. All dependents you claim on your tax return.
3. Any person you could have claimed as a dependent on your return except that:
   1. The person filed a joint return,
   2. The person had gross income of $3,800 or more, or
   3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2012 return.

But in various places it talks about eligible persons as being those not covered by unqualified plans. So.. I don't know.

 

[bignateyk]

This link says I can do it:

http://www.yourhsaadmin.com/MC/pdf/Distribution_Worksheet.pdf#page=1

HSA funds may only be used for yourself, your spouse and your dependents.
Note: there is no requirement that you or your family member be currently eligible for an HSA (covered by an HDHP). Eligibility is only important when contributing to an HSA, not in being allowed to use the funds.

 

[yuchai]

This link says I can do it:

http://www.yourhsaadmin.com/MC/pdf/Distribution_Worksheet.pdf#page=1


[/FONT]

I think they assumed there that those dependents are cover through your policy.

HSA funds may only be used for yourself, your spouse and your dependents.
Note: there is no requirement that you or your family member be currently eligible for an HSA (covered by an HDHP). Eligibility is only important when contributing to an HSA, not in being allowed to use the funds.

About this quote, I think they're still talking about your own policy. For example, if next year you are in a PPO and are covering your spouse with the plan, then you can use HSA funds to pay for expenses for your spouse, even though the both of you are not covered under a HDHP.

 

[PenguinPower]

Yes.

Qualified medical expenses. Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. These are explained in Publication 502, Medical and Dental Expenses. Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug:

1. Requires a prescription,
2. Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or
3. Is insulin.

For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. State law determines when an HSA is established. An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established. If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses. Qualified medical expenses are those incurred by the following persons.

1. You and your spouse.
2. All dependents you claim on your tax return.
3. Any person you could have claimed as a dependent on your return except that:
   1. The person filed a joint return,
   2. The person had gross income of $3,800 or more, or
   3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2012 return.

Also see.

Also also see.

If I am enrolled in single coverage under an HSA-compatible health plan, can HSA funds be used for my spouse or eligible dependent that are not under my health plan?

HSA funds can be used for you, your spouse or eligible dependents (as identified on your Federal tax return) even if they are not covered by the HSA-compatible health plan.

 

[yuchai]

Yes.


Also see.

Also also see.

Can't argue with that kind of documentation. Thanks for correcting my misconception about how these work.

 

[dullard]

Don't do it (regardless of the law). You'll miss the main benefit for having an HSA if you do.

I assume you have a 401k, IRA, Roth, or similar. With each of those retirement accounts you will pay taxes at some point. With the 401k or standard IRA you typically put your money in tax free, but you get nailed with taxes when you withdraw in retirement. With the Roth IRA you get nailed with taxes now, but everything grows tax free after that point.

But with the HSA, you can put money in now tax free, let it grow for decades tax free, and then withdraw the big growth AND your original money tax free. It is by far the best and biggest legal way to grow money completely tax free for typical people. Huge tax loophole. The only catch is that you have to spend it on medical purposes at some point in your life. And who doesn't have medical expenses as they age?

So, DON'T pay for your wife's medical expenses with it. DON'T pay for your medical expenses with it. Pay for those out of pocket. Contribute all you can to the HSA and let it grow for years. Then start paying for medical expenses years later from your HSA. If you can't afford to pay for it out of pocket, then contribute less to your IRA, Roth or 401k (except be sure to get your full company match).

You'll be far wealthier if you do.

 

[mikeford]

What are you talking about, every HSA I have had is use it or lose it year by year. This year AFAIK is the first where something like $500 can be carried over.

 

[PenguinPower]

What are you talking about, every HSA I have had is use it or lose it year by year. This year AFAIK is the first where something like $500 can be carried over.

You're talking about an FSA.

 

[bignateyk]

Don't do it (regardless of the law). You'll miss the main benefit for having an HSA if you do.

I assume you have a 401k, IRA, Roth, or similar. With each of those retirement accounts you will pay taxes at some point. With the 401k or standard IRA you typically put your money in tax free, but you get nailed with taxes when you withdraw in retirement. With the Roth IRA you get nailed with taxes now, but everything grows tax free after that point.

But with the HSA, you can put money in now tax free, let it grow for decades tax free, and then withdraw the big growth AND your original money tax free. It is by far the best and biggest legal way to grow money completely tax free for typical people. Huge tax loophole. The only catch is that you have to spend it on medical purposes at some point in your life. And who doesn't have medical expenses as they age?

So, DON'T pay for your wife's medical expenses with it. DON'T pay for your medical expenses with it. Pay for those out of pocket. Contribute all you can to the HSA and let it grow for years. Then start paying for medical expenses years later from your HSA. If you can't afford to pay for it out of pocket, then contribute less to your IRA, Roth or 401k (except be sure to get your full company match).

You'll be far wealthier if you do.

As far as I know we don't have any control over the investments in the HSA, so it will probably be a shitty return. It is handled by highmark and bank of america. I went with it because my employer is contributing $800 a year to it on my behalf.