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HSA question

2,960 Views | 24 Replies | Last: 6 yr ago by 62strat
62strat
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AG
My wife recently signed up for an HSA through employer since they fund it $100/mo. Her employment contract (working for school district) is July 1-June 30, so the HSA was created on July 1 of this year, and got its first monthly contribution from school district about a week ago.

Question; Can this money be used to pay for medical expenses that were incurred two months ago in June, before the HSA was created?
Bird Poo
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I don't see why not. It doesn't seem like a benefit that begins at a certain time. It's basically a bank account that you can manage however you see fit (while meeting authorized healthcare purchases).
62strat
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In the faq it asks 'Can an HSA be used to pay previous year expenses?' with the answer 'you can pay or reimburse yourself for any eligible medical expenses incurred after your HSA was established.

So that's throwing me off. I guess it won't hurt to just add the expense and see if it pays it.
Caesar4
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AG
I think it's an IRS rule, not a rule created/enforced by the trustee.

Here's a link to IRS text:
https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204081
Quote:

For HSA purposes, expenses incurred before you establish your HSA aren't qualified medical expenses.

southernskies
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I've heard my coworkers buying all kinds of stuff with their HSA card. As long as it is a healthcare related expense you will be fine. Worst case scenario if you ever got audited they would just ask for the taxes on the money you spent not related to healthcare. But we are just talking about $100 here right? That's nothing....just pay out of pocket for the past expenses. You will eventually use the money elsewhere, the account stays with you and keeps growing, like an investment account, accruing interest over time.

If you had like $3k in your account and were thinking about paying for past expenses then that might be worth talking about...not $100
malenurse
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I guess I'm confused. What part of
Quote:

any eligible medical expenses incurred after your HSA was established.

do you not understand?
Ragoo
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If you can afford the medical expense out of pocket within your budget or emergency funds then leave the HSA alone.

Also, it can only be used on medical expenses. OTC drugs are not considered medical.
62strat
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malenurse said:

I guess I'm confused. What part of
Quote:

any eligible medical expenses incurred after your HSA was established.

do you not understand?
that answer was specifically for expenses incurred during the previous year. I know this kind of stuff is based on calendar year, but if hsa was active, it's ok. It says you have until April 15 to claim it. That doesn't address my issue of expenses from the same year. My wife's contract is not inline with calendar year, but I didnt know if IRS cares about that.
aggiebq03+
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For $100 the IRS likely won't care.
But neither should you. Just pay out of pocket and use the HSA money going forward.
Stive
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AG
Caesar4 said:

I think it's an IRS rule, not a rule created/enforced by the trustee.

Here's a link to IRS text:
https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204081
Quote:

For HSA purposes, expenses incurred before you establish your HSA aren't qualified medical expenses.



While I'm definitely not an HSA expert, this quote that Caesar put up from the IRS website is pretty clear (to me).

And as others have said....we're talking about the taxes on $100. Pay it and move on; you'll have plenty of expenses in the future that will undoubtedly qualify.
62strat
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aggiebq03+ said:

For $100 the IRS likely won't care.
But neither should you. Just pay out of pocket and use the HSA money going forward.
You're the second person to think the bill is $100; My current account balance is $100, the medical bill more than $100. If I can pay the bill using HSA funds, I can load up the HSA in order to do so.


aggiebq03+
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62strat said:

aggiebq03+ said:

For $100 the IRS likely won't care.
But neither should you. Just pay out of pocket and use the HSA money going forward.
You're the second person to think the bill is $100; My current account balance is $100, the medical bill more than $100. If I can pay the bill using HSA funds, I can load up the HSA in order to do so.




For significantly more than $100, the IRS will care.
Don't **** with the IRS. It's not worth it for at most $1200 or so in tax savings. Just load up the HSA anyway and use it going forward. You'll have more medical bills in the future to use the tax savings on.
aggiedata
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AG
HSA is a retirement tool. Don't look at it for short term reimbursement. Let it grow and invest the account in mutual funds once it reaches the minimum. If you take funds out now, you limit your growth for the future. If you take your funds out for a non-eligible expense, well, that's even worse.

DadAG10
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62strat said:

My wife recently signed up for an HSA through employer since they fund it $100/mo. Her employment contract (working for school district) is July 1-June 30, so the HSA was created on July 1 of this year, and got its first monthly contribution from school district about a week ago.

