HSA age difference

[LastOfTheBoomers]

I can't find a good answer to the following - when one spouse reaches 65 and the other spouse is younger - I read that the younger one can contribute to the HSA but the older spouse can then withdraw the money for non medical use - so what prevents the younger spouse from benefiting from contributing and withdrawing for non medical use?

 

[audreyh1]

I don't know the answer to this specifically, but there are several issues.

HSA accounts are individual accounts, not joint accounts, although it is possible to make all contributions to one HSA account if you have a family health insurance plan - in this case, you don't have two different people contributing - you have one person contributing on behalf of themselves and their spouse. A fine distinction. And apparently once someone turns 65, they can continue to contribute on behalf of their younger spouse.

And withdrawing is only done by whomever is named on the account. You can pay for medical bills for family members, and if you are over 65, you can withdraw funds for personal use, but you pay ordinary income tax on those withdrawals. Whether its for bills or

So - for each HSA account, only one person is making the contributions and the withdrawals.

Once one spouse reaches 65, it may make more sense for the younger spouse to have their own HSA account since they have different insurance now from their older spouse. In fact while both spouses are between 55 and 65, having separate HSA accounts allows each of them to take advantage of the catch up contribution.

I expect the younger spouse, if they have a separate HSA account, can't simply withdraw funds for their older spouse unless used to pay medical bills. I expect the younger spouse's age is used to determine whether withdrawals can be made without penalty. They apparently also can't pay for their spouses HSA eligible Medicare premiums until they themselves are 65 or older.

But I also ask whether it matters. Two married people filing jointly are treated as one tax entity. And the money is not being withdrawn tax-free, unless used to pay medical bills. So there is nothing to be gained by contributing and then withdrawing.

DH and I maintain separate insurance and separate HSA accounts (which means each of us can use the 55+ catch up contribution). To me this keeps things cleaner, and causes less disruption once someone reaches Medicare age and one spouse switches insurance. It's more flexible as well, because each spouse can have a different health insurance plan if they choose. Of course we can still pay for each other's HSA eligible medical expenses.

Some related issues here. http://www.ifebp.org/inforequest/ifebp/0166103.pdf

 

[bingybear]

As audreyh1 pointed out, I don't see the benefit the younger one is really getting by contributing and the older one withdrawing in the scheme of things. You subtract in one place and add it back in another place, so just a wash.
So far we have had a single health plan but will be adding a second HSA plan so we can take advantage of the catch up provisions.
While one can take advantage of no penalty withdraws, we think it will be better used to cover higher health care costs as we age. We are using the investment options in the HSA to attempt to grow the accounts.

 

[rodi]

I thought the older one could pull out money to pay for medicare supplemental premiums tax free.

Another thing is that you can accumulate medical bills over the years - paying out of pocket, but saving the receipts... then cash out, tax free, in later years based on the saved receipts.

My DH is turning 65 in just over a year... We have separate accounts and are saving our receipts... we have more receipts than hsa savings so that money can grow, tax free... like a roth.

 

[bingybear]

I thought the older one could pull out money to pay for medicare supplemental premiums tax free.

Another thing is that you can accumulate medical bills over the years - paying out of pocket, but saving the receipts... then cash out, tax free, in later years based on the saved receipts.

My DH is turning 65 in just over a year... We have separate accounts and are saving our receipts... we have more receipts than hsa savings so that money can grow, tax free... like a roth.

You can use the HSA for medicare premiums. I think I read on another post that you can't use it for advantage plan premiums (could be mistaken). So I don't know what other supplemental premiums.
I believe you can use older medical receipts to claim some HSA funds, but I believe the HSA had to be opened before the medical costs were incurred.

The OP was asking about withdrawing HSA $ for non-medical expenses.

 

[kaneohe]

from pub 969: https://www.irs.gov/pub/irs-pdf/p969.pdf

Insurance premiums. You cannot treat insurance
premiums as qualified medical expenses unless the premiums
are for:
1. Long-term care insurance.
2. Health care continuation coverage (such as coverage
under COBRA).
3. Health care coverage while receiving unemployment
compensation under federal or state law.
4. Medicare and other health care coverage if you were
65 or older (other than premiums for a Medicare supplemental
policy, such as Medigap).

(This means you can use it to pay for Medicare A,B, C (Advantage plans) & D (Rx Drug plans) but not supplement plans.

 

[audreyh1]

I thought the older one could pull out money to pay for medicare supplemental premiums tax free.

Yes, BUT they can only be paid from the HSA account where the owner is already 65 years old. In other words, if a younger spouse with their own HSA account has not yet reached age 65 they cannot pay for the Medicare premiums of their older spouse from their own HSA account. This according to the PDF I linked above.

You do have to pay attention to the under 65 restrictions with HSAs and make sure you don't pull funds from the wrong account.

In the OPs case above it seems foolish to take money out for non-qualified reasons after 65 as long as you are paying Medicare premiums and for other qualified expenses (dental, vision) not covered by Medicare.

