For HSA Receipt Savers

[kaneohe]

My spouse would be able to absorb my HSA into her HSA if I'm 6 feet under, but not sure she's going to be able to exhaust the HSA as well. .

and what happens to your stack of receipts that contain your own past expenses?
My impression is that she can't use them for reimbursements from her HSA because they are your expenses. I think there used to be a transitional rule that allowed your current yr expenses within a certain short time period but I'm not sure that exists anymore.

 

[audreyh1]

No big tragedy, I suppose, if you end up w/ excess funds after age 65. You can always burn the excess but just pay ordinary income rates on non-medical expenses like a TIRA. Still it seems a bit of a waste paying those taxes when they could be used for qualified medical expenses tax free. Past 65, it is possible that the only expenses you can reimburse (medical) are for Medicare (now perhaps 2.5K for pt B and perhaps another 1K for pt D for a couple). Yes , you might get old and feeble but w/ a good supplement plan (like F), there may be not be any out of pocket charges to be reimbursed.

Seems like a bit tricky walking the middle path between too much and too little w/o a crystal ball...........................

Lots of potential dental and eye expenses after 65. Those aren't covered by Medicare. People may still run into deductibles. Some long term care expenses are eligible.

 

[Animorph]

There will be a period later in retirement when we should be drawing down our Roth IRA's to stay in a lower tax bracket. At that point, the HSA goes first, using accumulated receipts and current medical expenses. Hopefully we can spend the HSA's down to zero before using the Roth IRA's, getting rid of the restricted money before the unrestricted. On the other hand, it would be nice not to have spent that much on medical expenses by then.

 

[ChrisC]

and what happens to your stack of receipts that contain your own past expenses?
My impression is that she can't use them for reimbursements from her HSA because they are your expenses. I think there used to be a transitional rule that allowed your current yr expenses within a certain short time period but I'm not sure that exists anymore.

I was under the impression that she would be able to cash out those prior expenses (which include her two knee replacement surgeries). While I'm alive, my HSA can reimburse my medical expenses as well as her medical expenses, and her HSA can do the same, though we've scored all of our family medical expenses on my HSA spreadsheets. If she inherits my HSA, I know of no rule that precludes her from using the combined HSA (my old account which became added to hers) to cover my past medical expenses. I think the transitional rule you mentioned is for a non-spouse beneficiary of an inherited HSA, where a one year rule applies to cash out/reimburse expenses of the decedent after the original account holder died. http://www.irs.gov/pub/irs-pdf/p969.pdf

 

[growerVon]

Premera through DW's and my megacorp has a site that keeps track of non-HSA payments against deductibles and co-insurance payments into an "HSA Save-It" record, automatically. Considering the manually alternative, I'm thankful for this.

 

[kaneohe]

I was under the impression that she would be able to cash out those prior expenses (which include her two knee replacement surgeries). While I'm alive, my HSA can reimburse my medical expenses as well as her medical expenses, and her HSA can do the same, though we've scored all of our family medical expenses on my HSA spreadsheets. If she inherits my HSA, I know of no rule that precludes her from using the combined HSA (my old account which became added to hers) to cover my past medical expenses. I think the transitional rule you mentioned is for a non-spouse beneficiary of an inherited HSA, where a one year rule applies to cash out/reimburse expenses of the decedent after the original account holder died. http://www.irs.gov/pub/irs-pdf/p969.pdf

ChrisC......I don't know the answer here......I brought it up as something to be concerned about.

I checked that link you provided...........it is not clear to me what it means.
"It will be treated as your spouse's HSA after your death." To me that sounds like it can reimburse your spouse's expenses only.

And the transitional rule under TIP.....not clear to me what that means either.
Organizationally it seems to be grouped w/ non-spouse beneficiary but the words say "any beneficiary but estate" so my guess would have been that it
applies for spousal beneficiary also so only recent charges paid could be reimbursed from the HSA.

***************************************************************
Spouse is the designated beneficiary. If your spouse
is the designated beneficiary of your HSA, it will be treated
as your spouse's HSA after your death.

Spouse is not the designated beneficiary. If your
spouse is not the designated beneficiary of your HSA:
The account stops being an HSA, and
The fair market value of the HSA becomes taxable to
the beneficiary in the year in which you die.
If your estate is the beneficiary, the value is included on
your final income tax return.

TIP:
The amount taxable to a beneficiary other than
the estate is reduced by any qualified medical expenses
for the decedent that are paid by the beneficiary
within 1 year after the date of death.

 

[kaneohe]

Fairmark Forum :: Retirement Savings and Benefits :: HSA non-spouse beneficiary

fwiw...........I had forgotten about this. It starts out about non-spousal beneficiaries of HSA but at the end switches to spousal. For those energetic to slug your way through, see what you think. To me it was a murky...maybe.

 

[MooreBonds]

My spouse would be able to absorb my HSA into her HSA if I'm 6 feet under, but not sure she's going to be able to exhaust the HSA as well. (We have no other dependents now, though my 95 year old MIL might be moving in with us sometime this year -- though she fiercely wants to keep her independent living lifestyle and so it's not a done deal that she'll ever be our dependent.)

