I accidentally broke an IRS regulation - HSA accounts

They will probably just have one of their guys come and undo any medical work you have had done.

I can give you an analogous situation: years ago I mistakenly (it turns out) signed up for some child-care savings benefit. My wife doesn't work outside the home, so it turns out we were not eligible.

Unenroll? Nope.

Refund? Nope

Result? FORFEIT.

Yup.

So... just in case.... be prepared to FORFEIT. Money goes to the operation of the plan...

I'm still mad about that one.

Also: it's pretty much on your conscience: Had I done nothing, kept quiet, woulda been no problem. But I'm funny that way, you know, tryin' to walk the walk, ethically speaking.

Also: I totally sympathize. Tax laws are WHACKED, and politicians seem to LOVE to make laws that APPEAR to offer a break but that are nigh on IMPOSSIBLE to exploit (or onerous, or dangerous).

HSA. FSA. Childcare savings. etc. etc. Hafta PROJECT my expenses then either USE or LOSE.... Thanks gubmint!

Either don't OFFER 'em or make 'em REAL (or just go to a flattish tax with no loopholes; heck, I'd even forego mortgage deduction to simplify things).

Thanks...this is a good heads up. I didn't know this rule.

yeahyeahyay wrote:

Also: I totally sympathize. Tax laws are WHACKED, and politicians seem to LOVE to make laws that APPEAR to offer a break but that are nigh on IMPOSSIBLE to exploit (or onerous, or dangerous).

HSA. FSA. Childcare savings. etc. etc. Hafta PROJECT my expenses then either USE or LOSE.... Thanks gubmint!

Either don't OFFER 'em or make 'em REAL (or just go to a flattish tax with no loopholes; heck, I'd even forego mortgage deduction to simplify things).

The HSA is not use it or lose it. It carries over to the next year on and on until you reach retirement age. Then you can make tax free withdraws like a retirement account.

Also, there is no limitation on when you can make a qualified withdraw. I can have a qualified medical expense this year and withdraw the money tax-free five years later.

So this was a case where politicians actually looked at what people hate about the FSA and fixed it for the HSA.

By the way, our Commander-in-Chief also added the stipulation that qualified HSA spending does not include over-the-counter meds, only those obtained via a prescription. So you need to see a doctor first and the doctor will determine that you need prescription ibuprofen at 400mg per pill, rather than taking 2 200mg pills over the counter.

McTed wrote:

By the way, our Commander-in-Chief also added the stipulation that qualified HSA spending does not include over-the-counter meds, only those obtained via a prescription. So you need to see a doctor first and the doctor will determine that you need prescription ibuprofen at 400mg per pill, rather than taking 2 200mg pills over the counter.

Good example. How much ibuprofen are you taking that it would improve your money situation by purchasing the pills with before tax dollars?

oops now what wrote:

... The high-deductible plan for myself only costs like $60 per year. But my company offers all these incentives to promote healthy living where they'll deposit up to $600 per year into your account. Being the smart guy that I am, I saw this as a net $540, ...

I just found out that under IRS rules you're not permitted to have an HSA account if you have another health plan. ...

I think the rule is that to contribute to an HSA, you must have a high deductible plan. If you are paying that $60 per year for the plan, seems to me you are eligible.

The worst that could happen if you do not actually qualify is that you pay taxes on the $600. Big deal.

Fat hurts wrote:

The HSA is not use it or lose it.

So this was a case where politicians actually looked at what people hate about the FSA and fixed it for the HSA.

True--but see what happens when you mistakenly enroll for BOTH (yes, it's possible; yes, it ends up being an unbelievable hassle to take advantage of the "advantages").

HSA is good, agreed; all others are overly problematic, IMO.

I'm pretty sure that you ARE permitted to have an HSA account if you have another health plan.

I just don't know if you can have two health plans for one person.

The HSA account is not a health plan, it's a bank account.

The $600 given to you by your employer may be something you cannot accept along with the high-deductible plan if you are covered otherwise.

So, I guess, pick a plan and drop the other.

If you choose your wife's plan you should be able to keep the HSA account and any money you put in yourself.

I had this situation where I had an HSA account with a company that I left.

I could use it for dentist stuff and medical co-payments, but it was just basically sitting there. Then it started to get inactivity fees, eating away at the balance.

So I just wrote a check to myself for the balance and closed it.

That check to myself should be taxable income since it wasn't originally taxed.

"But anyway, now what? Just un-enroll myself for next year and hope I'm never audited? I've already incurred benefits this year. What's the worst that could happen?"

You may be fine with this. Be prepared to give up the $600 given by your employer.

I believe that the penalty for spending money from a health savings account on non-medical expenses is simply that you have to pay taxes on the income that was previously untaxed. I wonder what happens if you just spend all the money before they have a chance to make you forfeit the balance. Could you just go buy yourself something nice, put it on the HSA card, pay the tax on the income, and have zero balance to forfeit?

yeahyeahyay wrote:

Fat hurts wrote:

The HSA is not use it or lose it.

So this was a case where politicians actually looked at what people hate about the FSA and fixed it for the HSA.

True--but see what happens when you mistakenly enroll for BOTH (yes, it's possible; yes, it ends up being an unbelievable hassle to take advantage of the "advantages").

HSA is good, agreed; all others are overly problematic, IMO.

Yea, the whole is way too complicated. Just put everyone on Medicare and be done with it!

I meant, "Yea, the whole system is way too complicated."

But this bears repeating again. JUST PUT EVERYONE ON MEDICARE AND BE DONE WITH IT!

Interesting. I work for a hospital with great health insurance that covers both me and my spouse for pretty much nothing. The deductibles are very low and they openly encourage enrollment in the HSA.

Yet it looks like the OP may be correct based on this article.

http://www.kiplinger.com/article/insurance/T027-C000-S002-health-savings-accounts.html