 

[jabbahop]

Anyone thinking about building up a substantial HSA account balance and use it for long term care instead of insurance? Seems if you max out hsa's in early retirement and then hold them, there could be a substantial balance to use for LTC if needed.

 

[kaneohe]

I thought the older one could pull out money to pay for medicare supplemental premiums tax free...........................

from: Forbes Welcome

"once you turn 65, you can use HSA money for non-medical expenses without facing the 20% penalty, but you’ll still owe income taxes."

Premiums for Medicare (and other Medicare plans like pt C-Advantage & D-Rx Drug) are qualified medical expenses for HSA. Premiums for medicare supplement (Medigap) plans are not.

 

[bingybear]

Anyone thinking about building up a substantial HSA account balance and use it for long term care instead of insurance? Seems if you max out hsa's in early retirement and then hold them, there could be a substantial balance to use for LTC if needed.

That is our plan. We only had one year of HSA compatible plans when working (and only one spouse in it). So we should have about a decade of contributions by medicare time. It likely won't be sufficient for LTC if we really need it, but may put a good dent in it assuming LTC is a long term away. We are investing the HSA to the extent allowed in the plan.

Looks like all in one advantage plan premiums can be paid with HSA $

Many out-of-pocket expenses qualify for tax-free HSA withdrawals even after you’re on Medicare. You can use the money to pay premiums for Medicare Part B, Part D prescription-drug coverage or all-in-one private Medicare Advantage plans (but not for medigap premiums). You can also use the money for co-payments and deductibles you pay for medical expenses, out-of-pocket costs for prescription drugs, vision and dental care, and even a portion of qualified long-term-care premiums ($3,500 in 2012 for people ages 61 to 70, for example and more if you’re older). For a full list of eligible expenses, see IRS Publication 50
Read more at Health Savings Accounts After Medicare-Kiplinger

 

[LastOfTheBoomers]

Thanks for your feedback - I think I know what has to be done - open a new single account when the older spouse turns 65 since the younger spouse will not be on a family plan - but one issue was mentioned that I need to research more - since both of us will be over 55 at the same time at some point - then I thought having a single HSA for our family medical plan - we could both contribute the extra 1K to catch up - some of the posters indicate that we will need separate HSA to do this

 

[bingybear]

Thanks for your feedback - I think I know what has to be done - open a new single account when the older spouse turns 65 since the younger spouse will not be on a family plan - but one issue was mentioned that I need to research more - since both of us will be over 55 at the same time at some point - then I thought having a single HSA for our family medical plan - we could both contribute the extra 1K to catch up - some of the posters indicate that we will need separate HSA to do this

the 1k catch up contribution must be placed in the HSA having the individuals name that is doing the catch up, thus you need two HSAs.

Are you saying that your spouse will be 64 during some part of the year when you turn 55? If both are covered with an HSA for part of the year, then maybe it will work that one year. I have not looked at the turning 65 rules closely since it is more than a decade off for us.

 

[mpeirce]

the 1k catch up contribution must be placed in the HSA having the individuals name that is doing the catch up, thus you need two HSAs.

My CPA says otherwise. Of course he well may be wrong, but we have a single HSA and put our contributions into it - including a catchup contribution for my wife.

We've been doing this for a few years and nothing bad has happened, we'll see.

 

[bingybear]

My CPA says otherwise. Of course he well may be wrong, but we have a single HSA and put our contributions into it - including a catchup contribution for my wife.

We've been doing this for a few years and nothing bad has happened, we'll see.

I've seen this multiple places and the sites could be wrong

An individual age 55 and over may make an additional “catch-up” contribution. A married couple can make two catch-up contributions as long as both spouses are eligible and at least 55 years of age. The catch-up contribution for the spouse must be placed in a separate HSA in their name.

From link

I don't recall the IRS docs covering the dual catch up specifically when I was looking for information

 

[LastOfTheBoomers]

Now I'm thinking we should open the second HSA this year - to properly fund the contribution - I opened the original HSA with me as the owner and I am the younger one - but I will research it more as well as the IRS form you report it on

 

[MBSC]

I don't recall the IRS docs covering the dual catch up specifically when I was looking for information

Reference: https://apps.irs.gov/app/vita/content/37/37_06_020.jsp?level=basic

If both spouses are 55 or older and not enrolled in Medicare:

• Each spouse is entitled to increase his or her contribution limit with an additional contribution.
• Any additional contribution for age 55 or over must be made by each spouse to his or her own HSA.

The chart below lists the different HDHP/HSA combinations. Notes 1 & 2 indicate when a catch up contribution can be made under that scenario.

https://hsa.umb.com/Individuals/Contributions/Q025015

 

[bingybear]

Reference: https://apps.irs.gov/app/vita/content/37/37_06_020.jsp?level=basic
The chart below lists the different HDHP/HSA combinations. Notes 1 & 2 indicate when a catch up contribution can be made under that scenario.

https://hsa.umb.com/Individuals/Contributions/Q025015

I was reading the full publications. I had not seen this online class format. Thanks for sharing