Couldn't tell from your post above if you had this in mind, but if your MIL qualifies as your dependent, then couldn't her medical expenses qualify for allowable HSA withdrawals?

 

[ChrisC]

ChrisC......I don't know the answer here......I brought it up as something to be concerned about.

I checked that link you provided...........it is not clear to me what it means.
"It will be treated as your spouse's HSA after your death." To me that sounds like it can reimburse your spouse's expenses only.

I'm not really concerned. I don't read that language to imply that one cannot reimburse qualified medical expenses incurred by the prior holder of the account. It simply says that going forward, after death of the account holder, the spouse that inherits the HSA can treat the account as her own HSA. This to me, simply means, that she can merge the account into her own HSA if she had her own account (or have the account designated in her own name if she didn't have her own account before) and pay for medical expenses that she and her dependents incur. It's a stretch to say there is a prohibition not to pay prior expenses of the decedent (and his family, including the decedent's wife or children) that obviously occurred before the account could now be treated as the surviving spouse's HSA. The implication you read from the IRS Publication would permit the surviving spouse to cover medical expenses she incurred under the umbrella of her decedent's spouse's HSA but not her children or her deceased spouse! Makes no sense. Rules, regulations and guidance provided by the IRS are generally interpreted to yield sensible, not baffling or illogical, results.

I also read the link you provided in your other post. Didn't see anything there that alters my impression. But I do agree with you that it's not the clearest guidance provided by the IRS. No less an authority as the Bogelheads wiki on this subject appears to agree with you that the issue is from clear as I think it is, given the fact that we ought to be interpreting the language in a common sensible manner. https://www.bogleheads.org/wiki/Health_savings_account

But the worse that could happen, assuming I haven't caught up with reimbursing all my prior qualified medical expenses, is that my surviving spouse has an oversized HSA and that some distributions will be treated as ordinary income to her. I guess what I will do in the next few years is accelerate the reimbursement process for me. I'm really more concerned about the paper trail issues rather than her not being able to reimburse prior medical expenses that occurred on my watch.

 

[ChrisC]

Couldn't tell from your post above if you had this in mind, but if your MIL qualifies as your dependent, then couldn't her medical expenses qualify for allowable HSA withdrawals?

Yes that was the plan. Though my MIL has excellent insurance coverage and her uninsured, qualified medical expenses would be very low.

 

[kaneohe]

Couldn't tell from your post above if you had this in mind, but if your MIL qualifies as your dependent, then couldn't her medical expenses qualify for allowable HSA withdrawals?

Does she meet the income requirements for being a dependent.....< 3950 gross income (not including SS)?

 

[ChrisC]

Does she meet the income requirements for being a dependent.....< 3950 gross income (not including SS)?

Probably not. Thanks for pointing this out to me. Didn't know there was a gross income test.

 

[kaneohe]

I'm

. No less an authority as the Bogelheads wiki on this subject appears to agree with you that the issue is from clear as I think it is, given the fact that we ought to be interpreting the language in a common sensible manner. https://www.bogleheads.org/wiki/Health_savings_account

Thanks for that link......agree w/ you........

 

[kaneohe]

A more recent answer from Alan S. perhaps clearer than before
Fairmark Forum :: Retirement Savings and Benefits :: HSA--Spouse Inherits..old receipts

 

[mpeirce]

I'm a bit unclear on if saving the quarterly printout from the insurance company is sufficient documentation for later use of that spending from an HSA?

With our HDHP w/ HSA they always send everything through insurance so it counts against the deductible. Obviously some things are covered, some are not, and some are partially covered. The statement from the insurance company is the only place that shows the amount we actually had to pay.

 

[kaneohe]

I'm a bit unclear on if saving the quarterly printout from the insurance company is sufficient documentation for later use of that spending from an HSA?

With our HDHP w/ HSA he always send everything through insurance so it counts against the deductible. Obviously some things are covered, some are not, and some are partially covered. The statement from the insurance company is the only place that shows the amount we actually had to pay.

That's a good start. In my mind, that statement assigns responsibilities to who owes what and what the insurance paid. It does not necessarily show what you paid? only what you owe so somehow you need to show that you paid a particular bill. Then you need to show that you didn't use the same expenses to get a tax deduction. That means copies of your tax returns to show you either didn't take a deduction or that you did and the supporting receipts for those......again that you actually paid and what it was for.

 

[ChrisC]

I'm a bit unclear on if saving the quarterly printout from the insurance company is sufficient documentation for later use of that spending from an HSA?

With our HDHP w/ HSA he always send everything through insurance so it counts against the deductible. Obviously some things are covered, some are not, and some are partially covered. The statement from the insurance company is the only place that shows the amount we actually had to pay.

You sure you don't have multiple layers of documentation of expenses? I do and most of the stuff goes in my files. I also have a spreadsheet recording the expenses as well. If that's not enough, I also use my HSA's custodian's management tool to record the expenses as well. Now, I'm thinking about scanning some of this stuff, too.

