HSA 101

Question 1

Who/what created the HSA?

Answer 1

Created by the IRS (IRS Code 223)

Question 2

Who is eligible for an HSA?

Answer 2

1) An individual covered by an HDHP
2) An individual who is not enrolled in Medicare or TRICARE
3) An individual who cannot be claimed on another person’s tax return
4) An individual whose primary residence is in the U.S. and has a valid SSN
5) An individual who has not used their VA Benefits in the last 90 days for a non-service related disability

Question 3

What makes you ineligible for an HSA?

Answer 3

1) Medicare
2) General Purpose FSA or HRA
3) FSA Grace Period or Rollover
4) VA Benefits
5) TRICARE
6) Indian Health Services

Question 4

What are some HSA-compatible health plans?

Answer 4

1) Workers compensation
2) Accidents
3) Specific disease/illness
4) Disability
5) Dental care
6) Vision care
7) Long-term care
8) Prescription drug plans
9) Fixed amount per day or other period of hospitalization

Question 5

When are HSAs effective?

Answer 5

The first of every month

Question 6

What’s the “Triple Tax Advantage” ?

Answer 6

1) Contributions are pre-taxed
2) Earnings grow tax free
3) Distributions for QMEs are tax free

Question 7

Where can QMEs be found?

Answer 7

IRS Publication 502

Question 8

What are the 3 ways you can contribute to an HSA?

Answer 8

1) Employer
2) Yourself (Employee)
3) Transfer/Rollover

Question 9

When does the 5498-SA go out and what does it report?

Answer 9

May; Reports contributions

Question 10

When does the 1099-SA go out and what does it report?

Answer 10

January; Reports distributions

Question 11

What are the 3 things that could happen to an HSA when the AH passes away?

Answer 11

1) If beneficiary is spouse, account may be transferred to spouse name and remain an HSA
2) If beneficiary is not spouse, balance is paid to the beneficiary as a taxable transaction
3) If there isn’t a beneficiary, balance is paid the employee’s estate

Question 12

How can someone designate a beneficiary?

Answer 12

1) Online on the Member Website

2) Beneficiary Form

Question 13

Define catch-up contribution

Answer 13

Individuals and/or their spouses, over the age of 55 and not enrolled in Medicare can make an additional $1,000 catch-up contribution annually.

Question 14

What is the deadline to remove excess contributions?

Answer 14

The tax filing deadline (include extensions)

Question 15

What does IRS Form 8889 report?

Answer 15

It is completed to report the HSA on your taxes

Question 16

What is the Last Month Rule?

Answer 16

If HSA compatible coverage is effective Jan 1st in a given year, employees can contribute IRS annual max as long as the HSA compatible plan is effective before December 1 and fulfills the testing period

Question 17

What is the Testing Period?

Answer 17

A period in which qualifying coverage must continue through December 31st of the following year from when the HSA-compatible plan was effective

Question 18

What happens if an employee does not maintain eligibility through the testing period? (Relating to Last Month Rule)

Answer 18

The contributions exceeding the prorated amount for the months of actual eligibility become taxable income and are subject to 10% penalty

Question 19

When can an employee reimburse themselves from their HSA?

Answer 19

An employee can pay for or reimburse themselves for IRS-qualified QMEs incurred after the date their HSA is established

Question 20

Who can an account holder spend his/her HSA funds on?

Answer 20

Spouse and any dependents

Question 21

Can married people have a joint HSA account?

Answer 21

No - HSAs are owned individually

Question 22

SCENARIO: Peggy’s 23 year old daughter graduated from college and is covered under Peggy’s medical health plan, can Peggy use her HSA to pay for her daughter’s medical expenses? Her daughter is not a dependent and has her own full time job.

Answer 22

No, Peggy cannot use her HSA because her daughter is not a dependent, but her daughter can have her own HSA to pay for her own medical expenses

Question 23

SCENARIO: What if you add a domestic partner? Can the employee cover the domestic partner with their HSA?

Answer 23

No, the HSA cannot cover costs for the domestic partner, even if they are covered under the same medical health plan

Question 24

SCENARIO: If a military person was covered by VA benefits, but got a new full time job with HDHP, can they now have an HSA?

Answer 24

Yes, as long as they are no longer using their VA benefits. If they do use their VA benefits, they cannot contribute their HSA funds for 90 days (unless they use their VA benefits for a service disability)

Question 25

SCENARIO: Wife wants to rollover her HSA funds to husband’s HSA, can she do this?

Answer 25

Technically, yes, but do we recommend it? No, because there are tax implications. It’s considered a distribution for a non-QME and a contribution that counts towards max limit.

Question 26

SCENARIO: Wife has HDHP coverage and husband has PPO coverage, how much can they contribute?

Answer 26

It depends on if the husband has an FSA, because if the husband does, then the wife CANNOT have an HSA. The contribution limit also depends on the wife’s health plan coverage