Author Topic: Employer says I cannot front load my HSA  (Read 9274 times)

jabell

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Employer says I cannot front load my HSA
« on: January 13, 2015, 02:05:24 PM »
My employer changed our health care plans this year and we were left with 3 choices.  I chose a high detectable plan with an HSA account.

I understand the government limits pretax contributions to $3,350.00 per year and that is $128.85 x 25.99 pay periods=  $3,350.00  This Jan $128.85  is deducted every pay period to fund the HSA.

At my former employer we were allowed to front load our HSA if we anticipated higher medical expenses and that is what I did at one point.

My medical expenses already exceed what is in my HSA account.  I would like to front load my HSA in order to pay for my current expenses and near future expenses without having to wait until I have enough money built up in the HSA.  My employer is telling me I can only contribute $128.85 from each pay period pre taxed and if I want to contribute more it has to be post-tax.

This doesn't seem right to me especially having worked for a company previously where the same situation occurred and I was able to front load as long as I did not go over the $3,350.00 yearly limit.

Is this legit?
« Last Edit: January 13, 2015, 02:16:49 PM by jabell »

dunhamjr

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Re: Employer says I cannot front load my HSA
« Reply #1 on: January 13, 2015, 02:46:59 PM »
its probably just a limitation of the HSA accounts that your new employer is working with.  for example, my employer takes a level amount from me each pay period, but they kind of front load their own contributions to my HSA by adding in a triple share into the January contribution (but then they skip contribution till April).

from what i can see, in general, yes you are allowed to front load the HSA.  however. it very well might be that you need to front load w/ after tax funds and then write in the deduction on taxes later. 

sucks, but you should be able to adjust your withholding appropriately as well to account for the after tax spend.

ShoulderThingThatGoesUp

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Re: Employer says I cannot front load my HSA
« Reply #2 on: January 13, 2015, 02:49:29 PM »
Right, I'd think that if you adjust your withholding properly later in the year you'll get it back with your tax return.

nobody123

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Re: Employer says I cannot front load my HSA
« Reply #3 on: January 13, 2015, 02:55:11 PM »
My employer just began to offer a HD plan with the HSA option this year.  I was able to front-load the HSA, but the HR rep had to set it up outside of our usual 'self-service' portal where we could just specify the annual amount we want withheld and it is evenly taken out of all 24 paychecks.

jabell

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Re: Employer says I cannot front load my HSA
« Reply #4 on: January 13, 2015, 03:06:41 PM »
My employer just began to offer a HD plan with the HSA option this year.  I was able to front-load the HSA, but the HR rep had to set it up outside of our usual 'self-service' portal where we could just specify the annual amount we want withheld and it is evenly taken out of all 24 paychecks.

Pretty much the same thing we have but our HR rep is not going to set anything up outside of our self service portal.

bacchi

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Re: Employer says I cannot front load my HSA
« Reply #5 on: January 13, 2015, 03:15:35 PM »
You can only contribute to an HSA for the months you have an HDHP. The employer is probably just doing a CYA to prevent you from over contributing

Save your receipts and have your HSA cut you a check later in the year.

Numbers Man

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Re: Employer says I cannot front load my HSA
« Reply #6 on: January 13, 2015, 03:56:18 PM »
A combination of lazy HR or a system where your company can't keep track of anything besides the normal contributions. If it were me, I would stop the payroll deduction and write my own check to the HSA Bank.

jabell

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Re: Employer says I cannot front load my HSA
« Reply #7 on: January 13, 2015, 04:14:49 PM »
You can only contribute to an HSA for the months you have an HDHP.

I've had the new HSA since the 1st of this year.  Are you saying that I can only contribute $128.85 because the account is new and I am in week 2 of Jan?  If that's what you mean I don't understand why my old employer let me dump in $1000.00 right off the bat when I needed to as long as I did not accede the yearly limit.

The employer is probably just doing a CYA to prevent you from over contributing

Could be, but it just doesn't seem right when I can go in and change my 403b contribution at any time from 0-85% of my salary as long as I do not accede the 403b limit for the year.

jabell

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Re: Employer says I cannot front load my HSA
« Reply #8 on: January 13, 2015, 04:16:02 PM »
A combination of lazy HR or a system where your company can't keep track of anything besides the normal contributions.