In my case, I pay almost all bills by credit card (so I have the credit card receipt and monthly statement showing payment); the provider (pharmacy, dentist, doctor, hospital or even retail store for qualified over the counter expenses) provides me with a bill/receipt, and the insurance company sends me an EOB, to the extent I have a co-pay or partial insurance coverage. In fact, the only provider who doesn't provide me with an invoice or an annual statement is my LTCi carrier, who I now pay directly from my HSA. But if I needed a statement from the carrier, I'm sure I can get one easily.

I wouldn't just rely on statements from the insurance company.

 

[mpeirce]

That's a good start. In my mind, that statement assigns responsibilities to who owes what and what the insurance paid. It does not necessarily show what you paid? only what you owe so somehow you need to show that you paid a particular bill. Then you need to show that you didn't use the same expenses to get a tax deduction. That means copies of your tax returns to show you either didn't take a deduction or that you did and the supporting receipts for those......again that you actually paid and what it was for.

The expenses are way to low to be used as a tax deduction - at least up to now, but I do keep all my old tax returns (PDF files I get from the CPA).

So the insurance company sends me printouts of my non-covered expenses (which I scan and keep) and my tax return shows that I didn't take them as a tax deduction.

I think I'm good to go by just keeping the old PDF files around for the next 25 years...

 

[travelover]

Perhaps I'm too cavalier, but given current IRS staffing, I can't imagine them going after an individual to prove normal looking HSA contributions and withdrawals.

 

[kaneohe]

The expenses are way to low to be used as a tax deduction - at least up to now, but I do keep all my old tax returns (PDF files I get from the CPA).

So the insurance company sends me printouts of my non-covered expenses (which I scan and keep) and my tax return shows that I didn't take them as a tax deduction.

I think I'm good to go by just keeping the old PDF files around for the next 25 years...

unless the insurance printouts also show you paid your share of the bills, you will need receipts/statements from the docs offices to show that you paid the bills. My insurance statements only show my share, not that I paid them.

 

[MichaelB]

That means copies of your tax returns to show you either didn't take a deduction or that you did and the supporting receipts for those......again that you actually paid and what it was for.

AFAIK only if you did not itemize medical expenses for deduction that year. If you did, the expense is not eligible for HSA withdrawal.

unless the insurance printouts also show you paid your share of the bills, you will need receipts/statements from the docs offices to show that you paid the bills. My insurance statements only show my share, not that I paid them.

Agree. The EOB together with a cancelled check, debit or credit card receipt should be sufficient.

 

[kaneohe]

AFAIK only if you did not itemize medical expenses for deduction that year. If you did, the expense is not eligible for HSA withdrawal.

.

Michael........suppose you have some old receipts from 2005 that you are using for HSA distributions. Perhaps you also itemized medical expenses also in 2005 ....but different ones from the ones you used for HSA distributions in a later year. IRS will want you to demonstrate that you didn't use the same ones for both purposes..........but agree with what you perhaps are thinking.....why would someone split up a years' bills to itemize some and not others.....perhaps not common , but possible.

 

[MichaelB]

Michael........suppose you have some old receipts from 2005 that you are using for HSA distributions. Perhaps you also itemized medical expenses also in 2005 ....but different ones from the ones you used for HSA distributions in a later year. IRS will want you to demonstrate that you didn't use the same ones for both purposes..........but agree with what you perhaps are thinking.....why would someone split up a years' bills to itemize some and not others.....perhaps not common , but possible.

My prior post was not clear. Put another way, any medical expense included on a schedule A is not eligible for HSA withdrawal in that or any other year.

 

[kaneohe]

Does she meet the income requirements for being a dependent.....< 3950 gross income (not including SS)?

for ChrisC re: MIL as dependent:

associated w/the income test was a footnote that I didn't check. Just in case it
might be relevant:

3)There is an exception if the person is disabled and has income from a sheltered workshop (exception to the gross income test......I'm assuming that means
no requirement but if it's relevant, pls doublecheck)

 

[bamsphd]

... I'm thinking that I need to eliminate the saved receipts issue that could plague my spouse. I have receipts dating back to 2008, when we first started the accounts. And we're switching HSA custodians in which I have all of my receipts stored electronically on its management tools.

I believe you can split your HSA balance across multiple HSA custodians. In your situation I would be really tempted to keep the current account open with just a minimum balance to maintain access to all those electronic records.

Last year was our first year with an HSA, but I decided to pay our routine medical bills with the HSA as we incurred the expenses. If we had a single multiple thousand dollar catastrophic expense, I might consider deferring that payment, but for little routine expenses saving, scanning, and spreadsheeting [-]dryer sheets[/-] medical receipts is just not how I want to spend my retirement. I remember the pain of managing capital gain tax lots when I had mutual fund dividends directly reinvested, and I also have a variety of illegible faded receipts originally saved for warranties. Add in the problems of the DW trying to figure out what to do with old receipts after I pass, our current low tax bracket, and it just does not seem worth it for me.