Each year, the IRS requires companies with pre-tax reimbursement accounts to complete nondiscrimination testing. Nondiscrimination testing ensures that the business owners and Highly Compensated Employee(s) (HCE) do not receive a disproportionate benefit from a pre-tax plan compared to other employees.
All “eligible employees” who received compensation during the previous year are included in nondiscrimination testing. Generally only union employees, non-resident aliens, leased employees and independent contractors can be excluded from nondiscrimination testing because they are not considered “eligible employees.”
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.
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.
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.
