FAQs

FAQs

You’ve got questions, we’ve got answers.

Unsure of the difference between a grace period and the carryover? Wondering what happens to your HSA if you switch employers or retire? Not sure which plan documents you need to ensure your group plan is compliant?

NueSynergy wants to make sure you understand the ins and outs of your benefit account, so we have put together a comprehensive list of the most common questions we receive about employee benefits.

Did we not answer your question? Contact our team to get the answers you need and help us improve our list.

 

If you are enrolled in qualified High Deductible Health Plan (HDHP) - either through your employer or you have purchase and individual policy - you are most likely eligible to open and contribute to an HSA.

Additional eligibility criteria include:

  • You must have a valid Social Security Number (SSN) and a primary residence in the U.S.
  • You cannot be covered by any other type of health plan, including Medicare Part A or Medicare Part B.
  • You cannot be covered by TriCare.
  • You cannot have accessed your VA medical benefits in the past 90 days (to contribute to an HSA).
  • You cannot be claimed as a dependent on another person's tax return (unless it's your spouse).
  • You must be covered by the qualified HDHP on the first day of the month.

The IRS sets the maximum contribution limits for the HSA each year. The maximum annual contribution limit for 2018 is $3,450 if you are enrolled in Individual coverage and $6,850 if you are enrolled in Family coverage. Once you are over the age of 55, you can contribute an additional $1,000 above the standard annual maximum. (Note: if both spouses are over the age of 55, each spouse would need have their own HSA to contribute the $1,000 catch-up)

If your HDHP was effective on January 1st, the total amount you can contribute to your account is the maximum contribution amount set by the IRS.

If your HDHP is effective after the first day of the month, you may make or receive a full year's contribution to your HSA for partial year coverage as long as you maintain your HDHP enrollment for 12 months. If enrollment is less than 12 months, the tax benefit is lost and a 10% penalty is imposed.

Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year or after a designated grace period is forfeited. You may choose to use a Limited Purpose FSA to pay for eligible heath care expenses and save your HSA dollars for future health care needs. You may use Limited Purpose FSA dollars to reimburse yourself for expenses not covered by your high-deductible health plan, such as:

1. Vision expenses, including: Glasses, frames, contacts, prescription sunglasses, goggles, vision co-payments, optometrists or ophthalmologist fees, and corrective eye surgery

2. Dental expenses, including: Dental care, deductibles and co-payments, braces, x-rays, fillings, and dentures

Above the line means you will reduce your taxable income regardless of whether you itemize or use the standard deduction on your income tax form. If you contribute to your HSA with after-tax dollars, you may deduct the contribution amount, subject to the maximum annual contribution limits from your taxes at filing time.

With a high-deductible health plan, you have the security of comprehensive health care coverage. Like a traditional plan, you are responsible for paying for your qualified medical expenses up to the in-network deductible; however, the deductible will be higher, and you can use HSA funds to pay for these expenses.

After the annual deductible is met, you are responsible only for a portion of your medical expenses through coinsurance or co-payments, just as with a traditional health plan. The deductible and maximum out-of-pocket expenses are indexed annually for inflation by the IRS and US Department of Treasury.

Health Savings Accounts (HSAs) are tax-advantaged medical savings accounts available to individuals who are enrolled in a Qualified High Deductible Health Plan (HDHP). HSAs are owned by the individual, unlike other types of benefit accounts such as  Health Reimbursement Arrangements (HRAs) and Flexible Spending Account (FSA). HSA funds also roll over and accumulate year over year if not spent, with the ability to earn tax-free interest on the account. HSA funds may be used to pay for qualified medical, dental and vision expenses tax-free at any time.

When you participate in a payroll deduction program through your employer, deductions can be taken from your payroll before calculating your taxable federal income, FICA (Social Security and Medicare) tax and for most states, taxable state income. By taking deductions pre-tax, you reduce the dollars on which you are taxed and, as a result, reduce your total tax bill.

At age 65 and older, your funds continue to be available without federal taxes or state tax (for most states) for qualified medical expenses; for instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.

If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

Your HSA is an inheritable account. What happens to your HSA when you die depends who you named as your beneficiary.

  1. Spouse designated beneficiary. If your spouse is your designated beneficiary, the account will be treated as your spouse's HSA after your death. The account will continue to be tax-free for qualified medical distributions. If your spouse is covered by a qualified HDHP, contributions to the account may also be made tax-free, up to maximum annual contribution limits.
  2. Other than Spouse designated beneficiary. If you designate someone other than your spouse as the beneficiary of your HSA:
  • The account stops being an HSA on the date of your death;
  • The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die (without penalties); and
  • The amount taxable to a beneficiary (other than your estate) is reduced by any qualified medical expenses you incurred prior to your death that are paid from the HSA by the beneficiary within one year after the date of death.
  1. Your estate is the beneficiary. If your estate is the beneficiary of your HSA, the value of your account is included on your final income tax return.
  2. NO designated beneficiary on file. If you do not have a beneficiary on file, the funds are payable to the accountholders estate.

