HSA question

[frugaldrummer]

So I have a health plan that allows an HSA. I haven't gotten around to funding the HSA (I was put off by the high fees on HSA accounts)  but I'm planning to fund it now.

My question is this: what happens if next year, I change to a higher-coverage silver plan that doesn't qualify for an HSA? Can I still spend that HSA money for uncovered items during the year I have the silver plan, or do I have to wait until age 65 or until I switch back to an HSA compatible plan to spend that money?

[Joel]

Once the money is in an HSA it can be spent whenever.

[charis]

So I have a health plan that allows an HSA. I haven't gotten around to funding the HSA (I was put off by the high fees on HSA accounts)  but I'm planning to fund it now.

My question is this: what happens if next year, I change to a higher-coverage silver plan that doesn't qualify for an HSA? Can I still spend that HSA money for uncovered items during the year I have the silver plan, or do I have to wait until age 65 or until I switch back to an HSA compatible plan to spend that money?

Where are you facing high fees? I have a Chase HSA and there are no fees for just contributing to it (the investment side, on the other hand...oof).

[rubybeth]

So I have a health plan that allows an HSA. I haven't gotten around to funding the HSA (I was put off by the high fees on HSA accounts)  but I'm planning to fund it now.

My question is this: what happens if next year, I change to a higher-coverage silver plan that doesn't qualify for an HSA? Can I still spend that HSA money for uncovered items during the year I have the silver plan, or do I have to wait until age 65 or until I switch back to an HSA compatible plan to spend that money?

It's my understanding that you can't spend it on medical expenses if your insurance plan isn't compatible. But you can pay the taxes on unqualified distributions and spend on whatever you like. Or you wait and your plan coverage may change to be compatible and use it then. Or, just save your receipts from the year it is compatible and pay that out whenever based on the receipts you saved.

I like to put everything on my BarclayCard and get the funds out of the HSA as soon as possible so I'm not dorking around with a lot of receipts to submit later, but that's just me.

[seattlecyclone]

It's my understanding that you can't spend it on medical expenses if your insurance plan isn't compatible. But you can pay the taxes on unqualified distributions and spend on whatever you like. Or you wait and your plan coverage may change to be compatible and use it then. Or, just save your receipts from the year it is compatible and pay that out whenever based on the receipts you saved.

This is incorrect. The money can be spent on medical expenses at any time. What type of health plan you have only matters for determining whether you can contribute to the account.

[NumberCruncher]

It's my understanding that you can't spend it on medical expenses if your insurance plan isn't compatible. But you can pay the taxes on unqualified distributions and spend on whatever you like. Or you wait and your plan coverage may change to be compatible and use it then. Or, just save your receipts from the year it is compatible and pay that out whenever based on the receipts you saved.

This is incorrect. The money can be spent on medical expenses at any time. What type of health plan you have only matters for determining whether you can contribute to the account.

Yep.

Though, without an eligible plan, they usually charge an extra maintenance fee for the account (maybe a few dollars a month?) in my experience. That depends on your plan, I'm sure.

[rubybeth]

It's my understanding that you can't spend it on medical expenses if your insurance plan isn't compatible. But you can pay the taxes on unqualified distributions and spend on whatever you like. Or you wait and your plan coverage may change to be compatible and use it then. Or, just save your receipts from the year it is compatible and pay that out whenever based on the receipts you saved.

This is incorrect. The money can be spent on medical expenses at any time. What type of health plan you have only matters for determining whether you can contribute to the account.

Yep.

Though, without an eligible plan, they usually charge an extra maintenance fee for the account (maybe a few dollars a month?) in my experience. That depends on your plan, I'm sure.

Oh, okay, that's helpful, thanks!

[frugaldrummer]

Thanks all.

I asked because I was debating between putting money in the HSA or in my IRA.  I want to build up my cash reserves a bit (they got pretty low) but also need the deduction to make my income fit my tax estimates.  I figured the HSA might be a better choice because, if I get strapped, I could start paying for my ongoing medication and lab test costs out of that, making that money more accessible than money in my IRA.  (Don't worry, I have plenty in my 401k for the future so it's not crucial that I put money in the IRA this year).

The fees I referred to weren't investment fees, but the crazy charges to actually USE the money in your HSA.  That's why I didn't fund it in the first place, seemed like those fees would eat up a lot of the initial tax benefit.