The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: fuzzy math on May 27, 2015, 01:43:31 PM
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First post here - long time reader. Please be nice!
I have an old HSA with $1300. Minimum to invest with it is $2100. I do not have a qualifying HDHP anymore and there isn't one offered through my employer. It does not earn any interest, and there are no fees as long as my balance is above $1000.
What are my options for this account? Can I contribute post tax to it? Can I put money back in the account after I spent it on medical expenses (a do over)? Google is not helping me with an answer at all.
I don't know whether to just leave it there long term as it was tax advantaged. If I draw it down a bit it will start incurring fees. If I spend it down as medical expenses come up I would have cash in my regular bank account available to invest as opposed to spending regular post tax $ on medical expenses
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What are my options for this account? Can I contribute post tax to it? Can I put money back in the account after I spent it on medical expenses (a do over)? Google is not helping me with an answer at all.
From http://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204068:
"You can roll over amounts from ... other HSAs into an HSA. You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Rollover contributions do not need to be in cash. Rollovers are not subject to the annual contribution limits."
See also http://forum.mrmoneymustache.com/ask-a-mustachian/low-hsa-balance-hsa-bank-or-no-feelow-fee-provider/.
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You can only contribute to an HSA if you have an HDHP. Once you have taken the money out to pay medical bills, there's no "do over" as far as I know. At this point your options are to leave the money in the account, roll it over to a new HSA, or use it to pay medical bills over the next few years. Given that you have fees if the account goes below $1,000, you may want to save up your medical bills until you have spent that much, get it all reimbursed at once, and close the account at that time. I personally don't think it's worthwhile to bother with rolling it over and investing such a small sum if you don't intend to have an HDHP in the foreseeable future that would allow you to contribute more.
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1) Can I contribute post tax to it?
2) Can I put money back in the account after I spent it on medical expenses (a do over)?
3) I don't know whether to just leave it there long term as it was tax advantaged. If I draw it down a bit it will start incurring fees. If I spend it down as medical expenses come up I would have cash in my regular bank account available to invest as opposed to spending regular post tax $ on medical expenses
1) no
2) no
3) I don't understand what you're saying. If you have a qualifying medical expense, generally you should withdraw the money from this account to reimburse you for that medical expense in the tax year you incur the expense.
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I think it's just a question of whether keeping the account as a quasi IRA is worth the hassle. Are your average annual medical bills enough to spend the account in a single year? If so, I would just deplete the account and move on. If not, then consider looking at a different HSA provider—one that allows investing at a lower account balance.
If you take money out for non-qualified expenses, it gets taxed as income & there is a 10% penalty applied as well. Don't do that! =D
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3) I don't understand what you're saying. If you have a qualifying medical expense, generally you should withdraw the money from this account to reimburse you for that medical expense in the tax year you incur the expense.
Depends on how one defines "should."
For a medical expense incurred after an HSA was established, one can withdraw that amount from an HSA at any time. The tax year is not a consideration.
If the medical expense can be covered by normal cash flow, keeping the money in the HSA to take advantage of tax-free growth and later withdrawal is worth considering. The issue of "is it enough to bother?" is also worth considering. For me the answer would depend on how much growth one might expect within the account. The lower the expected growth, the more likely I'd withdraw it ASAP, and vice versa.
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Like seattlecyclone said, I would save up enough medical bills to get "reimbursed" for the full amount of the account. You don't want it to come down slowly and start incurring fees. You also just have dead money if you leave it there since you stated you do not have enough to invest and do not have an eligible plan to make contributions.
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Given that you have fees if the account goes below $1,000, you may want to save up your medical bills until you have spent that much, get it all reimbursed at once, and close the account at that time.
This was my initial thought as well. I'd just leave it there until you've spent $1300 on medical care (keep your receipts) and then cash it all out. There's no expiration date on when medical expenses can be reimbursed, so it doesn't matter if you never hit $1300 in any one year. I do believe the expenses must be incurred after the date you opened your HSA though, so you can't reimburse yourself for expenses you paid before you had the HSA.