Since you own your HSA, you will be able to keep your account, even if you change health plans or change employers. However, if you no longer are enrolled in an qualfied HDHP you are not eligible to make future contributions to your HSA, but you may continue to use your HSA to pay for qualified medical, dental or vision expenses.

 

 

Once you are no longer enrolled in a qualified HDHP, you will stop being able to contribute additonal funds to your HSA. The maximum contribution to your HSA for that tax yeart would be determined by the number of months you were enrolled in the qualfied HDHP.  To determine your pro-rated contribution amount,  you would divide the full annual individual or family maximum contribution amount allowed for that tax year by 12 months  You would then multiply the number of months you were enrolled in the qualified HDHP by the montly pro-rated maximum to determine you allowed maximum contribution for that tax year. (Example: 2017 individual max $3,400 ÷ 12 months = $283.33 montly pro-rated maximum contribution. If you were enrolled in a qualified HDHP for 5 months your maximum contribution for that tax year would be 5 x $283.33 = $1,416.66.)

REMEMBER: You can continue to use any remaining funds in your HSA to pay for qualified medical, dental or vision expenses tax-free even if you are not enrolled in a qualified HDHP.

 

You may withdraw the excess amount and any earnings on the excess amount prior to April 15th of the following year. However, you must pay income tax on your excess contributions and income tax on any earnings of the excess contribution. If you believe you have exceeded your allowable contribution amount, you should contact us at 855-890-7239 to help you correct the over contribution.

  • Your HSA funds can be used tax-free to pay for out-of-pocket qualified medical expenses, even if the expenses are not covered by your HDHP. This includes expenses incurred by your family.
  • There are hundreds of qualified medical expenses, including many you might not expect: over-the-counter medications; dental visits; orthodontics; glasses; long-term care insurance premiums; cost of COBRA coverage; medical insurance premiums while receiving federal or state unemployment compensation and post age-65 premiums for coverage other than Medigap or Medicare supplemental plans.
  • In addition, HSA funds may be used to pay your Medicare Parts A and B premiums and for employer-sponsored retiree plans.
  • All of these expenses may be paid for with your HSA funds, free from federal taxes or state tax (for most states). Refer to IRS Publication 502 for a more complete list of qualified medical expenses.

• Change in legal marital status (marriage, death of spouse, divorce, legal separation, annulment)
• Change in number of tax dependents (birth, death of dependent, adoption or placement for adoption)
• Change in dependent’s eligibility
• Change in employment status of employee, spouse or dependents
• Other changes that may permit an election change under the Dependent Care FSA are:

     ○ Change of dependent care provider
     ○ Change of rate charged by unrelated dependent care provider
     ○ Child attaining age 13

Election changes must be consistent with the event. If you experience a Change in Status, please review your Summary Plan Description, as it will provide you with important information on the deadline for reporting this event.

There are no tax penalties for closing an HSA. However, if you use HSA funds for other than qualified medical expenses, those distributions will be subject to ordinary income tax, and in some cases, a 20 percent penalty.

  1. Tax-advantaged:
  • Contributions you may make through payroll deposits are made with pretax dollars, meaning they are not subject to federal (or state, for most states) income taxes.
  • Contributions to your HSA made with after-tax dollars can be deducted from your gross income, meaning you pay less income tax at the end of the year.
  • The interest you earn on your HSA balance is not taxed.
  • Withdrawals from your HSA for qualified medical expenses are not subject to federal income tax. As long as you use your HSA funds for qualified medical expenses, you will not have to pay federal (or state, for most states) income taxes.
  • Employers may make contributions to your account; these contributions are excluded from your gross income.
  1. Flexible:
  • The money is yours; it grows and remains with you, even when you change medical plans, change employers or retire. There are no "use it or lose it" rules. Even if you are no longer eligible to make contributions, funds in your account may still be used to pay for qualified medical expenses tax-free. And after age 65, or in cases of disability, the funds in the account can be used for nonqualified expenses.
  1. Portable:
  • Accounts move with you when you change medical plans, change employers or retire.
  1. Savings mechanism for future health needs:
  • Unused funds can grow through interest and investment earnings and can be "banked" for future medical expenses.
  1. Contributions can come from multiple sources:
  • As long as you are covered by a qualified HDHP, you, your employer, family members, or anyone else may contribute to your HSA up to the maximum annual contribution limit.

No. Even though you are covered by an HDHP, since you are also covered by a low-deductible plan too, you are not eligible for an HSA. Only those individuals covered by an HDHP only can contribute to an HSA.

