I have an HSA from my old job that I can't make deposits to since I am no longer covered under the High deductible Healthcare plan.


There's basically 2 grand sitting in a bank account that I'll never use otherwise, and I want to withdraw it and put it in a real account where I can draw some real interest on it (the HSA interest rate is 0.25% - the company got bait-and-switched on a 5% rate but that's a story for another time).


I don't care about whatever tax penalty would occur, I can't imagine it'll be too bad considering how half of the money was a contribution from the employer.


Anybody know anything?

4/21/2009 10:19:10 AM

Quote :

"What happens if I don’t use the money in the HSA for medical expenses? If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty"

http://www.treas.gov/offices/public-affairs/hsa/faq_using.shtml

4/21/2009 10:40:47 AM

So just withdraw it.

It only matters what you used it for if you get audited.

4/21/2009 12:10:50 PM

^^ thats some bullhonkey.

I make contributions to my HSA from my checking account. It doesn't get taken from my paycheck, so it is already taxed. How can they add an extra penalty on top of that?


I'm sort of in the same boat. $texas in the HSA with no expenses. (knock on wood)

4/21/2009 1:22:18 PM

^Contributions are 100% deductible though up to the limit of 2.9k/5.8k or whatever it is for the year in question (single/joint); no itemizing required.

http://www.irs.gov/pub/irs-pdf/f8889.pdf

The way it sounds, kiljadn will have to pay income tax for his employer's contributions and also pay 10% off the top as a penalty.

[Edited on April 21, 2009 at 1:52 PM. Reason : but i am by no means an expert on the matter]

4/21/2009 1:48:35 PM

^^

You sure about that?

A health savings account (HSA), is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit.

http://en.wikipedia.org/wiki/Health_Savings_Account

4/21/2009 2:08:39 PM

^ If he's not taking the deductions straight from his paycheck, then they most certainly are post-tax.


My question is why you'd be contributing from anywhere but a paycheck deduction.

Quote :

"The way it sounds, kiljadn will have to pay income tax for his employer's contributions and also pay 10% off the top as a penalty."

and yeah, that is what it's looking like. I'm thinking that I'll still come out ahead by a couple hundred bucks, though.

[Edited on April 22, 2009 at 8:54 AM. Reason : .]

4/22/2009 8:52:56 AM

hell if I know why it comes from my checking. I was under the assumption that it was an automatic deduction from my paycheck when I enrolled, but apparently not.

I did get a tax credit when doing the taxes this year, so I imagine you get your tax back when filing.

4/22/2009 10:45:09 AM

Here's an example for you:
I had ~$1,500 in my HSA when my employer switched plans. Instead of continuing to pay a $3.00/month maintenance fee @ BB&T I just moved it to my checking. No penalty upfront.
When I did my taxes, I was nervous that I would have to pay tons of back interest because I didn't use the money for a medical use. In the end it ended up costing me somewhere around $150.00 in extra return money. I say go for it, unless you can find a bank that has decent interest return on their HSA; then you might could roll it over and use it for medical expenses down the road. Might wanna try SECU if you want to go that route

4/22/2009 11:12:00 PM

^ oh hell yes, that's what I wanted to hear. I was expecting a loss of somewhere closer to $400-$500... which still would have me coming out on top, but still. $150 is way more appealing

4/23/2009 8:37:45 AM

Yea it kind of blows how they like "yea, the money in your HSA is yours forever". Well it is, but the bank the account is with is probably charging a maintenance fee if you discontinue the high deductible plan.

I called and asked if I could withdraw mine and they said sure, you just have to pay taxes on it. I didn't ask any more questions but I would guess that since that money was subtracted from your gross income when it was contributed you'd just add it back when you withdraw it and pay taxes on it like you would any ordinary income.

4/23/2009 8:50:44 AM

Yeah... I'll avoid using this thread as a soapbox and a platform to voice my displeasure with the entire idea of HDHPs....

but suffice it to say - HDHPs fucking blow and are one of the shining examples of what's broken with the American healthcare system

4/23/2009 8:53:28 AM

Quote :

"I called and asked if I could withdraw mine and they said sure, you just have to pay taxes on it. I didn't ask any more questions but I would guess that since that money was subtracted from your gross income when it was contributed you'd just add it back when you withdraw it and pay taxes on it like you would any ordinary income. "

Thats wierd, because I can freely take from mine whenever I want, and nobody ever questions what I am taking it for.

The way our company explained it to us, we only have to substantiate the claim if we get audited.

I could go withdraw everything today, and as long as if i get audited, I have enough qualifying expenses to cover the withdrawal, Im in the clear.

4/23/2009 9:23:25 AM

food counts as a medical expense right? If you don't eat, you die? Right?

4/23/2009 9:36:37 AM

Quote :

"The way our company explained it to us, we only have to substantiate the claim if we get audited."

This is usually true for any form of tax evasion.



I understand what you (well your company) is saying though, if you drain it all out, $2K for example, to buy a car and then later in the year have to pay $2k in medical expenses then it evens it out. If it doesn't even out though...

