Are there additional tax details I should know?

Yes. We recommend that you consult your tax advisor about eligibility, contributions and distributions. Here are your major responsibilities.

  • Determine your eligibility for an HSA each year you make a contribution. From a tax standpoint, actual eligibility is determined on the first day of each month.
  • Ensure that the contributions you make are within the limits set forth by the IRS and other tax laws.
  • Make sure you understand the tax consequences of any contributions (including rollover contributions) and distributions.
  • Keep appropriate records and receipts of your payments for qualified medical expenses.

What happens to the money in my HSA if I no longer have my high deductible insurance coverage?

If the funds are already in your HSA, the account can still be used to pay for qualified medical expenses, regardless of coverage. However, you will no longer be able to make additional contributions.

What happens to the money in an HSA after I turn 65 and qualify for Medicare?

You can continue to use your account tax free for qualified out-of-pocket medical expenses. In the case of Medicare enrollment, your funds can be used to pay for deductibles, co-pays and coinsurance. The purchase of a Medicare supplemental insurance policy is not a qualified expense.

Additionally, after you turn 65 your account can be used for expenses outside the medical arena. If used in this manner, the amount withdrawn will be treated as income and subject to income tax but not to penalties.

What happens to an HSA at death?

If you are married, the spouse becomes the owner of the account and can continue to use it as an HSA. If you’re not married, the account will no longer be considered an HSA and will pass to a designated beneficiary or become part of the estate. At that time, it will become subject to any applicable taxes.