Employer HSAs after Retirement

[Senator]

I know I can keep my HSA open after I leave my employer and retire. It’s not really my employers account, it’s mine according to the law. I know I can use the HSA funds at a (much) later date, and I know that there may be additional account maintenance fees after I leave my job, that my employer may be covering now. I am not worried about the money in the HSA today, I am wondering about where future HSA contributions may go. I use my HSA like a Roth, and let the funds build.

I will probably get a bronze health care plan; I should be still eligible for contributing to an HSA. Will I be able to use my current HSA, assuming I am still eligible for an HSA, and keep contributing to it? Or do healthcare plans, employers and HSAs somehow become tied together?

A hypothetical question… If I have a bronze plan for a single month, can I max out the HSA in the first month, and then drop the insurance to a different type of health insurance with a lower out of pocket? I plan on maxing out my HSA before I leave my employer, and that is likely a similar situation.

Has anyone retired and continued to fund their previous HSA that was set up with their former employer?

 

[athena53]

I left my employer in mid-2014 and rolled it over to healthsavings.com although I had the option of leaving it with the employer's plan (Optum Health) indefinitely. It's just been my practice that when I leave a company, my money goes with me. Since I have a qualifying HDHP, I've been able to continue my contributions.


The answer to your hypothetical question is probably not. When I retired, DH enrolled in Medicare, so not an HDHP. Our max HSA contribution was pro-rated to reduce it for the months DH was in Medicare.

 

[Theseus]

Although not your situation exactly, many years ago the employer offered a healthplan that was HDHP but did not make an HSA available, so I started an HSA with our local CU. Was fine by me, as I preferred to have separation between the two anyway. I kept my HSA with the CU as they offer 1.5% return, not bad for ready cash although my intent is to leave it sit and collect receipts for future use, I just consider it as a CD in my overall scheme. In our first year of ACA I chose separate HDHP plans for DW an myself, and opened an HSA for her also. The insurance company did not mention HSA beyond that the policies were HDHP compliant. Switched insurance plans this year and went to Anthem, I was surprised when I started getting their deluge of mailings which included their HSA offering - believe I promptly tossed it as the return was pitifully low. Didn't realize the insurance carriers were able to associate themselves with HSA accounts directly but with that kind of return I don't suppose they'll get too many takers, at least not among those that are even slightly financially aware.

 

[travelover]

.....Has anyone retired and continued to fund their previous HSA that was set up with their former employer?

Like Athena, I rolled my employer HSA over to a new HSA.

The employer HSA reps were a bunch of nannies and I had to submit every receipt and get their approval based on evidence that I had actually paid for the service. This was a PITA. Plus employer no longer paid fees, which were high. I use HSA Administrators and invest in Vanguard funds.

 

[athena53]

I use HSA Administrators and invest in Vanguard funds.

So do I (it was recommended here); the URL is now healthsavings.com. I think the Vanguard Wellington fund in which it was invested did better than anything else in my portfolio last year!

 

[MBSC]

A hypothetical question… If I have a bronze plan for a single month, can I max out the HSA in the first month, and then drop the insurance to a different type of health insurance with a lower out of pocket? I plan on maxing out my HSA before I leave my employer, and that is likely a similar situation.

Reference: https://www.hsaresources.com/pdf/HSA_Resources_Eligibility_Contribution_Worksheet.pdf

A. Less Than Full Year Eligibility –Eligible on December 1. If you become eligible for an HSA sometime during the year, rather than on January 1, you can still contribute and deduct the full amount of the Federal Limit above if you remained eligible on December 1 of that year (this assumes you are a calendar year taxpayer and this rule applies even if your first day of eligibility was December 1). However, if you fail to maintain your eligibly for a testing period then the amount you contributed under this rule is subject to taxation and a 10% penalty (except in the case of disability or death). The testing period is the period beginning in the last month of the taxable year (generally December 1) and ending on the last day of the 12th month following such month (generally December 31 of the next year). Please see the HSA Testing Period Worksheet for details.

B. Less Than Full Year Eligibility –Not Eligible on December 1. If you are not eligible for the HSA in all months of the year and are not eligible on December 1, a different rule applies. You must apply the Sum of the Months rule to determine the maximum amount of your HSA contribution. The Sum of the Months calculation requires you to determine your eligibility month-by-month and only contribute a pro-rata amount of the maximum federal HSA limit. Please use the chart on page 2.

Has anyone retired and continued to fund their previous HSA that was set up with their former employer?

Yes, I am still funding the same HSA account after retirement. I set up an ACH link to my checking account to fund it since it was previously funded by payroll deduction. As you stated, the HSA account is not linked to the employer or insurance carrier.

 

[Senator]

Yes, I am still funding the same HSA account after retirement. I set up an ACH link to my checking account to fund it since it was previously funded by payroll deduction. As you stated, the HSA account is not linked to the employer or insurance carrier.

Thanks. That is what I thought i could do. I did look up the HSA rules and it implies a similar thing. My checking account is already linked to it.

It appears there may be a fee of 3.25 per month, I am not sure if that is a lot of not. I will have to compare.

 

[MichaelB]

It appears there may be a fee of 3.25 per month, I am not sure if that is a lot of not. I will have to compare.

That doesn't sound high for an HSA, but it really depends on your investment options. As Travelover already posted, you can open an account elsewhere and rollover your current balance.

