Help me understand current HSA law

[MilesTeg]

I am pretty confused about HSAs currently. I understand the basics of what they are, but not sure about specifics.

I have insurance through my employer, and we have always turned down HSA accounts because we are pretty healthy and there is little for us to spend on them. We turn them down specifically because HR tells me they are use-it-this-year-or-lose-it.

However, when I read about HSAs in general, it seems like they are NOT use-it-or-lose it, or there is some type of HSA that is not.

I would really like to start an HSA to save up tax free for the almost certainty of needing it, but don't know what the hell is going on with regards to:

1.) use-it-or-lose it
2.) getting an HSA with a source that is NOT my employer
3.) ability to withdrawl funds for purposes other than health (obviously would be taxed).

So, what's the actual deal here?

[skuzuker28]

Sounds like there is some confusion between HSAs (Health Savings Accounts) and medical FSAs (Flexible Spending Accounts).

FSA:
-2500 contribution limit (all pre-tax, including FICA)
-use it or lose it (small optional carryover)
-can be offered by any employer with a group health insurance plan

HSA:
-3350 limit for single coverage, 6650 for family coverage (all pre-tax, including FICA if made through payroll)
-Account is persistent, meaning unused contributions carry over
-Can only make contributions if you have a qualifying High Deductible Health Plan.

If your insurance qualifies for a HSA account your employer should be set up for payroll deductions.  From your post, it sounds like you only have access to a FSA, but your benefits administrator would be able to clarify.

[JPatch]

Minor quibble:

HSA maximum for family coverage is up to $6,750 this year.

[skuzuker28]

Thanks for the correction.  I don't get to start 2016 until October 15th, haha.

[MDM]

See Publication 969 for more details on the differences between HSAs and FSAs.