Author Archives: Evan

Out of Pocket Maximum Too High For HSA?

This question was submitted by HSA Edge reader Kathy. Feel free to send in your question today to evan@hsaedge.com.

Is it possible for maximum out of pocket expenses to be too high to qualify for a Health Savings Account? Mine is $6800. My deductible is the same. This is for a single person.

Yes, it is possible for an insurance plan not to qualify as an HDHP due to to an out of pocket max being too high.

An insurance plan must be considered a High Deductible Health Plan (HDHP) to be HSA eligible. Each year, the IRS publishes their HDHP definitions of what qualifies. The requirements are pretty consistent although amounts vary from year to year due to inflation calculations. You must meet all of the requirements to be HSA eligible, and they traditionally look at the following:

Minimum Deductible – your plan’s deductible must be greater than this amount
Out of Pocket Max – your plan’s out of pocket maximum (the total amount you can spend in 1 year on your plan) must be less than this amount

Once you compare your health insurance to these numbers for a given year, you determine if your insurance is categorized as an HDHP, and if so you are able to open and contribute to a Health Savings Account.

For 2017, that out of pocket maximum is $6,550, so if your plan has an out of pocket max of $6800, it likely does not qualify. I don’t know why the government does this and excludes certain plans. In my mind, they have not adequately adjusted the HDHP definitions in line with out of control insurance costs. In addition, plans offered on the “marketplace” by the Affordable Care Act systematically priced plans out of HSA eligibility using your exact example, setting out of pocket maximums just above the HDHP definition. Hopefully the government rights the ship and opens up HSA’s to more people.

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Note: The IRS requires that you keep receipts for your Health Savings Account purchases. Please consider my service TrackHSA.com for your Health Savings Account record keeping. You can store purchases, upload receipts, and record reimbursements securely online.

How Much Did I Contribute to My HSA?

This question was submitted by a user of EasyForm8889.com. Feel free to send in your question today to evan@hsaedge.com.

I don’t know where to find the amount I contributed to my HSA. The IRS says I had $774 in my HSA account. My W2 says my employer contributed $850. Does this make sense?

The bad way to determine your HSA contribution

First off, using your bank account, HSA transaction history, or W2 isn’t the way to determine your HSA contributions for a given year. Why is this? While these numbers may often equal the amount you contributed to your HSA, they may not equal what was reported to the IRS as contributed to the HSA. Mistakes happen, and sometimes your HSA administrator will miss a contribution or mess up the dollar amount. If this happens, they will report a different amount than you report on your taxes. This discrepancy can be a red flag to the IRS, which is why it is critical to have a “source of truth” for your HSA contributions. This serves as the official amount contributed to your HSA for the year, and if it is not correct, you can have your custodian fix it fairly easily.

Form 5498-SA reports contributions for the year

Each year, your HSA custodian (bank where you have account) is required to send you IRS Form 5498-SA. This form provides an accounting of all contributions to your HSA for the tax year, including personal, employer, prior year, and rollover contributions. Form 5498-SA is the “source of truth” we describe above, and is the final say in what was contributed. It is basically the “writing in stone” between you, your HSA custodian, and the IRS. Thus, if it is not correct, contact your custodian and make it so.

Here is an example of what Form 5498-SA looks like:

HSA_Form_5498-SA_2016 completed

For more detailed information on Form 5498-SA, please see this article.

Where is my Form 5498-SA?

Your HSA custodian is required to send you this form each year before you file your taxes. Generally, you should get the form by January 31st. However, mail gets lost or sent to wrong addresses. If you do not have your Form 5498-SA, don’t worry, you should be able to find this form on your custodian’s website in the document archive. Worst case, give them a call and ask to resend it or email it to you.

Why HSA Contribution amounts are important

Getting your HSA contribution amount is critical when you go to file Form 8889 each year, as an incorrect value can cost you money. If you under report your contribution to your HSA, you will not receive the tax deducation that Form 8889 allows you (by means of Form 1040). You basically did all the hard work for the HSA and didn’t get any benefit. On the other hand, if you over report your contribution, you risk taking too much of a deduction. This results in filing your taxes wrong and spending time dealing with fixing them or wost case, a friendly chat with the IRS.

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Note: if you need help calculating your contribution on your HSA taxes this year, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.

Paying for Health Insurance Premiums with HSA Funds

This question was submitted by HSA Edge reader Laura. Feel free to send in your question today to evan@hsaedge.com.

I was forced into early retirement and the company COBRA was outrageously expensive. I went to the marketplace and found a plan with Anthem. I have been paying for the coverage with HSA funds. Is this an eligible (covered) expense? I am not receiving unemployment benefits.

How to Pay for Premiums with HSA

It is unfortunate that HSA funds cannot be used for insurance premiums except in extenuating circumstances involving job loss. While it is possible this law will change in the future, currently it is not the case. Even so, the rules for paying insurance premiums while unemployed are strict. Long term care and Medicare are included, as is continuing health coverage such as COBRA. If those don’t apply, you can pay for health insurance while on unemployment benefits from the state/federal government. This clause explicitly requires being on state/federal unemployment compensation. Unfortunately this is usually the only real option as continuing coverage via employer sponsored COBRA insurance is excessively expensive.

The IRS spells this out when insurance premiums are considered qualified medical expenses in IRS Publication 969:

Insurance premiums. You can’t treat insurance premiums as qualified medical expenses unless the premiums are for:

Long-term care insurance

Health care continuation coverage (such as coverage under COBRA)

Health care coverage while receiving unemployment compensation under federal or state law

Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap)

That leaves most people going back to the market place for coverage. In theory, you can pay for any health insurance premium using HSA funds, but you must be unemployed. Specifically these premiums are a qualified medical expense if you are receiving federal or state unemployment compensation. I believe they do this as their filter for who is truly unemployed seeking assistance. So if you lose your job, you can sign up for any health insurance you want, and if you are receiving unemployment benefits, you can pay for the expenses with your HSA. This is part the strategy of building up your HSA to use as an unemployment safety net, as it does provide some flexibility for your funds if you lose your job.

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Note: if you need help with your HSA tax forms, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.