 

[Senator]

That doesn't sound high for an HSA, but it really depends on your investment options. As Travelover already posted, you can open an account elsewhere and rollover your current balance.

I just called. If I have more than $2500, there are no fees. Since I have ~$9K, I should be safe for a while as I do not spend this money.

I have the bulk of it in Nuveen Equity Index I which has a .94% expense ratio...

Here are my investment choices.

Investment Name

FIRST AMER PRIME OBLIGATION Y

FIDELITY ADV FREEDOM 2010 T

FIDELITY ADV FREEDOM 2020 T

FIDELITY ADV FREEDOM 2030 T

FIDELITY ADV FREEDOM 2040 T

NUVEEN STRAT CONSERV ALLOC I

NUVEEN STRAT BALANCED ALLOC I

NUVEEN STRAT GROWTH ALLOC I

NUVEEN STRAT AGGR GROW ALLOC I

NUVEEN EQUITY INDEX I

NUVEEN MID CAP INDEX I

NUVEEN SMALL CAP INDEX I

NUVEEN DIVIDEND VALUE I

NUVEEN MID CAP VALUE I

NUVEEN SMALL CAP VALUE I

NUVEEN LARGE CAP GROWTH OPP I

NUVEEN MID CAP GROWTH OPP I

NUVEEN SMALL CAP GROWTH OPP I

NUVEEN PLUS CORE BOND I

PIMCO TOTAL RETURN INST

NUVEEN INTERNATIONAL GROWTH I

 

[erkevin]

OK, help me out here. I currently have an HSA and an HDHP. Pre-tax contributions are made to my HSA out of my paycheck (obviously, I am still employed). The terrific advantage being "pre-tax". After I retire, I won't make contributions or probably even keep the HSA. Is there a point keeping it? Those that link their checking to it- what is the advantage of an HSA if the contributions aren't pre-tax?
What am I missing?

Thanks-

 

[travelover]

OK, help me out here. I currently have an HSA and an HDHP. Pre-tax contributions are made to my HSA out of my paycheck (obviously, I am still employed). The terrific advantage being "pre-tax". After I retire, I won't make contributions or probably even keep the HSA. Is there a point keeping it? Those that link their checking to it- what is the advantage of an HSA if the contributions aren't pre-tax?
What am I missing?

Thanks-

Money put into a HSA comes right off your taxable income and unlike a deductible IRA, you never pay taxes on it if used for medical, dental, prescriptions, eye care or Medicare premiums. It is like FREE money. I max mine out and invest it in Vanguard funds. The earnings are also tax free.

 

[ziggy29]

OK, help me out here. I currently have an HSA and an HDHP. Pre-tax contributions are made to my HSA out of my paycheck (obviously, I am still employed). The terrific advantage being "pre-tax". After I retire, I won't make contributions or probably even keep the HSA. Is there a point keeping it? Those that link their checking to it- what is the advantage of an HSA if the contributions aren't pre-tax?

Well, don't be so sure you won't have an HSA/HDHP after retirement, at least while retired and under 65. If there's any possibility a retiree may need health insurance on the ACA Marketplace, a Silver or Bronze HDHP with HSA reduces your MAGI for the purposes of tax credits and cost sharing. And HSA contributions, unlike IRA contributions, do not require *earned* income.

 

[audreyh1]

OK, help me out here. I currently have an HSA and an HDHP. Pre-tax contributions are made to my HSA out of my paycheck (obviously, I am still employed). The terrific advantage being "pre-tax". After I retire, I won't make contributions or probably even keep the HSA. Is there a point keeping it? Those that link their checking to it- what is the advantage of an HSA if the contributions aren't pre-tax?
What am I missing?

Thanks-

The contributions are pre-tax even if unemployed. You get to take them right off your income before any taxes are calculated - just like a qualified IRA contribution.

 

[erkevin]

Money put into a HSA comes right off your taxable income and unlike a deductible IRA, you never pay taxes on it if used for medical, dental, prescriptions, eye care or Medicare premiums. It is like FREE money. I max mine out and invest it in Vanguard funds. The earnings are also tax free.

Bingo! I did not know that contributions were tax-deductable (as my contributions are pre-tax and therefore, not deducible.
I will be keeping my HSA as I will have a Bronze HDHP.

Thank you all for your assistance

 

[travelover]

Bingo! I did not know that contributions were tax-deductable (as my contributions are pre-tax and therefore, not deducible.
I will be keeping my HSA as I will have a Bronze HDHP.

Thank you all for your assistance

Plus when you're over 55, you get to tack on another 1000 bucks to your HSA.

 

[Senator]

OK, help me out here. I currently have an HSA and an HDHP. Pre-tax contributions are made to my HSA out of my paycheck (obviously, I am still employed). The terrific advantage being "pre-tax". After I retire, I won't make contributions or probably even keep the HSA. Is there a point keeping it? Those that link their checking to it- what is the advantage of an HSA if the contributions aren't pre-tax?
What am I missing?

When you are working, the HSA contributions are tax free, you may not even pay medicare or FICA on them depending on your employer.

You can accumulate medical expenses now, in 2016, and pay them when you retire, tax free - even 20 year later. You can pay medicare part B premiums with the money, or LTC insurance.