4/23/2009 10:04:32 AM

I'm not going to evade any taxes, I'll make sure I claim it. I don't have time for all the legal mumbo-jumbo, it's easier in this case to just be honest.

4/23/2009 10:18:34 AM

Maybe I'm missing something, but from that same link jethromoore posted:

Quote :

"I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free? Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds."

Are you saying you want to transfer the money? If so, you can probably (call/talk to banks) transfer the money from your existing 0.25% account to your new 4-5% account, so long as they are both HSAs. Otherwise, if you want to withdraw, well, that's what does suck about the HSA, you'll need to pay the taxes and possibly a penalty on it.

Myself, I'd keep the money in there, knowing I'll have $2000 at some point in my life I'll want to reimburse, either all in one shot or cumulative. No idea how painful the paperwork is for the HSA, but the HCSA is pretty straightforward.

[Edited on April 23, 2009 at 10:22 PM. Reason : .]

4/23/2009 10:21:37 PM

^ I want to withdraw it. I will never be able to contribute to and HSA again, because I will never have a HDHP.

I am more than willing to pay any penalties involved, as most likely this money will be used in more lucrative investments.

4/23/2009 10:25:41 PM

http://www.ustreas.gov/offices/public-affairs/hsa/faq_using.shtml

Quote :

"I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free? Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds. What happens to the money in my HSA if I lose my HDHP coverage? Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again"

7/13/2010 12:57:07 AM

don't you have any major medical procedures you'd like to have done like braces of lasik or anything like that

maybe a boob job?

7/13/2010 12:59:04 AM

Yea, I don't understand why you wouldn't leave it there and use it to pay future medical expenses? You aren't going to find a savings rate that will make up for the 10% penalty.

7/13/2010 7:56:43 AM

Quote :

"You aren't going to find a savings rate that will make up for the 10% penalty."

On the other hand 10% is $200 if you do not mind burning $200 to get $1800 in your pocket roll on with it. Maybe you have a credit card to pay off, or you want to start another investment account, or bolster your emergency savings.

Hell maybe a night out with some decent hookers, booze, and cocaine.

LIVE YOUR LIFE MAN.

7/13/2010 8:01:00 AM

Quote :

"Hell maybe a night out with some decent hookers, booze, and cocaine. "

Count me in

7/13/2010 7:38:15 PM

^you a decent hooker?

7/13/2010 8:31:48 PM

Quote :

"You aren't going to find a savings rate that will make up for the 10% penalty."

All in due time. Considering that I had already paid taxes on it, yes, I actually did.

7/13/2010 8:49:46 PM

when you consider that you will pay taxes on the interest you earn, isn't it going to take 5+ years to make the penalty back?

7/13/2010 10:30:09 PM

Does it matter if it takes 5 years to approach that point? It was free money. If I came out owing $998 in taxes on the $2000, I'd still be up by $2 and would have saved myself the taxes on the money I actually put IN. I literally lost NOTHING by taking the money out. I wasnt counting on it, didn't need it to survive, and certainly didn't want it to sit stagnant in an account drawing a quarter of a percent interest.

7/14/2010 12:50:14 AM

All I'm saying is, don't you think you'll have $2000 in medical expenses before you will net $200 in after-tax interest income? Can you use it for prescriptions and OTC drugs like a HCFSA?

7/14/2010 8:05:12 AM

Once the new law kicks in - Prescriptions, yes. OTC, NO. WTF.

7/14/2010 8:17:48 AM

^^ Nope. I'm pretty healthy.

7/14/2010 9:42:49 AM

Then why the hell did you put 2K in it?

7/14/2010 1:42:15 PM

^ Because it was part of our group plan at my old job. In retrospect, I should have never done it, but 1k of the 2k was seed money, put in the accounts for us by our employer. If I didnt sign up under the group plan, I didn't get the money, period.

Basically the company baited & switched health benefits on all the employees.

One year we had a pretty respectable BCBS plan with low deductibles, and the next year they gave us the option of switching to an HDHP with a HSA that had a 5% interest rate because it was cheaper for them.

Literally ONE WEEK after we made the group plan switch and were locked in, we all got notices saying that the bank we were using was dropping the interest rates on our HSAs to 0.25%.

Not only that, but the company was never willing to allow employees to buy their own health care and accordingly adjust their salary to compensate for the lack of benefits.




Long story short, if I could go back in time and do it all a different way, I would, but at least now I'm not at that shithole company, and I'm paying for my healthcare myself and it's drastically cheaper.

7/14/2010 7:26:13 PM

Different question but relevant topic.

I have an FSA where I've elected to contribute $1000. So far this year, I've used about the same amount as I've put in, with a balance of about $30.

My company was acquired on 4/1/11. Any HR experts know what happens to the FSA after the benefits change over to the new company on 5/1/11? Am I still entitled to the $1000 I selected, although I haven't contributed that amount yet? Is FSA linked to a person rather than through a company, meaning my FSA election will follow me to my new job? Job change is a qualifying event usually, so I wonder if this will be a new opportunity to select a greater amount of contribution.

