converting from FSA to HSA

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date converting from FSA to HSA idp 07-26-2007  Re: converting from FSA to HSA Cal 07-26-2007  Re: converting from FSA to HSA idp 07-26-2007  Re: converting from FSA to HSA Cal 07-27-2007  Re: converting from FSA to HSA Mark Bole 07-26-2007  Re: converting from FSA to HSA wyu 07-26-2007  Re: converting from FSA to HSA Mark Bole 07-26-2007
Posted by idp on July 26, 2007, 8:56 am we're facing as a family the decision to move from an HMO+FSA health insurance to an HSA the Flexible Spending Account (FSA) is used with the HMO plan to pay for anything not covered by the HMO, such as dental and eyeglasses and deductibles like office visits in reading some of the Health Savings Account (HSA) literature, it appears there is a restriction that to be eligible, one can not be claimed as dependent on someone else's tax return while we file a joint return, one of our children is claimed as dependent (under 24) and is currently covered by our HMO and FSA as he is a full time student while working part time at the university. does that mean he would not be covered by the HSA ? the other part the literature mentions is that the money grows in the HSA like an IRA but does one have investment choices on this money? or does that refer to just some money market like interest paid on the balance? morningstar had a short HSA commentary today http://news.morningstar.com/articlenet/article.aspx?id=199639&pgid=wwhome1a&lpos=Commentary would it also make sense to pre-load a larger contribution to the HSA for the 1st year one enrolls and then use that as a "bank" while reducing future years contributions slightly ? anything else to consider about HSA rules ? Posted by Cal on July 26, 2007, 10:10 am > the other part the literature mentions is that the money grows in the HSA like an IRA > but does one have investment choices on this money? or does that refer to > just some money market like interest paid on the balance? > I can only speak to this one part of your query. The answer will depend on whom you have the HSA with. Some may have restrictions in the investment area, others DO NOT. Generally speaking you are permitted to invest some portion of the HSA Savings account in a mutual fund. That choice MAY be restricted. You will need to inquire of the HSA Administrator. Cal Lester CLU Posted by idp on July 26, 2007, 11:40 am Cal wrote: > Generally speaking you are permitted to invest some portion of the HSA > Savings account in a mutual fund. That choice MAY be restricted thank you. if it is restricted, how does the money grow? Posted by Cal on July 27, 2007, 11:09 am > Cal wrote: >> Generally speaking you are permitted to invest some portion of the HSA >> Savings account in a mutual fund. That choice MAY be restricted > > thank you. if it is restricted, how does the money grow? The restriction is usually that you MUST INVEST it in either thier proprietory fund, or interest account. Cal > Posted by Mark Bole on July 26, 2007, 11:05 am idp wrote: > we're facing as a family the decision to move from an HMO+FSA health > insurance to an HSA > > in reading some of the Health Savings Account (HSA) literature, it > appears there is a restriction that to be eligible, one can not be > claimed as dependent on someone else's tax return That is correct, your dependent can't open his own HSA, but you can open one that includes your dependent in the coverage. > would it also make sense to pre-load a larger contribution to the HSA > for the 1st year one enrolls and then use that as a "bank" while > reducing future years contributions slightly ? anything else to consider > about HSA rules ? There are annual limits to what you can contribute, tied to the amount of the HDHP (high-deductible health plan) you have, so "pre-loading" isn't allowed. If you are going to use the HSA at all, I imagine you'd always want to make the maximum contribution allowed. Is your decision being driven by losing employer-provided group health coverage for one or both of you? I'm guess family coverage through your employer if available will be a better deal than an HSA. On the other hand, if your health remains good, you can use the balance in the HSA for any purpose, not just medical expenses, without additional penalty after age 65. You might want to spend some time with IRS Pub 969 to learn more. Also check your state rules; California for example does not allow HSA's and treats them like ordinary savings accounts (no deduction for contributions, earnings are taxable). -Mark Bole