Author Topic: Just found out I can get an HSA for Nov-Dec. Help!  (Read 2686 times)

busymom

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Just found out I can get an HSA for Nov-Dec. Help!
« on: October 06, 2015, 08:43:08 PM »
I am a stay-at-home mom and my husband is a senior software developer. We live in the twin cities area in Minnesota.

The place my husband works at has always done their benefits (health insurance, dental insurance, FSA, etc) from November 1st-October 31st (based on the fiscal year of the company). Open enrollment is usually during the first half of October and changes take place Nov 1. This is pretty annoying as things like the health insurance deductibles run the regular calendar year (Jan 1-Dec 31) so it makes it kind of strange if you want to change health plans or anything....

Anyways, the company just announced yesterday that they are going to switch their benefits to a calendar year schedule (Jan 1-Dec 31) which is great and will be less confusing in the long run. However, this means that there is a very interesting (and possibly GOOD) opportunity---they are going to do an enrollment NOW that will be effective November 1-December 31, 2015, and they will do an enrollment in about a month for the 2016 calendar year.

Where it gets good--they also announced a new healthcare option of a high deductible plan with HSA option (there was NO option with an HSA before). AND, we can choose that plan already for the Nov 1-Dec 31 period.

So here's my questions to you Mustachians out there:

1) We currently have an FSA that will end Oct 31. Will it be okay to sign up for the HSA option and put the family max of $6650 in it for 2015 in Nov and Dec? Or is it a problem that we will have had an FSA and an HSA in the same calendar year?

2) For 2016, can you have both an FSA and a HSA? Or is that not allowed? Obviously the HSA is better, but can I have both?

3) So those of you that use an HSA for saving for early retirement--any suggestions on how to save receipts? Are you just paying cash, and saving the receipt for reimbursement at a much later date? Has anyone actually done this?


Thanks in advance for any advice you have for me!


Jack

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #1 on: October 06, 2015, 09:46:32 PM »
I think HSA and FSA rules go by your tax year, not your job's insurance year, so you won't be able to contribute to the HSA until January because of the existing FSA.

I'm pretty sure with (health care) FSAs and HSAs you have to pick one or the other, not both. Sorry. I think you are allowed to have both one of those plus a child care FSA, though.

I know this because something similar happened to me: I started a new job 3months before the plan year ended. I almost over contributed before I read the IRS publication about it.

MDM

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #2 on: October 06, 2015, 09:59:01 PM »
1) We currently have an FSA that will end Oct 31. Will it be okay to sign up for the HSA option and put the family max of $6650 in it for 2015 in Nov and Dec?
If I understand your situation correctly, if the available balance in your FSA on 10/31/15 is $0, the answer is "yes".  The HSA eligibility law talks about "plan year," not calendar year.  See 26 U.S. Code 223(c)(1) at https://www.law.cornell.edu/uscode/text/26/223.  See also http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204025.

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2) For 2016, can you have both an FSA and a HSA?
No, unless it is a specific type of FSA - see above.

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3) So those of you that use an HSA for saving for early retirement--any suggestions on how to save receipts? Are you just paying cash, and saving the receipt for reimbursement at a much later date? Has anyone actually done this?
Yes, exactly this.  Haven't cashed any in, but that is how we are proceeding.

N

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #3 on: October 06, 2015, 10:47:30 PM »
My HSA account provides me with a debit card, so I just use that to pay for all the medical stuff.

Jack

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #4 on: October 06, 2015, 11:01:33 PM »
My HSA account provides me with a debit card, so I just use that to pay for all the medical stuff.

But if you do that, you can't use that money for investment. The beauty of an HSA is that it's like an IRA, except that you can "cash in" your medical bill receipts after FIRE but before age 59 1/2, tax-free.

busymom

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #5 on: October 07, 2015, 06:47:09 AM »
1) We currently have an FSA that will end Oct 31. Will it be okay to sign up for the HSA option and put the family max of $6650 in it for 2015 in Nov and Dec?
If I understand your situation correctly, if the available balance in your FSA on 10/31/15 is $0, the answer is "yes".  The HSA eligibility law talks about "plan year," not calendar year.  See 26 U.S. Code 223(c)(1) at https://www.law.cornell.edu/uscode/text/26/223.  See also http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204025.

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2) For 2016, can you have both an FSA and a HSA?
No, unless it is a specific type of FSA - see above.

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3) So those of you that use an HSA for saving for early retirement--any suggestions on how to save receipts? Are you just paying cash, and saving the receipt for reimbursement at a much later date? Has anyone actually done this?
Yes, exactly this.  Haven't cashed any in, but that is how we are proceeding.