Question; Can this money be used to pay for medical expenses that were incurred two months ago in June, before the HSA was created?
HSA started July 1st.

Nothing, absolutely nothing prior to that date is an eligible medical expense.

Does not matter if the expense was June 30, 2017 or October 12, 1928.

Andy Dufresne may have said it best:

    "How could you be so obtuse!"

The Collective
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aggiedata said:

HSA is a retirement tool. Don't look at it for short term reimbursement. Let it grow and invest the account in mutual funds once it reaches the minimum. If you take funds out now, you limit your growth for the future. If you take your funds out for a non-eligible expense, well, that's even worse.



It doesn't have to be a retirement tool though. If someone can't max out all of their accounts - it's a useful tool that can be used for the here and now.
The Wonderer
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All expenses incurred prior to the effective date of the HSA are disqualified and you are not allowed to use HSA funds to pay for them. Further, understand that incurred is not the same as billed - the date of service controls, not the date of invoice (if applicable).
The Wonderer
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62strat said:

aggiebq03+ said:

For $100 the IRS likely won't care.
But neither should you. Just pay out of pocket and use the HSA money going forward.
You're the second person to think the bill is $100; My current account balance is $100, the medical bill more than $100. If I can pay the bill using HSA funds, I can load up the HSA in order to do so.



You should load up the HSA anyway if possible. As a family, your max is $6750 and you can fund the full amount prior to 12/31/2017.
{AggieGirl}#07
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HSA should be used as a supplemental retirement plan. If you can pay out of pocket for yor medical expense - do so. And use the HSA in your retirement years.
The Wonderer
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{AggieGirl}#07 said:

HSA should be used as a supplemental retirement plan. If you can pay out of pocket for yor medical expense - do so. And use the HSA in your retirement years.
Save all of your receipts and just start pulling money out of your HSA to supplement your retirement income. Expenses do not have to be reimbursed in the year that they are incurred. You can wait 2, 5 or 20 years if you to. Just keep the receipts.
MGS
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The Wonderer said:

{AggieGirl}#07 said:

HSA should be used as a supplemental retirement plan. If you can pay out of pocket for yor medical expense - do so. And use the HSA in your retirement years.
Save all of your receipts and just start pulling money out of your HSA to supplement your retirement income. Expenses do not have to be reimbursed in the year that they are incurred. You can wait 2, 5 or 20 years if you to. Just keep the receipts.

After age 65, you can start pulling out money for any reason.
aggiedata
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Tax free if associated with medical expense that occurred after HSA account creation. That's the kicker.
The Wonderer
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aggiedata said:

Tax free if associated with medical expense that occurred after HSA account creation. That's the kicker.
ding ding ding


While you are not subject to the 20% withdrawal penalty for non-qualified expenses after age 65, the withdrawal becomes taxable as income. By withdrawing to pay for qualified expenses, even if incurred 20 years ago (hypo), the money is tax free.
62strat
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I'll be honest, I didn't know what an HSA was, and when we got it, I figured it was just a way to pay for medical pretax like an fsa or hra. It's interesting to see that most opinions here think it should be used for an investment tool.

I suppose that's just what I'll do. Can it pay for premiums once retired?
DadAG10
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Both.
Max out contributions and pay for qualified medical expenses.
Hopefully the expenses will be few and you will have available in retirement.

The Wonderer
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62strat said:

I'll be honest, I didn't know what an HSA was, and when we got it, I figured it was just a way to pay for medical pretax like an fsa or hra. It's interesting to see that most opinions here think it should be used for an investment tool.

I suppose that's just what I'll do. Can it pay for premiums once retired?
It can pay for any qualified medical expense (http://hsabank.com/~/media/files/eligible_medical_expenses) incurred after the effective start date of the account, even if you don't contribute to it for years.
62strat
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from that link, I see this in fine print:

Insurance premiums only qualify as an IRS-qualified medical expense for HSAs under the following circumstances: while continuing coverage under COBRA; for qualified long-term care coverage; coverage while receiving unemployment compensation; for any healthcare coverage for those over age 65 including Medicare (except Medicare supplemental coverage)

That's good to know. COBRA premiums are covered, and any coverage when you're over 65.

So I may just not touch this and invest instead. Just the employer contribution alone could be worth $50k in 20 years.
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