Curious how YNAB folks handle their HSA

[Thegoblinchief]

Those of you who use YNAB, do you treat your HSA as an on-budget or off-budget account?

I am thinking of treating it as off-budget because of restrictions on how you can spend money, but then that makes it a pain to handle eligible medical spending.

Also, more general question: I assume I can use an HSA to pay for dental expenses even if I don't have dental insurance, yes?

This is our first year having an HSA, so I'm new to all this.

Never mind, answered this part for myself by finding the appropriate IRS pub.

[Runge]

I don't have one, but if I did, I'd handle it as off budget. Mainly because I'd be treating it like another retirement account.
http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/

In addition, I'd keep all of my medical expenses all under the same budget category, and/or I would put a "tag" in the memo field of, something like #medical.

[johnny847]

More or less what Runge said.

If you want the nitty gritty of how I would set this up :

Every time I get a paycheck, I enter my gross paycheck into my bank account in YNAB, and then I enter the state and federal tax withholdings (I don't pay FICA as a student) . I do it this way because I like to use YNAB to help me keep track of tax withholding, and about half my pay comes from a source that doesn't withhold tax.

If you were to do it this way then you could record a virtual transfer from your bank account that just because received the paycheck to the off budget HSA.

Then if you do make a withdrawal, I would make a dummy category for the withdrawal (because moving money from off to on budget requires a category). But this category is a dummy because it results in a "negative expense". This dummy category gets excluded from any expense reports.  Then I'd enter another transaction in the on budget account you transfered HSA money to for the actual medical expense.

[Thegoblinchief]

I don't have one, but if I did, I'd handle it as off budget. Mainly because I'd be treating it like another retirement account.
http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/

I'm well aware of the HSA as a retirement vehicle, but we're a couple years away from maxing it out because of debt repayment priorities. I'm only contributing enough to cover estimated outflows plus a buffer to be determined. The HSA we have immediate access to is very low-interest checking. Depending on how the next year or so goes, I'll roll $ into an HSA with more aggressive investments.

I realize there's optimization debates which could be made there, so I'm open to arguments about that.

[catccc]

I don't have an HSA, so not sure if this is helpful:  But I have an FSA.  And I know there are reasons I shouldn't do this, but I only record my net pay, so FSA contributions aren't part of it.  Then when I have an FSA reimbursable expense, I record the expense to a budget category I call "Reimbursable."  I don't budget for these expenses, so I let the category go into the red.  Once I am reimbursed I post the "income" to that account.  This is lacking because at the end of the year, it's like the medical expenses and the corresponding income never existed, so I have a skewed picture of actual spend.

Essentially from an accounting perspective, it's all on the income statement and never on the balance sheet... I don't have an account for it at all, on or off budget.

I also have a dependent care fsa, which I treat differently.  I budget monthly for preschool tuition that is paid twice yearly, then when I get reimbursed for it, it just comes in as regular income, and I typically throw it into some savings vehicle.  Like the medical FSA, there is no separate account for the funds as they taken from my paycheck.  I just call them into existence when I'm reimbursed.

I probably should treat the medical fsa the same way I do the dependent care FSA.

Maybe going forward.

But I also don't keep non-spending accounts (401K, ROth, other investments) in YNAB, for the most part.  Pretty much just the checking, short term savings, and cards we utilize (and pay off immediately.)

[ender]

We're keeping all medical stuff outside our regular budget, since HSA covers all of it.

Some of the smaller stuff we just keep track of so we can build the balance in the HSA. I expect at some point we'll actually have to use the HSA for medical related things.

[midweststache]

Could you do both? Could you have an on-budget HSA account that you perpetually keep at zero (like another debit card account) and then an off-budget HSA account to track your contributions/growth. Then, when a cost does arise, transfer the cost of that purchase (copay, prescription, etc.) into the on-budget HSA account not as income but as +medical?

Let's say you have $5,000 in your off-budget HSA and $0 in your on-budget HSA. You go to the doctor and have a $20 copay and purchase $30 in prescriptions. Your costs in your "Medical" budget are now $50. So you move $50 from your off-budget HSA account (retirement) to your on-budget HSA account (debit) as a $50 credit in "Medical", not in "Income." Your off-budget HSA is $4,950 and your on-budget HSA is again $0, since your $50 debit was cancelled out by your $50 credit.

Or is that too convoluted? It seems pretty convoluted... We have an HSA but we haven't had any qualifying medical expenses yet... this is how I imagine I'll deal when the time comes...

[johnny847]

Could you do both? Could you have an on-budget HSA account that you perpetually keep at zero (like another debit card account) and then an off-budget HSA account to track your contributions/growth. Then, when a cost does arise, transfer the cost of that purchase (copay, prescription, etc.) into the on-budget HSA account not as income but as +medical?

Let's say you have $5,000 in your off-budget HSA and $0 in your on-budget HSA. You go to the doctor and have a $20 copay and purchase $30 in prescriptions. Your costs in your "Medical" budget are now $50. So you move $50 from your off-budget HSA account (retirement) to your on-budget HSA account (debit) as a $50 credit in "Medical", not in "Income." Your off-budget HSA is $4,950 and your on-budget HSA is again $0, since your $50 debit was cancelled out by your $50 credit.

Or is that too convoluted? It seems pretty convoluted... We have an HSA but we haven't had any qualifying medical expenses yet... this is how I imagine I'll deal when the time comes...

With respect to the way that I like to keep track of expenses, the problem here is that now your medical expense category hasn't changed - you incurred a $50 charge in your on budget HSA, and then recorded a $50 credit towards the medical category.
In YNAB, that would make it seem like I spent nothing in Medical for that transaction. Not to say that this approach is wrong - some people may like this approach. But I think it would be a bit problematic if we were talking about larger regular medical expenditures, and you were trying to establish your annual expenses to figure out your FIRE number.

[Thegoblinchief]

I think I'm just going to keep it on budget for now and mentally subtract that balance from any planned buffer when arranging the next months budget. (So the actual buffer would be budgetable dollars minus HSA balance.)

Thanks for the input all :)

[whiskeyjack]

Sounds like you've settled it - but I enter the HSA as an on-budget account that receives money/income automatically 2x per month.

Other than the HSA contribution I only record net income and not what happens pre-tax.  Most of our HSA is currently being spent on medical and I wanted it all to show in the budget.