HSA questions

[pirsquared]

I will have an HSA-eligible plan (through the ACA Marketplace) for the first time starting in 2024. I plan to open an HSA at Fidelity on January 1. I have been reading up on HSA rules, but have a few questions:

1) Can I fully fund the HSA ($4150) at the beginning of the year?

2) Let's say I choose to deposit 1/12 of the full amount (approx $345) on the first of each month. What if I have a $500 medical expense in January. Can I reimburse myself in February for an expense incurred in January given that the full amount was not in the HSA until after the expense was incurred?

3) It is my understanding that I can pay my LTC premiums (up to a certain amount) with HSA funds if I want to. Is this correct?

4) My husband is on Medicare. He has never had an HSA. It is my understanding that I cannot pay his Medicare premiums or his LTC premiums from my HSA, but I can pay for things like his copays or glasses if I want to (we file jointly). Is this correct?

Thanks!

 

[SecondCor521]

I will have an HSA-eligible plan (through the ACA Marketplace) for the first time starting in 2024. I plan to open an HSA at Fidelity on January 1. I have been reading up on HSA rules, but have a few questions:

1) Can I fully fund the HSA ($4150) at the beginning of the year?

2) Let's say I choose to deposit 1/12 of the full amount (approx $345) on the first of each month. What if I have a $500 medical expense in January. Can I reimburse myself in February for an expense incurred in January given that the full amount was not in the HSA until after the expense was incurred?

3) It is my understanding that I can pay my LTC premiums (up to a certain amount) with HSA funds if I want to. Is this correct?

4) My husband is on Medicare. He has never had an HSA. It is my understanding that I cannot pay his Medicare premiums or his LTC premiums from my HSA, but I can pay for things like his copays or glasses if I want to (we file jointly). Is this correct?

Thanks!

1. Yes. If your insurance situation changes later in 2024 such that you're no longer eligible, you'd have an excess contribution situation, but if you keep the HSA eligible plan all of 2024 then no problem.

2. As long as the medical expense was incurred after the HSA was established, which generally means after you made your first contribution to the HSA. So make sure you have at least one contribution to the HSA before incurring the expense. But there is no "cash flow" requirement regarding the amounts.

3. Yes. The limits are based on your age.

4. No. You can pay for his LTC insurance (subject to age limits) and his eyeglasses and so forth. You cannot pay for his Medicare premiums unless you are age 65 or older. See instructions for Form 8889 and 26 USC 233.

 

[pirsquared]

1. Yes. If your insurance situation changes later in 2024 such that you're no longer eligible, you'd have an excess contribution situation, but if you keep the HSA eligible plan all of 2024 then no problem.

2. As long as the medical expense was incurred after the HSA was established, which generally means after you made your first contribution to the HSA. So make sure you have at least one contribution to the HSA before incurring the expense. But there is no "cash flow" requirement regarding the amounts.

3. Yes. The limits are based on your age.

4. No. You can pay for his LTC insurance (subject to age limits) and his eyeglasses and so forth. You cannot pay for his Medicare premiums unless you are age 65 or older. See instructions for Form 8889 and 26 USC 233.

Thanks! The reason I thought I could not pay for his LTC premiums from my HSA comes from Pub 969:

"Insurance premiums. You can’t treat insurance premiums as qualified medical expenses unless the premiums are for any of the following.
Long-term care insurance.
Health care continuation coverage (such as coverage under COBRA).
Health care coverage while receiving unemployment compensation under federal or state law.
Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).
The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. See Limit on long-term care premiums you can deduct in the Instructions for Schedule A (Form 1040).

Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. For item (4), if you, the account beneficiary, aren’t 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) aren’t generally qualified medical expenses."

The bolded says that (2) or (3) can be for a spouse or dependent but LTC premiums are (1) on their list. They don't say that it's prohibited, but I wonder why they would not specifically state its allowability when they state it for (2) and (3).

 

[gauss]

My understanding is that under current law you cannot pay Medigap (supplemental) premiums with HSA funds, but you can pay Part B / Part D premiums.

This assumes you meet the other requirements (ie age 65).

-gauss

 

[SecondCor521]

The bolded says that (2) or (3) can be for a spouse or dependent but LTC premiums are (1) on their list. They don't say that it's prohibited, but I wonder why they would not specifically state its allowability when they state it for (2) and (3).