Thank you for these links, that was really, really helpful! I really appreciate it. As you pointed out, it refers to the "plan year" so I think we will be fine doing it.

nobody123

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #6 on: October 07, 2015, 08:32:35 AM »
I don't think you can dump the whole amount in if you're only covered for 2 months.  You would only be allowed to put 1/6 of the annual amount in and have it be tax deductible (it sort of 'vests' for each month you are covered).  I remember our HR folks pointing this out in case we chose to front-load our HSAs but then left the company at some point during the year.  I could be wrong, though.  I'd check the IRS website.

Gin1984

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #7 on: October 07, 2015, 08:36:13 AM »
I don't think you can dump the whole amount in if you're only covered for 2 months.  You would only be allowed to put 1/6 of the annual amount in and have it be tax deductible (it sort of 'vests' for each month you are covered).  I remember our HR folks pointing this out in case we chose to front-load our HSAs but then left the company at some point during the year.  I could be wrong, though.  I'd check the IRS website.
That was my understanding as well, but there is a loophole.  If you have it on Dec of one year (2015) and then the next year (2016), you can could a full year for 2015 even if you normally would not.  It is sort of risky, because what if you change plans, but it is there.

charis

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #8 on: October 07, 2015, 09:43:11 AM »
I don't think you can dump the whole amount in if you're only covered for 2 months.  You would only be allowed to put 1/6 of the annual amount in and have it be tax deductible (it sort of 'vests' for each month you are covered).  I remember our HR folks pointing this out in case we chose to front-load our HSAs but then left the company at some point during the year.  I could be wrong, though.  I'd check the IRS website.
That was my understanding as well, but there is a loophole.  If you have it on Dec of one year (2015) and then the next year (2016), you can could a full year for 2015 even if you normally would not.  It is sort of risky, because what if you change plans, but it is there.

We did this. Got HSA set up in Nov 2014 and fully loaded it for 2014 by March 2015.  I don't see the risk if you keep the same plan, which you would typically have to decide by then anyway.  If there is a chance you might change plans in January, obviously it is not a good idea.  If you think you might have to change jobs during the year, I guess the concern could be that the new employer doesn't offer an HSA/HDHP option, I think that's rare these days.
« Last Edit: October 07, 2015, 09:57:15 AM by jezebel »

MDM

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #9 on: October 07, 2015, 11:55:01 AM »
I don't think you can dump the whole amount in if you're only covered for 2 months.  You would only be allowed to put 1/6 of the annual amount in and have it be tax deductible (it sort of 'vests' for each month you are covered).  I remember our HR folks pointing this out in case we chose to front-load our HSAs but then left the company at some point during the year.  I could be wrong, though.  I'd check the IRS website.

Yes, you would be limited to 1/6 if the 2 months were at the beginning or in the middle of the year.  End of the year is different.  The IRS version of Gin1984's note (see the IRS publication linked above):
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Last-month rule.   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month.

Testing period.   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. For example, December 1, 2014, through December 31, 2015.

  If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and additional tax are shown on Form 8889, Part III.

nobody123

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #10 on: October 07, 2015, 12:47:29 PM »
So, you have to keep the coverage for a year under the "testing period", which I'm sure you are going to do.  What an awesome opportunity.  My company just adjusted its benefits year to match the calendar year; it's nice they are letting you fill up your HSA prior to potentially having to use it.

busymom

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Re: Just found out I can get an HSA for Nov-Dec. Help!
« Reply #11 on: October 07, 2015, 01:56:22 PM »
I don't think you can dump the whole amount in if you're only covered for 2 months.  You would only be allowed to put 1/6 of the annual amount in and have it be tax deductible (it sort of 'vests' for each month you are covered).  I remember our HR folks pointing this out in case we chose to front-load our HSAs but then left the company at some point during the year.  I could be wrong, though.  I'd check the IRS website.
That was my understanding as well, but there is a loophole.  If you have it on Dec of one year (2015) and then the next year (2016), you can could a full year for 2015 even if you normally would not.  It is sort of risky, because what if you change plans, but it is there.

We did this. Got HSA set up in Nov 2014 and fully loaded it for 2014 by March 2015.  I don't see the risk if you keep the same plan, which you would typically have to decide by then anyway.  If there is a chance you might change plans in January, obviously it is not a good idea.  If you think you might have to change jobs during the year, I guess the concern could be that the new employer doesn't offer an HSA/HDHP option, I think that's rare these days.


We are considering moving out of state next summer (and thus, switching employers), so it's good for us to take that into consideration.