HSA / FSA issues

slappy

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8:09p, 12/22/24

AG

Question for those much more knowledgeable than me:

My work offers a HDHP, which I'm on with my family. I signed up for a HSA account, but only to find out my work does not have a cafeteria plan, so I can't contribute pre-tax - I have not made any contributions to it.

My wife then started a FSA account where she can contribute pre-tax from her work (her work doesn't contribute to her FSA, either).

I'd rather be able to use the HSA, but not sure how the best way to achieve it is. I also feel like I'm missing something here about her FSA account. My HR department is worthless with everything, so no sense asking them.

Can someone perhaps clear the air for me or have an idea about what to do best?

ktownag08

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11:13p, 12/22/24

AG

Honestly never heard of an HSA that's not funded with pre-tax money. Are you sure that's what they said?

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gigemhilo

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In reply to ktownag08 • 8:34a, 12/23/24

AG

ktownag08 said:
Honestly never heard of an HSA that's not funded with pre-tax money. Are you sure that's what they said?

Technically you are correct. However, I think what the OP meant was that his employer does not offer a way to contribute "pretax" through payroll deductions, or by an employer match/contribution.

TO THE OP - if the employer is not contributing or matching either plan, the HSA is the way to go. You will be able to save that money if not used. The FSA, however, is a use it or lose it plan.

In your situation, I would only contribute to the FSA if the employer offered a match. That would be free money if they did. Otherwise, the HSA is a better plan.

If the employer is not offering payroll deductions, I would open my HSA account with livelyme.com
- they offer debit cards
- you can use the program to keep receipts until reimbursed
- you can use it as an investment tool through schwab

If you can afford to pay medical bills out of your cash flow, the HSA can be a great investment avenue. You can keep accumulating contributions and invest in the market. If you ever need the cash, you can reimburse yourself for any medical expense since the account was opened.

Good luck!

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CapCity12thMan

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1:24p, 12/23/24

AG

if you have a choice, you go with the HSA plan, 100%. While you might lose out on "free money" from any FSA match...it must be used within a year, so you miss out on the growth from an HSA.

Fund your HSA pre-tax
Pay medical expenses out of pocket if you can and let your HSA grow tax free
Save ALL medical receipts
When you want some tax free income - submit those receipts for reimbursement from your HSA.

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slappy

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4:58p, 12/23/24

AG

That's correct - my employer won't allow me to do pre-tax contributions to the HSA. My wife's employer will allow her to do pre-tax contributions to her FSA, but there is no employer contribution.

From what I read, I can't contribute to my HSA (even post-tax) if my wife's FSA is being contributed to. So, I'm in a bit of a quandry of how to actually fund the HSA so we can get the growth out of it.

Ark03

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In reply to slappy • 5:28p, 12/23/24

AG

slappy said:
That's correct - my employer won't allow me to do pre-tax contributions to the HSA. My wife's employer will allow her to do pre-tax contributions to her FSA, but there is no employer contribution.

From what I read, I can't contribute to my HSA (even post-tax) if my wife's FSA is being contributed to. So, I'm in a bit of a quandry of how to actually fund the HSA so we can get the growth out of it.

Assuming that your spouse is covered by a general purpose FSA, that's correct. In general, you can't contribution to a Health Savings Account in any way during a year in which you're covered by anything other than a high deductible health plan.

That's because the IRS considers a general purpose FSA to be a plan other than a HDHP, and since you're married that plan would include you as an eligible dependent. Ergo, covering you too.

Which means, no. You probably can't contribute to that HSA in any way until you're not longer covered by your spouse's FSA.

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YouBet

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10:46a, 12/24/24

AG

I would drop your wife's FSA and do your HSA next time around. HSA is the no brainer better option here.

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BQ2001

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6:35p, 12/24/24

AG

2 edits

ABATTBQ11

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In reply to slappy • 12:18p, 12/25/24

AG

Next time don't do the FSA, as others have said. Even if your employer doesn't offer a way to contribute pre-tax, you can contribute post tax and claim the deduction on your return.

