Which of the Following Decisions Would a Health Savings Account Owner Not Be Able to Make?
Health Savings Accounts (HSAs) have gained popularity in recent years as a way for individuals to save and pay for medical expenses. HSAs offer several benefits, including tax advantages and the ability to save for future healthcare costs. However, there are certain decisions that HSA owners are not able to make when it comes to their accounts. In this article, we will explore which decisions HSA owners cannot make and provide answers to frequently asked questions about HSAs.
1. Investing in individual stocks or specific companies: HSA owners cannot use their funds to invest in individual stocks or specific companies. HSAs are typically limited to a selection of investment options provided by the HSA provider.
2. Using HSA funds for non-qualified medical expenses: HSA owners cannot use their funds for non-qualified medical expenses. Qualified medical expenses are determined by the Internal Revenue Service (IRS) and include a wide range of healthcare services and products.
3. Contributing to an HSA without a high-deductible health plan (HDHP): To open and contribute to an HSA, individuals must have an HDHP. If you do not have an HDHP, you are not eligible to contribute to an HSA.
4. Making HSA contributions after age 65: Once an individual turns 65 and enrolls in Medicare, they can no longer contribute to their HSA. However, they can still use the funds in their HSA for qualified medical expenses.
5. Transferring HSA funds to another person’s HSA: HSA funds cannot be transferred to another person’s HSA. Each individual’s HSA is separate and cannot be combined or transferred to another person’s account.
6. Using HSA funds for health insurance premiums: HSA funds cannot be used to pay health insurance premiums, except in certain circumstances such as COBRA continuation coverage, long-term care insurance premiums, or if the individual is unemployed and receiving federal or state unemployment benefits.
7. Withdrawing HSA funds for non-medical purposes before age 65: If HSA owners withdraw funds for non-medical purposes before age 65, they will be subject to income taxes and a 20% penalty. After age 65, withdrawals for non-medical purposes are taxed as ordinary income but are not subject to the penalty.
8. Reimbursing expenses paid from a different source: HSA owners cannot reimburse themselves for expenses paid from a different source, such as personal savings or credit cards. To use HSA funds, the expenses must be paid directly from the HSA.
9. Making HSA contributions after losing HSA eligibility: If an individual loses their eligibility for an HSA, they can no longer contribute to the account. Loss of eligibility may occur if the individual no longer has an HDHP or becomes enrolled in Medicare.
10. Designating a beneficiary for the HSA: HSA owners can designate a beneficiary for their account. In the event of the owner’s death, the HSA funds go to the designated beneficiary. However, the beneficiary cannot make contributions or continue to use the HSA for medical expenses.
11. Using HSA funds for cosmetic procedures: HSA funds cannot be used for cosmetic procedures that are solely for aesthetic purposes. However, if the procedure is deemed medically necessary, it may be eligible for HSA funds.
12. Changing HSA providers without incurring fees: HSA owners may not be able to change HSA providers without incurring fees. Some HSA providers charge fees for account transfers or closing an account. It is important to review the terms and conditions of the HSA provider before making any changes.
Frequently Asked Questions (FAQs):
1. Can I use my HSA to pay for my spouse’s medical expenses?
Yes, HSA funds can be used to pay for qualified medical expenses of your spouse and dependents.
2. Can I use my HSA to pay for over-the-counter medications?
Yes, certain over-the-counter medications are considered qualified medical expenses and can be paid for using HSA funds.
3. Can I use my HSA to pay for dental and vision expenses?
Yes, dental and vision expenses are considered qualified medical expenses and can be paid for using HSA funds.
4. Can I use my HSA to pay for alternative therapies, such as acupuncture or chiropractic treatments?
Yes, if the alternative therapy is deemed medically necessary, it may be eligible for HSA funds.
5. Can I contribute to my HSA if I have a Flexible Spending Account (FSA)?
You can have both an HSA and an FSA, but there are certain restrictions. Generally, you cannot contribute to both accounts at the same time, except for limited-purpose FSAs that only cover dental and vision expenses.
6. Can I invest my HSA funds in stocks or mutual funds?
Depending on your HSA provider, you may have the option to invest your HSA funds in stocks, mutual funds, or other investment options. Check with your HSA provider for more information.
7. Can I use my HSA to pay for health insurance premiums while unemployed?
Yes, if you are receiving federal or state unemployment benefits, you may be eligible to use your HSA funds to pay for health insurance premiums.
8. Can I withdraw funds from my HSA for non-medical expenses after age 65?
Yes, you can withdraw funds from your HSA for non-medical expenses after age 65. However, the withdrawn amount will be subject to income tax but not the 20% penalty.
9. Can I save my HSA funds for future healthcare costs?
Yes, one of the advantages of an HSA is the ability to save funds for future healthcare costs. There is no time limit on using the funds in your HSA.
10. Can I use my HSA to pay for my child’s college tuition?
No, college tuition is not considered a qualified medical expense, and HSA funds cannot be used for this purpose.
11. Can I use my HSA to pay for health insurance premiums during retirement?
No, HSA funds cannot be used to pay for health insurance premiums during retirement, except for certain situations like long-term care insurance premiums.
12. Can I contribute to my HSA after age 65?
No, once you turn 65 and enroll in Medicare, you can no longer contribute to your HSA, but you can still use the funds for qualified medical expenses.
In conclusion, while Health Savings Account owners have significant control over their funds, there are certain decisions they cannot make. It is important for HSA owners to understand the limitations and guidelines set by the IRS and their HSA provider to ensure proper use and compliance with regulations.
