ACA and HSA question

[Gallaher]

When working, my income was too high and my “Cadillac” employer provided health insurance, prevented me from qualifying for an HSA.
Now it looks like I can manage income down low enough to qualify for an ACA subsidy.
In evaluating plans, some include an HSA some don’t.
My question is: What are the full benefits of an HSA?
Why do I care to have one?

Thanks so much for any input from this great forum.

[Retiree_Having_Fun]

HSA's allow you to save money on taxes. However you might be in a position where future taxes may be the same as taxes now so it doesn't matter. You could be in a position when RMD's kick in that your tax rate is higher than now - not sure without you posting more details on your current vs future income. You could also use it as a tax free savings vehicle.

In order for the plan to be hsa compatible, it must have a certain range in deductible for single/family and not provide services as part of the price of the policy. Disqualifying coverage is any other coverage that pays or reimburses for medical expenses before the individual’s HDHP minimum deductible has been met.

Here is some good info

[pb4uski]

I think of an HSA as the ability to same more than the Roth limits where future income/growth is tax-free like a Roth.... but with an additional limitation that the money be spent on health care services or some forms of health insurance.

We have yet to take a penny out of our HSAs and they are now six-figures, invested in a broad based domestic equity fund and growing tax free.

[HenryD]

Quote:

Originally Posted by pb4uski .... but with an additional limitation that the money be spent on health care services or some forms of health insurance.

I believe that after age 65 withdrawals for non-qualified medical expenses get taxed, but not penalized. Also no kind of RMD?

Quote:

Originally Posted by pb4uski We have yet to take a penny out of our HSAs and they are now six-figures, invested in a broad based domestic equity fund and growing tax free.

That is sweet! Five figures for us, might reach $75k at RE.

[Sunset]

Quote:

Originally Posted by HenryD I believe that after age 65 withdrawals for non-qualified medical expenses get taxed, but not penalized. Also no kind of RMD? ....

Yes but since many folks pay for medical plans to cover what Medicare does not cover, there are lots of opportunities to spend the HSA tax free.
No RMD on the HSA.

[MichaelB]

Also, all eligible medical expenses incurred after the HSA account was opened can be withdrawn from the HSA account at any time in the future, as long as they were not deducted on a tax return. Once eligible, always eligible.

[NoMoreJob]

You say that "now it looks like I can manage income down low enough to qualify for an ACA subsidy." One way to help do that is to contribute to an HSA account which reduces your income by the amount of your contributions. Some or all of that money can then be withdrawn to pay for qualified medical expenses without impacting income.

[michelek]

We invest our HSA money with HSAAdministrators (we learned about them on this site) . They have vanguard funds you can invest in with very low costs. There may even be better ones now.

[candrew]

Quote:

Originally Posted by Sunset Yes but since many folks pay for medical plans to cover what Medicare does not cover, there are lots of opportunities to spend the HSA tax free.

It should be pointed out that while a Medicare beneficiary can use HSA distributions to pay for qualified medical expenses, i.e. premiums for Part B, a Medicare Advantage plan (Part C), a prescription drug plan (Part D), and long-term care insurance; HSA funds cannot be used pay premiums for Medicare supplemental policies, AKA Medigap policies.

[NoMoreJob]

Quote:

Originally Posted by michelek We invest our HSA money with HSAAdministrators (we learned about them on this site) . They have vanguard funds you can invest in with very low costs. There may even be better ones now.

Fidelity is now a better (lower cost) option.

[pb4uski]

Quote:

Originally Posted by michelek We invest our HSA money with HSAAdministrators (we learned about them on this site) . They have vanguard funds you can invest in with very low costs. There may even be better ones now.

There is.... Fidelity has HSA accounts...no fees at all.

[targatom2019]

Sorry for bringing up old thread. in California, do I have to have an insurance that qualifies for HSA in order to open HSA account or I can open and contribute anytime regardless of my insurance plan ?

[MichaelB]

Quote:

Originally Posted by vipertom1970 Sorry for bringing up old thread. in California, do I have to have an insurance that qualifies for HSA in order to open HSA account or I can open and contribute anytime regardless of my insurance plan ?

You definitely cannot contribute to an HSA account unless you have an HSA eligible high deductible policy.

[Sue J]

Quote:

Originally Posted by vipertom1970 Sorry for bringing up old thread. in California, do I have to have an insurance that qualifies for HSA in order to open HSA account or I can open and contribute anytime regardless of my insurance plan ?

Your insurance must be HSA qualified to contribute to an HSA. You may have one open from an earlier year but you can't make a contribution unless your current insurance is an HSA qualified plan.

An insurance plan may say HSA in it's title. Or it will state that it's HSA qualified in it's documents or summary.

[targatom2019]

Got it, thank you.

[4legsgood]

Quote:

Originally Posted by pb4uski There is.... Fidelity has HSA accounts...no fees at all.

For those with existing HSA, fidelity reimburses transfer fee. I recently transferred to Fidelity from HealthEquity. I had to liquidate to do it and it took over 2 weeks. But so worth it!

[RetiredAndLovingIt]

Am I calculating my MAGI correctly?

Savings & CD interest 10,000
Roth Conversion 20,000
HSA - 4,550 3500 +1K catchup 60 years old, never had an HSA

MAGI ===== $25,450
* I also got a huge tax refund last year using the standard deduction, hopefully that doe not come into play

[MichaelB]

Quote:

Originally Posted by RetiredAndLovingIt Am I calculating my MAGI correctly? Savings & CD interest 10,000 Roth Conversion 20,000 HSA - 4,550 3500 +1K catchup 60 years old, never had an HSA MAGI ===== $25,450

This part looks good

Quote:

Originally Posted by RetiredAndLovingIt * I also got a huge tax refund last year using the standard deduction, hopefully that doe not come into play

State or federal refund? A federal refund does not affect MAGI, but I think a state tax refund does.

[cathy63]

Quote:

Originally Posted by vipertom1970 Sorry for bringing up old thread. in California, do I have to have an insurance that qualifies for HSA in order to open HSA account or I can open and contribute anytime regardless of my insurance plan ?

Just FYI, for state tax purposes, in California your HSA is just another taxable investment account. You cannot deduct the contributions from your income and you will pay tax on the dividends and capital gains.

[cathy63]

Quote:

Originally Posted by RetiredAndLovingIt Am I calculating my MAGI correctly? Savings & CD interest 10,000 Roth Conversion 20,000 HSA - 4,550 3500 +1K catchup 60 years old, never had an HSA MAGI ===== $25,450 * I also got a huge tax refund last year using the standard deduction, hopefully that doe not come into play

$3500 + $1K = $4500, not $4550

With this change, your MAGI would be $25,500, not $25,450.