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Drawkcab

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In reply to ABATTBQ11 • 12:25a, 12/30/24

ABATTBQ11 said:
Next time don't do the FSA, as others have said. Even if your employer doesn't offer a way to contribute pre-tax, you can contribute post tax and claim the deduction on your return.

This is the answer. Your employer can't disallow the tax break you get from contributing to an HSA. They may not be able to make the tax free contribution for you but you can claim the deduction when you file your taxes.

Who processes your company's payroll? I can't imagine they're incapable of making pre-tax contributions. What more likely is your employer doesn't know how to use the platform correctly.

Lastly, I second the person above who recommended Lively. They make things simple.

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goatchze

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In reply to slappy • 2:10p, 12/30/24

AG

slappy said:
That's correct - my employer won't allow me to do pre-tax contributions to the HSA. My wife's employer will allow her to do pre-tax contributions to her FSA, but there is no employer contribution.

From what I read, I can't contribute to my HSA (even post-tax) if my wife's FSA is being contributed to. So, I'm in a bit of a quandry of how to actually fund the HSA so we can get the growth out of it.

I've had an HSA account for a decade or so now, and I have never funded it through payroll deduction. I just fund it myself, then take the deduction when I file my taxes.

Just set up the HSA account with someone like Fidelity. Link it to your bank account. Move the money over. No different than contributing to an IRA.

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insulator_king

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4:43p, 12/31/24

AG

I have a Livelyme account, but I ended up moving it to Fidelity when Schwab bought out TD Ameritrade. At Lively, you now have to keep $2000 [or maybe $3000] in a cash account before you can invest a single dollar in stocks/ETF's etc. through Schwab.

I just do a direct payroll deduction to Fidelity, and every 2 weeks I have $320 deposited and can buy whatever stock/ETF I want.... even WWR!

Fidelity also allows me to trade in my HSA account, select which particular stock to sell by cost basis, and do various kinds of trades.

It is great.

insulator_king

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4:46p, 12/31/24

AG

Also, you CAN have both an HSA and a Limited Expense FSA at the same time. An LEXFSA is only for dental and vision, but if you can plan your expenditures like I did for a crown 2 years ago and an implant this year, it works really nice.

gigemhilo

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In reply to insulator_king • 6:00p, 12/31/24

AG

insulator_king said:
I have a Livelyme account, but I ended up moving it to Fidelity when Schwab bought out TD Ameritrade. At Lively, you now have to keep $2000 [or maybe $3000] in a cash account before you can invest a single dollar in stocks/ETF's etc. through Schwab.

I just do a direct payroll deduction to Fidelity, and every 2 weeks I have $320 deposited and can buy whatever stock/ETF I want.... even WWR!

Fidelity also allows me to trade in my HSA account, select which particular stock to sell by cost basis, and do various kinds of trades.

It is great.

Interesting- my livelyme account doesn't require that. I literally have about $2 in the cash account right now.

ABATTBQ11

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1:32p, 1/2/25

AG

I think my HSA Bank account requires $1000 in cash.

As someone mentioned early on, though, it's an excellent investment vehicle. Tax free going in and out (for medical expenses), so contributing early and often can set you up really well for retirement when your medical expenses will be highest. With even modest 5% returns, I should be hitting $250k for tax free medical spending at retirement. With a market indexed fund that averages out to 8-10% annually (more realistic, less conservative estimate) over such a long range, that number could be close to double that.

Honestly though, I'll probably leave it alone for the most part, other than adjusting risk allocation as I age, even after retirement. After seeing my mom in a medicare/medicaid funded nursing home, there's no way I'm cheaping out on that phase of life or not preparing for it for myself and my wife. I'd like to have my HSA at a point where it's funded so well that whatever returns I'm seeing will take care of a nursing home or assisted living for the two of us and we never worry about running out.