Posts Tagged ‘HSA’

Who is eligible to open and contribute to an HSA?

Tuesday, August 11th, 2009 by WPJ

To open or contribute to an HSA you must meet certain eligibility requirements. Specifically:

  • You must be covered by a qualified high deductible health plan on the first day of the month
  • You cannot be covered by any other health plan that is not a qualified high deductible health plan, including spouse’s health insurance
  • You cannot be covered by spouse’s Medical FSA
  • You cannot be enrolled in Medicare Part A or Part B
  • You cannot be covered by TriCare
  • To make contributions you cannot have accessed your VA medical benefits in the past 90 days
  • You may not be claimed as dependent on another person’s tax return

Please feel free to contact us if you have any questions about HSAs with Health Savings Administrators.

Can I use my HSA to pay for Concierge medical fees?

Tuesday, November 25th, 2008 by WPJ

There are essentially four “Concierge” models:

  1. Fees for care. In this model the fees charged are directly related to medical care, as described by the IRS, and would generally be considered as eligible medical expenses under the HSA guidelines.
  2. Annual Physical. Here a fee is charged for an annual physical, usually comprehensive in scope, that includes no additional non-medical services. The physical is considered to be medical care and would generally be considered as eligible medical expenses under the HSA guidelines.
  3. Annual physical plus amenities. Here a fee is charged for an annual physical and some additional non-medical services (amenities). The physical is considered to be medical care and would generally be considered as eligible medical expenses under the HSA guidelines. The amenities (e.g. retainer fess or timely access to a physician) are not eligible medical expenses under the HSA Guidelines. If the Physician group provides itemized billing for the services included, the physical can be reimbursed from the HSA as a medical expense, but the “amenities” cannot. In the case where the physician group furnishes only a global bill with no itemization for specific services, it may be difficult to prove the expense was eligible.
  4. Amenities Only. Here the fees collected by the physician groups are exclusively for amenities like retainer fees or guaranteed timely access. These are not medical expenses and as such are not generally reimbursable by the HSA.

The rationale is detailed below.

The final decision as to whether an expenditure is primarily for medical care, or is merely beneficial to general health, is a question of fact ( i.e. would be supported by evidence unique to the situation in question). If you have questions about your situation after reviewing this answer, you should consult your tax advisor or tax attorney.

Section 213(a) Of the IRS code allows a deduction for uncompensated expenses for medical care of an individual, the individual’s spouse or a dependent, to the extent the expenses exceed 7.5 percent of adjusted gross income. Section 213(d)(1) provides, in part, that medical care means amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This is the basis for all HSA eligible medical expenses.

Under § 1.213-1(e)(1)(ii) of the Income Tax Regulations, the deduction for medical care expenses will be confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. An expense that is merely beneficial to the general health of an individual is not an expense for medical care. Whether an expenditure is primarily for medical care or is merely beneficial to general health is a question of fact.

This is echoed in IRS Publication 502:

“Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include dental expenses. Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.”

Pub 969 (which speaks directly to additional HSA allowable expenses) again references 502 and makes no mention of physician concierge services:

“Qualified medical expenses. Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. These are explained in Publication 502, Medical and Dental Expenses. ” Publication 969 goes on to include over the counter medications and certain insurance premiums but is silent on the issue of concierge services, considering them to have been addressed in Publication 502.

Can I use my HSA for my children's medical expenses even though they will not be in my medical plan?

Tuesday, November 11th, 2008 by WPJ

Yes – the majority of HSA restrictions center around contributions to the HSA with fewer  restrictions on the withdrawals. In answer to the  question above, money in an HSA can ALWAYS be withdrawn tax-free for the medical expenses of the account holder (also known as the account beneficiary in the IRS regs), the account holder’s spouse, and the tax dependents of the account holder. (IRS notice 2004-2, Q & A 25). In addition IRS Notice  2008-59, Q&A 33 addresses the question of a dependent being claimed by a former spouse.

Does an employer-sponsored health clinic impact contributions to an HSA?