Yes, I noted that too. That's why I went and looked at the underlying law (26 USC 233), which says that it is permissible. The law is quite readable in this case. I don't know why the IRS wrote their publication that way.

 

[pirsquared]

Yes, I noted that too. That's why I went and looked at the underlying law (26 USC 233), which says that it is permissible. The law is quite readable in this case. I don't know why the IRS wrote their publication that way.

Found it this time. Pub 969 still concerns me, though. It also specifically says that I cannot pay my husband's Medicare premiums from my HSA, while 26 USC 223 does not address that.

 

[audreyh1]

You have to be 65 to pay your spouses Medicare premiums from your HSA.

 

[SecondCor521]

Found it this time. Pub 969 still concerns me, though. It also specifically says that I cannot pay my husband's Medicare premiums from my HSA, while 26 USC 223 does not address that.

USC is just the law. Lots of laws in various places give the executive branch permission to establish regulations which have the force of law. So the IRS does that quite a bit; this may be such a case. I don't know for sure, but that would be my guess.

If it is in Pub 969 (which it is), I would certainly expect that there is some regulation that prevents that, which in turn is based on some law somewhere.

 

[SevenUp]

Found it this time. Pub 969 still concerns me, though. It also specifically says that I cannot pay my husband's Medicare premiums from my HSA, while 26 USC 223 does not address that.

See (d)(2)(A) and (d)(2)(C)(iv) in 26 U.S. Code § 223. The first says, "your HSA can't pay for insurance premiums" and the second says, "yes it can if you are old enough" (loosely translated).

 

[pirsquared]

USC is just the law. Lots of laws in various places give the executive branch permission to establish regulations which have the force of law. So the IRS does that quite a bit; this may be such a case. I don't know for sure, but that would be my guess.

If it is in Pub 969 (which it is), I would certainly expect that there is some regulation that prevents that, which in turn is based on some law somewhere.

So I just re-read the text of 26 USC 223 and it does seem to allow for me to pay my husband's LTC premiums, although it still concerns me that Pub 969 mentions spouse and dependents for the other options and not for LTC premiums. I understand that I cannot pay for my husband's Medicare premiums with my HSA, but the reason for that seems to be based on the fact that I am not 65 yet.

It would be really nice to be able to pay my husband's LTC premiums with my HSA funds. I just wouldn't want to have to undo that later (or get some kind of penalty) as that would not be worth it.

 

[SevenUp]

So I just re-read the text of 26 USC 223 and it does seem to allow for me to pay my husband's LTC premiums, although it still concerns me that Pub 969 mentions spouse and dependents for the other options and not for LTC premiums. I understand that I cannot pay for my husband's Medicare premiums with my HSA, but the reason for that seems to be based on the fact that I am not 65 yet.

It would be really nice to be able to pay my husband's LTC premiums with my HSA funds. I just wouldn't want to have to undo that later (or get some kind of penalty) as that would not be worth it.

If you are referring to the following section of Pub. 969

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).

The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. See Limit on long-term care premiums you can deduct in the Instructions for Schedule A (Form 1040).

Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. For item (4), if you, the account beneficiary, aren’t 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) aren’t generally qualified medical expenses.

then you may be reading too much into spouse or dependent "not mentioned" in (1). Instead, the distinction seems to be between 2&3 vs. 4: there is no age limitation on 2&3, but there is on 4.

 

[pirsquared]

If you are referring to the following section of Pub. 969

then you may be reading too much into spouse or dependent "not mentioned" in (1). Instead, the distinction seems to be between 2&3 vs. 4: there is no age limitation on 2&3, but there is on 4.

Thanks! This is a helpful distinction. However, I would still feel better if the last paragraph read "Items (1), (2), and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage." The omission of (1) in that sentence is concerning. But, like you said, maybe I am reading too much into it. Your interpretation (that I can use my HSA funds to pay for my husband's LTC premiums) does seem more consistent with the rules in general. It sounds like I cannot pay my husband's Medicare premiums only because I am not yet 65. Age seems relevant to Medicare, but less so to LTC premiums, other than the age-based limits on how much can come from the HSA.