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Old 12-31-2009, 04:50 PM   #41
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Starting 2010, I decided to go ahead an start reimbursing myself from my HSA for medical expenses. In fact, I just put in a reimbursement request (postal mail) for my 2008 expeneses (which were about $2000). Soon, I will also reimburse myself for my 2009 expenses. Then each year, I'll reimburse myself for the previous year's expenses I've paid.

My strategy for doing this: The money I reimburse to myself will be from expenses I paid in the past and will help pay for upcoming expected expenses this year (such as portions from my dental and eye doctor visits that aren't covered).

I decided to use Vanguard Wellington (through HSA Administrators) as my HSA investment.

With my new approach, in a way, I feel as though I'm just shuffling money back and forth (to HSA, then to reimburse myself, then medical expenses), but at least that is tax-free.
I don't think you can re-imburse yourself for past expenses with an HSA....that kind of defeats the purpose, unless your state has some special rules or things have changed.
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Old 12-31-2009, 04:55 PM   #42
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By expenses, I was meaning eligible medical expenses. Not expenses such as HSA fees.
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Old 12-31-2009, 05:00 PM   #43
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By expenses, I was meaning eligible medical expenses. Not expenses such as HSA fees.
That's what I was referring to also. The policy and account must have been set up before the expenses occurred....if that was the case, it would seem that you would have already had the money in there to pay the past claims with.

U.S. Treasury - HSA Frequently Asked Questions

Can I use my HSA to pay for medical expenses incurred before I set up my account?
No. You cannot reimburse qualified medical expenses incurred before your account is established. We recommend you establish your account as soon as possible.
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Old 12-31-2009, 05:08 PM   #44
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Okay. I see. My HSA was set up in the beginning of 2008, so it looks like I'm okay. Thanks for the clarification in your link.
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Old 01-09-2010, 03:15 PM   #45
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  1. Put no money in the account, except when you incur a medical expense. This strategy allows you to legally "launder" any money used to pay medical expenses. In other words, by depositing money into your HSA, then immediately withdrawing it to reimburse yourself for medical expenses, you are making your medical expenses all tax-deductible. You may want to use this strategy if you are on a tight budget and want to keep your cash outlay as low as possible.
  2. Fully fund the account, or at least put in as much as possible based on your budget. Take money out of the account any time medical expenses are incurred, and let the rest grow tax-deferred. This strategy will maximize your tax deduction, while making your HSA funds available to pay any non-covered medical expenses before your deductible is met.
  3. Fully fund the account, but pay all medical expenses from a non-HSA account. Reimburse yourself for medical expenses at a later date. This strategy will allow you to maximize your tax deduction, and will also allow you to maximize the tax-deferred growth of your HSA. You can then reimburse yourself, tax-free, at any time in the future for medical expenses incurred over the ensuing years.

We have decided to go with Strategy #3. My main concern is about holding receipts for years and years and then turning them in for reimbursement...worried the rules will change on this...
My original plan was to go with #3 but the idea that you can accumulate receipts from prior tax years seems like a loophole asking to be closed. The Senate health care legislation eliminates non-prescription meds as "qualified expenditures" and increases the withdrawal penalty to 10% from 20%. I wonder how durable these HSA accounts will prove to be over time.

So I'll probably use a combination of 1 & 2. I have a balance already established that I'll let grow. But I'll make future contributions and withdrawals equal to my annual medical expenses.
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