Looking to Switch from FSA to HSA, Questions

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OnTrack2020
Posts: 45
Joined: Mon Mar 20, 2017 10:24 am

Looking to Switch from FSA to HSA, Questions

Postby OnTrack2020 » Mon Mar 20, 2017 11:01 am

Hi, first-time poster.....somewhat of a long-time lurker.

My husband is 58, I'm 53. We have 4 children---around junior high age to freshman in college. We have had an FSA for several years. Our youngest child has had multiple surgeries over the years, and this year will be the final year for surgery. We are looking to switch to an HSA in 2018.

My husband's employer offered a HSA this year. We chose the FSA as it has worked for us in the past in regards to our daughter's surgeries and feel like we know what to expect with the FSA account. I'm a stay-at-home mom.

Here are my questions.

I'm assuming my husband can set up an account through his employer as an individual and that I can set up an account through a HSA administrator as an individual? His employer provides a $500 contribution for employee or $1,000 for other tiers.

Is it worth him signing up for an HSA if he's 3-4 years away from retirement? I'm assuming it is.

Do I or does he have to mark one of our accounts for family? I guess my question is, if we both have an individual account, can either account be used to pay for our children's medical bills, or would he or I have to sign up for a family account?

Who are some of the administators for HSA accounts if I do an individual account for myself?

Since we do not have a HSA currently, how do I find out what the investment options would be through my husband's HSA plan administrator?

What happens to the account if an owner passes away?

Thanks,

Spirit Rider
Posts: 5642
Joined: Fri Mar 02, 2007 2:39 pm

Re: Looking to Switch from FSA to HSA, Questions

Postby Spirit Rider » Mon Mar 20, 2017 4:11 pm

You have asked a lot of questions. I will try to answer and provide some suggestions:
  1. The decision to choose a HDHP/HSA over a PPO/FSA should be based on relative premium costs (offset by company contributions), projected out-of-pocket costs and relative tax advantages. The number of years shouldn't be a big consideration.
  2. The current contribution limit for a family HDHP plan is $6,750. Each spouse >= 55 can also make a $1,000 catch-up contribution, but this must be made to their own account.
  3. Rules for married couples allow both spouses (if eligible) can allocate the family plan limit between themselves anyway they choose. However, only contributions by payroll deduction of the plan owner are FICA tax free. Therefore, most of the full family plan contribution + his catch-up​ should be contributed by him if the company sponsors a HSA account.
  4. It is important that both of you open and contribute $1 to your own HSA account as soon as eligible. You can only reimburse for medicals services that occur after the account is established. All HSA accounts are individual accounts, but once the accounts are established either on can be used for both spouses and all dependents.
  5. There are special considerations when switching from an FSA to a HSA. If there are any funds available for the grace period, this will make you ineligle for HSA contributions 1/1 - 4/1. If there are rollover funds it makes you ineligle for the whole year. So you really want to have a $0 balance at year end, officially elect to forgo those funds, or the best option if available, rollover the funds to a limited purpose and/or post deductible FSA.
  6. If the beneficiary is a spouse, that HSA becomes the spouses. If it is a non-spouse beneficiary, then it ceases to be an HSA and is taxable income to the beneficiary. If the non-spouse beneficiary is not the estate the can deduct any of decedent's unpaid expenses if paid within one year.


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