  1. To be eligible to contribute to an HSA, you must be covered by a qualified high-deductible health plan (HDHP) and have no other first dollar coverage (insurance that provides payment for the full loss up to the insured amount with no deductibles).
  2. You may use your HSA to help pay for medical expenses covered under a high-deductible health plan, as well as for other common qualified medical expenses.
  3. Unused HSA funds rollover from year to year, and may be able to be invested in a choice of investment options, providing the opportunity for funds to grow.
  • HSAs work in conjunction with an HDHP. All the money you (or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible from federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax.
  • You can use your HSA to pay for expenses not covered under your HDHP until you have met your deductible. The insurance company then pays covered medical expenses above your deductible, except for any co-insurance. Any coinsurance costs you incur can be paid for using your HSA. In addition, you can use your HSA to pay for qualified medical expenses not covered by the HDHP, such as dental, vision and alternative medicines.
  • If the funds in your account are used for other, nonmedical expenses, your dollars are subject to ordinary tax, plus a 20% penalty if you are under age 65.
  • The 20% penalty does not apply if the distribution occurs after you reach age 65, become disabled or die; however ordinary income tax may still apply.
  • Choosing which expenses use your HSA dollars vs. which to pay out-of-pocket with after-tax dollars is entirely up to you.

Money may be deposited to your HSA through payroll deduction, if your employer allows, or you may make deposits directly to your account. Deposits may be made periodically or in a lump sum, but only up to the contribution limits set by the IRS.

  • Payroll deductions: If your employer offers the option, you may specify a regular contribution to be deducted from your paycheck. This contribution will be made before Social Security, federal, and most state income taxes are deducted.
  • After-tax contributions: You may choose to make all or part of your annual account contributions to your HSA by making “after-tax” contributions to your account. These contributions, which you can make by writing a personal check, may be deducted on your income tax return, using IRS Form 1040 and Form 8889.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

Note: You will use IRS Form 1040 for your HSA contributions, not the short form 1040A or 1040EZ. This deduction is taken “above the line”: you do not need to itemize contributions on Schedule A in order to claim the deduction for HSA contributions.

Yes. Your HSA funds earn interest. Any earnings on your HSA funds are also tax free.

Distributions from your HSA used exclusively to pay for qualified medical expenses for you, your spouse, or dependents are excluded from your gross income. Your HSA funds can be used for qualified expenses and will continue to be free from federal taxes and states taxes (for most states) even if you are not currently eligible to make contributions to your HSA.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or for the year in which you die, the 20 percent penalty may not apply.

Yes, unsued will carryover into the next year. There is no limit or cap on how large the balance can grow in your HSA. However, the annual limit you can contribute to the HSA may not exceed the maximum contribution amount set by the IRS each year, plus the "catch up" contribution for those ages 55 to 65.

No, only one person can be named the account owner. If both you and your spouse have qualified HDHP coverage, and want to both make pre-tax HSA contributions or take advantage of the catch controbution once you are 55 or older, then you would each need to open an HSA.

If both you and your spouse have family coverage under qualified high-deductible health plans, the maximum total tax-deductible HSA contribution both of you can make (including employer contributions) is the IRS limit for family coverage.  This contribution can be divided between you and your spouse however you wish. If you and/or your spouse are eligible to make catch-up contributions, you may each contribute your eligible catch-up contribution to your individual HSA.

The government does allow a one-time transfer of funds from an IRA to an HSA. However, you can only roll your HSA funds into another HSA not an IRA.

  • The transferred amount, when combined with other HSA contributions for the year, may not exceed your annual maximum contribution.
  • Also, after making such a transfer, you must continue to participate in a qualifying high-deductible health plan for 13 consecutive months, beginning in the month of the IRA-to HSA transfer. If you do not, you will be subject to income taxes and a 20 percent penalty tax on the transferred amount, except in the case of death or disability.
  • Such a transfer may be an option if you incur significant medical expenses and find yourself unable to afford to make the maximum HSA contribution.

Yes. You always have the option to choose when and when not to use your HSA dollars. You may pay for qualified medical expenses with after-tax dollars, allowing your HSA balance to grow tax-free.

Many HSA participants elect to pay smaller expenses with after-tax dollars, allowing their balances to grow for the future. In fact, you can reimburse yourself at anytime in the future for eligible expenses you paid for using after-tax dollars as long as they were incurred while you had an open and funded HSA.

Yes, you may have more than one HSA and you may contribute to them all, as long as you are currently enrolled in an HDHP. However, this does not give you any additional tax advantages, as the total contributions to your accounts cannot exceed the annual maximum contribution limit. Contributions from your employer, family members, or any other person must be included in the total.