HSA: Am I eligible, and is it worth it?

[Anodyne]

Hi guys,

I'm starting a new job making about $60K on Monday. My employer offers access to a Cigna "CDHP" with an HSA. I'm 24, and currently still covered under a pretty good HMO plan through my father's employer. Am I still eligible to enroll in the plan that gives me access to an HSA or would existing coverage exclude this?

The details are as follows:

• $2.50 monthly "administration fee"
• $45/mo premium
• $500 yearly contribution to the HSA by my employer
• $2000 minimum initial balance
• The best fund is S&P500-ish index fund with something like 0.60% expense ratio

So, I'd be paying $75/year for the privilege of having the plan, and then $30/year in fees after it's closed. If I am eligible, would that be worth it? I'll be making the full 17.5K contribution to my 403(b), so I will, depending on side income, most likely be in the 15% marginal tax bracket without the use of an HSA.

Thanks!

[fragglebock]

You are not eligible to contribute to a HSA because you are covered by a non-HDHP (your pop's plan).

If you were eligible, the fees on that account would be too high to make it worth while (at least at the low-$ rates).  However, if you were eligible, you could shop around for a place to open your HSA account that didn't charge so many fees.  My credit union charges offers a no-fee HSA, but the catch is that the investment opportunities are limited.

If you decide to open your own HSA, you would want to double-check the fine print regarding that employer contribution.  It sounds like they want you to put in $1500 of your own money to get $500 of theirs, and that probably means you have to do it in the plan that has those high fees.

[Anodyne]

Thanks, fragglebock! I didn't think I was eligible but it's good to hear it from someone else.

It looks like I get paid an additional $50/mo if I opt out of my employer's coverage, so I can just put that towards my IRA or taxable accounts instead.

I'm not clear on specifics of the employer contribution either, but I have a little more time to figure out whether that's worth it now. :)

[seattlecyclone]

You're only eligible for an HSA if you don't have any health insurance but an HDHP. So your parents' plan would disqualify you.

A couple of questions:
- How much money (if any) are your parents paying to keep you on their insurance? Is it more than the premiums on your employer's plan?
- Are they happy to do that, or would they rather you get your own insurance if possible?

If your parents want to keep you on your plan, you might as well stay there until you turn 26 and then switch to your employer's plan and start making HSA contributions. If not, you might as well get off their plan and start maxing out that HSA. The HSA gives you $500/year in free money and the opportunity to save a bit more tax-free. The fees aren't ideal, but that's probably the price you have to pay to get the $500 from your employer. You can always move that money to a better HSA when you leave your current employer (assuming you don't spend it all on medical expenses in the meantime).

[Anodyne]

They are not paying any extra money to keep me on their plan: there are only "self only" and "family" versions, and since my mom doesn't have healthcare on her own, it'd be of no advantage to them for me to leave the plan. Even if that weren't the case, they're very generous with that sort of thing.

The point about the possibility of moving the money to a better HSA when I leave is a good one. I think I'm going to like my work here, but there doesn't seem to be a huge opportunity for advancement in pay or position, so I may end up maxing out HSA contributions for a year or two and moving on.

[fragglebock]

Have a good 1st day at work!