4/7/2011 4:22:56 PM

in most (if not all) fsa plans, you can use the funds before you actually contribute them. If I were you, I'd schedule appointments, fill scirpts etc... a much as possible before the switch. unless the two companies use the same fsa vendor, the amount will likely freeze when you stop contributing...but if you use/claim all you can while its still active, its all gravy.

when you enroll for benefits with the new company you can select a new fsa contribution, assuming they offer that.

4/7/2011 4:55:36 PM

well this thread will certainly be relevant to my interests...hopefully later than sooner. My company now has a HDHP but to compensate they put $50 a month into my HSA.

4/7/2011 5:05:16 PM

Honestly, if you're healthy, you may be better off finding your own Health plan.



under no circumstances is a HDHP worthwhile for a single, young, healthy person.

4/7/2011 8:38:37 PM

^that's the exact opposite of what I've been told. If you're young, single, and healthy, there is no need to pay high premiums, and because you won't be visiting the doctor much, you might as well pay as little for insurance as possible.


It's been a while since I've looked into this, but what qualifies for medical expenses now? I hear that our good ol' gov't nixed OTC medications. basterts. so what's left? RX, payment for doctor visits (since HDHP doesn't cover small time visits); what about dental or vision costs (copay, coinsurance)?

4/7/2011 9:55:37 PM

I like having an HSA because I can save up to get lasik and not pay taxes on it. I think it is wonderful especially if you are young.

4/7/2011 10:02:52 PM

Quote :

"that's the exact opposite of what I've been told. If you're young, single, and healthy, there is no need to pay high premiums, and because you won't be visiting the doctor much, you might as well pay as little for insurance as possible."

4/7/2011 11:35:41 PM

^^^with my plan, regular doc check up visits are 100% covered...not sure what on followup visits and such though

4/7/2011 11:52:45 PM

If you're shopping on your own, believe me, there is no cost advantage whatsoever to finding an HDHP AT ALL. Plus you are going to be putting money into an HSA that will generally have a shitty interest rate that you can't touch except for health reasons. That's pretty goddamned stupid. Banks LOVE HSAs because they dont have to pay out much interest on them and get to reap the reward of holding on to your money. Just like not taking the proper deductions on your W2, it's like giving an interest free loan. Just save that money in any other type of bank account with respectable interest rates without spending restrictions.

Also, finding yourself an agent is the absolute best thing you can do. I switched insurance providers recently because my original one decided that since "Health Care Reform" had passed, they were obliged to raise my rates by 60% without due cause, ignoring the fact that the healthcare laws don't take effect until 2014 (if then) and that I had made zero claims. My agent contacted me as soon as he found out about the arbitrary bullshit rate increase and found me a new plan with a different company with better coverage for $30 less than my original rate.

[Edited on April 8, 2011 at 1:20 AM. Reason : .]



And for the record, premiums aren't nearly as high as what those pitching HDHPs would have you believe.

[Edited on April 8, 2011 at 1:21 AM. Reason : .]

4/8/2011 1:06:46 AM

^ That isn't entirely true about the crappy interest rate because once you get your HSA to a certain dollar am you have the option of moving money into investments with better interest rates for the purpose of long term growth.

4/8/2011 6:06:45 AM

Quote :

"hookers, booze, and cocaine"

4/8/2011 9:04:54 AM

^^ It still doesn't make sense when there are tons of monetary vehicles with similar abilities that are accessible without arbitrary rules

4/8/2011 10:07:55 AM

My google skills are failing me today. Anyone know where I can get the list of FSA Qualified Expenses? I just got done with the Dentist and I think a Sonicare is definitely something I need to get in the near future. If it's covered by FSA it would be great to pick that up ahead of time.

Also, anyone know if you can pre-pay for prescriptions at retail stores like Wal-Greens, etc?

4/13/2011 10:29:53 AM

any of the lists from various FSA plan sites will suffice as they should be all the same.

http://www.ezflexplan.com/doc/FSA-Expense-List.pdf

4/13/2011 10:32:56 AM

Quote :

"Also, anyone know if you can pre-pay for prescriptions at retail stores like Wal-Greens, etc?"

Nope, I think it's illegal for pharmacies to take your money before they give you the medicines. At Walgreens, what they can do though is put your FSA card on file, so every time you pick up your prescription, it'll get charged to your FSA account.

4/13/2011 10:48:55 AM

^That's good to know.

^^Thanks for the .pdf, that's helpful.

4/13/2011 10:52:58 AM

Quote :

"I just got done with the Dentist and I think a Sonicare is definitely something I need to get in the near future. If it's covered by FSA it would be great to pick that up ahead of time."

I grabbed one after a dentist trip back in January using my HSA. Took a little while to get used to but it works great.

4/14/2011 7:28:26 AM

How different is HSA from FSA?

Even though it's not a pre-tax eligible item I'll probably still get one at Costco in the near future. I'm not a fan of these new rules though.

4/14/2011 8:16:22 AM