This is more of what I am leaning towards.


seattlecyclone

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Re: Employer says I cannot front load my HSA
« Reply #9 on: January 13, 2015, 04:31:56 PM »
You can only contribute to an HSA for the months you have an HDHP.

I've had the new HSA since the 1st of this year.  Are you saying that I can only contribute $128.85 because the account is new and I am in week 2 of Jan?  If that's what you mean I don't understand why my old employer let me dump in $1000.00 right off the bat when I needed to as long as I did not accede the yearly limit.

Suppose you front-load your HSA, leave your job mid-year, and switch to non-HDHP health insurance at that time. In that case you will have over-contributed to your HSA (because the maximum contribution is tied to the number of months you have HDHP coverage). My employer also doesn't allow front-loading the HSA, and I think the most likely reason is to keep people from getting into an over-contribution situation that they might have to go back and correct later.

jabell

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Re: Employer says I cannot front load my HSA
« Reply #10 on: January 13, 2015, 04:45:41 PM »
Well that at least makes sense,,, I don't like it but it makes more sense.

StikyBoots

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Re: Employer says I cannot front load my HSA
« Reply #11 on: January 13, 2015, 04:49:28 PM »
Save your receipts and have your HSA cut you a check later in the year.

This is what I do even though I have plenty in my HSA. I pay with a credit card (more rewards) or cash/check (sometimes the dentist gives me a 5% cash discount!) and submit the receipts to the HSA.

There is a backdoor sort of way to use the HSA.

Example:
Year 1 you have a HDHP, open a HSA, contribute $3350, and have $3000 worth of qualified medical expenses for which you withdraw $3000 from your HSA. Ending balance $350   
Year 2 you have a PPO and no HSA or FSA. You have $2000 in medical expenses that qualify for HSA withdrawals. You withdraw $250 from your HSA and save the receipts for $1750. Ending balance $100 to keep your HSA account open
Year 3 you have no healthcare coverage and have healthcare expenses of $250 for which you save the receipts from. Your HSA is still open with $100 in it
Year 4 you have a HDHP, contribute $3350 to your HSA that you opened in Year 1. You can now submit your Year 2 unrefunded receipts for $1750 and Year 3 unrefunded receipts for $250  to your HSA and get reimbursed for them.

Now this will only work if you keep your HSA open. They keep track of the open date and any receipt dated after that is valid for reimbursement as long as the funds are available.

There is also retirement benefits available via the HSA talked about here: http://blogs.reuters.com/shaneferro/2013/07/18/hsas-when-your-health-insurance-becomes-a-retirement-account/ Oddly enough my HSA has cheaper and, in my oppinion better investment oppertunities than my 401k.

Eventually, after I pay off all of my student loans I will retain the receipts as another layer of emergency funds and submit them when I need the money or for my post retirement but pre-59.5 years.

Hope this helps you!

Mrs. PoP

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Re: Employer says I cannot front load my HSA
« Reply #12 on: January 13, 2015, 06:16:29 PM »
A combination of lazy HR or a system where your company can't keep track of anything besides the normal contributions. If it were me, I would stop the payroll deduction and write my own check to the HSA Bank.

If you do this, it's my understanding that you end up paying FICA on your HSA contributions, costing you 6.8%.  If you go through payroll, they'll be taken out pre-FICA, which is pretty sweet. 

Numbers Man

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Re: Employer says I cannot front load my HSA
« Reply #13 on: January 14, 2015, 09:36:09 AM »
A combination of lazy HR or a system where your company can't keep track of anything besides the normal contributions. If it were me, I would stop the payroll deduction and write my own check to the HSA Bank.

If you do this, it's my understanding that you end up paying FICA on your HSA contributions, costing you 6.8%.  If you go through payroll, they'll be taken out pre-FICA, which is pretty sweet.

