If you have a Health Savings Account (HSA), there may be some benefits to this consumer directed healthcare account that you don’t know about. Most people understand the HSA benefits of triple tax savings: tax-free contributions, tax-free earnings, and tax-free withdrawals for qualified healthcare expenses. While designed primarily to help reduce the cost of healthcare, HSAs have some ‘hidden gem’ value as well.
Here’s a brief list of additional HSA benefits that can help account owners make the most of their tax-advantaged dollars.
Get Reimbursed at ANY Time
Did you know that you can receive reimbursements for eligible expenses ANY time after you establish your account? There is no time limitation on when account holders can file for reimbursement.
For example, if you signed up for an HSA on June 1, 2010, and incurred a qualified expense the following day, you can file in 2017 (or beyond) to get paid back from your HSA with a receipt. You could not, however, be reimbursed for an expense from May 2010, because the HSA had not yet been opened.
Some people 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 to do so.
Contributions Can Be Made by Anyone
If you are enrolled in a high deductible health plan (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.
HSA Funds are Yours to Keep, Forever
With a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA), if you leave your job, the funds stay with the employer. For FSA participants (who fund their accounts), that means any unused contributions also stay with the employer.
HSAs, on the other hand, are both owned and (generally) funded by the account holder. If you leave your job for whatever reason, the HSA stays with you (this is also known as portability).
You Can Use the Funds Even if You Aren’t on HDHP
So, speaking of leaving your employer…
If you leave your employer, you may lose your insurance coverage from the group high deductible health plan (HDHP). But no worries. Since the HSA funds are yours to keep, you can continue to use the money in the account to pay for qualified healthcare expenses, even if you’re enrolled in a different insurance plan or have a lapse in insurance.
One thing to note is that while you can continue to use the funds, you are not allowed to continue contributing to the HSA unless you’re enrolled in another HDHP.
After Age 55, You Can Contribute More
Each plan year, the IRS sets an annual contribution limit for account holders. But once account owners reach age 55, they can make ‘catch-up’ contributions up to $1,000 over the annual limit. For those preparing for retirement and possibly having increased medical expenses, this can help fill the coffers.
No Tax Penalties after Age 65
So you’ve reached age 65 and have an active balance in your HSA. While the idea behind an HSA is to help defray the costs associated with healthcare, the tax benefits for people over age 65 allow senior citizens to use their HSA as a supplemental retirement account.
Under age 65, account holders are penalized 20 percent (and the money is treated as regular income) for withdrawals for non-eligible expenses. After age 65, there is no penalty for non-eligible expenses; withdrawals are only taxed as income. If the money withdrawn is used for qualified expenses, then senior citizens can still enjoy the tax-free benefit.
These are six HSA benefits that can help account owners make the most of their accounts.