Wednesday, July 2nd, 2008 by WPJ

Is an otherwise eligible individual who has access to free health care or health care at charges below fair market value from a clinic on their employer’s premises eligible to contribute to an HSA?
An individual is not prohibited from contributing to an HSA merely because the individual has access to free health care or health care at charges below fair market value from an employer’s on-site clinic if the clinic does not provide significant benefits in the nature of medical care (in addition to disregarded coverage or
preventive care).

Example 1. A manufacturing plant operates an on-site clinic that provides the following free health care for employees: (1) physicals and immunizations; (2) injecting antigens provided by employees (e.g., performing allergy injections); (3) a variety of aspirin and other nonprescription pain relievers; and (4) treatment for injuries caused by accidents at the plant.
The clinic does not provide significant benefits in the nature of medical care in addition to disregarded coverage or preventive care.

Example 2. A hospital permits its employees to receive care at its facilities for all of their medical needs. For employees without health insurance, the hospital provides medical care at no charge. For employees who have health insurance, the hospital waives all deductibles and co-pays.

Because the hospital provides significant care in the nature of medical services, the hospital’s employees are not eligible to contribute to an HSA. (IRS publication 2008-59)

Can I pay Long Term Care premiums with my HSA?

Wednesday, June 11th, 2008 by WPJ

You may use your HSA for long term care premiums provided your policy meets certain requirements and you stay within the allowable premium expenditure limits.In order to spend money from your HSA on long-term care, your long-term care insurance contract must:

  1. Be guaranteed renewable;
  2. Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed;
  3. Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract, must be used only to reduce future premiums or increase future benefits;
  4. Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.

For 2012, the amount of premium you can pay with HSA funds are:

  • Age 40 or Under – Up to $340
  • Age 41 to 50 – Up to $640
  • Age 51 to 60 – Up to $1,270
  • Age 61 to 70 – Up to $3,390
  • Age 71 or Over – Up to $4,240

I am getting a divorce; can I transfer part of my HSA to my spouse?

Wednesday, June 11th, 2008 by WPJ

HSAs are the property of only one tax payer. IRS regulations do not permit transfers from one taxpayer to another under normal circumstances. Publication 504 does address the issue of HSA transfer (full or patial) in divorce situations.  The IRS guidelines described below require legal documentation (an “instrument”) for a custodian to move money from one HSA to another.

From IRS Publication 504:

 ”Health savings account (HSA). If you transfer your interest in an HSA to your spouse or former spouse under a divorce or separation instrument, it is not considered a taxable transfer. After the transfer, the interest is treated as your spouse’s HSA.”

Who can I name as my beneficiary?

Wednesday, June 11th, 2008 by WPJ

You may have any person as your beneficiary. If you designate your spouse as your HSA beneficiary, the account will be transferred to your spouse’s name with all tax benefits intact. If you designate your HSA to a non-spouse beneficiary, the HSA funds will be liquidated and the beneficiary will be responsible for paying taxes on the balance.

Do I need to name a beneficiary for my HSA?

Wednesday, June 11th, 2008 by WPJ

Yes, you will need to name a beneficiary for your HSA. If your spouse is the beneficiary of your HSA, the account transfers as an HSA with all of the tax benefits intact. When you initially enroll in the HSA, you will be required to complete enrollment forms. Included in the enrollment form is a section for you to name your HSA beneficiary.

What are the basic rules applying to domestic partners and HSA’s?

Thursday, June 5th, 2008 by WPJ

Generally the issues surrounding domestic partners (DPs) relate to contributions and withdrawals.

Note that domestic partners do not file joint tax returns so they are treated as individual taxpayers with no relationship. This means each can make their HSA contributions based on the coverage provide by their HDHP (Family or Individual). If the employer provides “Family” coverage to DPs, then each can contribute ar the family level.

Regarding withdrawals, unless the DP is a tax dependent of the account holder, the account holder cannot use HSA dollars to pay medical expenses of the DP.

One last issue – because a DP is not a spouse, if the DP is the beneficiary of the HSA, all tax advantages evaporate at the death of the account holder. The balance becomes the same as any other inheritance.