I have heard of the FICA deal (Social Security is 6.2% and Medicare is 1.45%) as long as the employer has a 125 cafeteria plan. I wonder if there's been a study on how that impacts your future social security check since your income is lower.

nobody123

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Re: Employer says I cannot front load my HSA
« Reply #14 on: January 14, 2015, 10:49:16 AM »

I have heard of the FICA deal (Social Security is 6.2% and Medicare is 1.45%) as long as the employer has a 125 cafeteria plan. I wonder if there's been a study on how that impacts your future social security check since your income is lower.

I was wondering about this as well.  Your traditional health insurance premiums reduce what the SSA says you earned anyway, so I would think it only would make a difference in your SS benefits if you now defer more $ into the HSA than the difference in the reduction in premium.  But you'd have to offset that potentially reduced SS benefit by however you quantify the benefit of the HSA today.  I'll take the known tax savings plus having control of my money today as opposed to a promise that I will get an extra buck or two per month 30-some years from now.

seattlecyclone

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Re: Employer says I cannot front load my HSA
« Reply #15 on: January 14, 2015, 01:23:39 PM »
Regarding how HSA payroll deductions might affect your social security, check out this document that describes how monthly social security benefits are calculated.

The gist of it is that you first look back at each year you worked and adjust the portion of your earnings for inflation. Then you add it all up (unless you worked more than 35 years, in which case you only add up the top 35 years). This lifetime total is then used to calculate monthly benefits in a graduated manner, similar to how the progressive income tax works. In this case there are three "brackets" of income that are used to calculate benefits. As lifetime income increases to the next bracket, each extra dollar earned adds less to your monthly social security benefit.

If this lifetime total is less than $342k when you collect benefits, each $1,000 you saved in an HSA would cost you $2.14/month in social security benefits if you collect benefits at your "full retirement age" (more if you wait until 70 to collect benefits, less if you start at 62). If the lifetime total is between $342k and $2.06 million, each $1,000 saved in an HSA will cost you 76/month in benefits. If the lifetime total is greater than $2.06 million, each $1,000 saved in an HSA will cost you 35/month in benefits.

I think the tax savings from putting money in an HSA likely outweigh lost social security income in almost all cases.

Numbers Man

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Re: Employer says I cannot front load my HSA
« Reply #16 on: January 14, 2015, 01:28:40 PM »
Regarding how HSA payroll deductions might affect your social security, check out this document that describes how monthly social security benefits are calculated.

The gist of it is that you first look back at each year you worked and adjust the portion of your earnings for inflation. Then you add it all up (unless you worked more than 35 years, in which case you only add up the top 35 years). This lifetime total is then used to calculate monthly benefits in a graduated manner, similar to how the progressive income tax works. In this case there are three "brackets" of income that are used to calculate benefits. As lifetime income increases to the next bracket, each extra dollar earned adds less to your monthly social security benefit.

If this lifetime total is less than $342k when you collect benefits, each $1,000 you saved in an HSA would cost you $2.14/month in social security benefits if you collect benefits at your "full retirement age" (more if you wait until 70 to collect benefits, less if you start at 62). If the lifetime total is between $342k and $2.06 million, each $1,000 saved in an HSA will cost you 76/month in benefits. If the lifetime total is greater than $2.06 million, each $1,000 saved in an HSA will cost you 35/month in benefits.

I think the tax savings from putting money in an HSA likely outweigh lost social security income in almost all cases.

Awesome post!

tfordon

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Re: Employer says I cannot front load my HSA
« Reply #17 on: January 14, 2015, 01:51:58 PM »

There is also retirement benefits available via the HSA talked about here: http://blogs.reuters.com/shaneferro/2013/07/18/hsas-when-your-health-insurance-becomes-a-retirement-account/ Oddly enough my HSA has cheaper and, in my oppinion better investment oppertunities than my 401k.

Eventually, after I pay off all of my student loans I will retain the receipts as another layer of emergency funds and submit them when I need the money or for my post retirement but pre-59.5 years.

Hope this helps you!

The mad-fientist had a post on this as well: http://www.madfientist.com/ultimate-retirement-account/

If you don't need to spend the HSA money today, you should probably spend normal post-tax money so your HSA can grow tax free.