If you have questions about the regulations behind your health savings account (HSA), you are not alone. There is quite a bit of confusion regarding contribution and distribution rules for HSAs—and understandably so. Healthcare regulations change frequently, and it can be difficult to keep the details straight. Here is what you need to know about current HSA regulations.
In order to qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP). You cannot be enrolled in any other health coverage, such as secondary insurance or Medicare. In addition, you cannot be claimed as a dependent for the most recent tax year.
HSA Contribution Limits (and Who Can Contribute)
Contribution limits are based on coverage type (self only vs. family), not on marital status. For 2017, the HSA contribution limits are $3,400 for individuals and $6,750 for families. Anyone is allowed to contribute to an HSA, including yourself, your employer, or members of your family.
If you begin coverage midyear, your contribution limit will be prorated according to the number of months that you were not enrolled in the HDHP.
If you enroll in a different health policy, you are allowed to keep your HSA (and all the funds in it), but you may no longer contribute to it. Unlike flexible savings accounts (FSAs), there is no “use it or lose it” clause with HSAs.
Who Is Eligible for Distributions
Only one person’s name is listed as the account holder on the HSA, so this is a very common question. Any person who is a dependent on the account holder’s taxes is eligible to receive distributions, as well as a spouse if you file jointly.
When Spouses Are Enrolled in Two Different HDHPs
If you are enrolled in a HDHP through your employer and your spouse is enrolled in his or her employer’s HDHP, you each will have to create your own HSA. Your dependents’ distributions can come from either, but the name on the HSA has to match the name on the HDHP.
HSAs and Medicare Restrictions
Once you are enrolled in Medicare, you can no longer contribute to your HSA; however, you can continue to receive distributions. If you work past age 65 and wish to remain enrolled in your employer’s health coverage, make sure you familiarize yourself with the IRS regulations applicable to your situation.
Fines for Nonqualified Expenses
Distributions for nonqualified medical expenses are fined 20 percent until age 65, at which point the money can be spent on anything without incurring fines.
Understanding the contribution and distribution rules surrounding your HSA can be frustrating at times, but there are plenty of resources available to help you along the way. Don’t forget that you can talk to your HR director or health insurance broker if you need additional assistance.
What questions do you still have about HSAs? Let us know in the comments below.