Random HSA Questions

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Topic Author
tormund
Posts: 15
Joined: Fri Oct 04, 2019 4:26 am

Random HSA Questions

Post by tormund » Wed Oct 09, 2019 12:48 pm

With the HDHPs offered to me from FEHB as a Federal employee (i.e., Aetna, GEHA, MHBP), am I able to open up another external HSA and rollover the funds yearly as long as the total contribution is under the limit between them both?

I also believe I could signup for the NALC CDHP and NALC Value plan and open an external HSA. You get a personal care account (which is different than a FSA) with these plans. The con here is you can't avoid payroll tax and you have to wait to deduct on your taxes your contributions I would think. Has anyone done this?

Also, selecting the Aetna CDHP would not allow me to open my own HSA since this is a HRA right?

On the topic of having HSAs and FSAs. I read you can suspend HRAs and still contribute to HSA. Or perhaps if you "self-certify" your FSA for post-deductible expenses or limited-purpose items you can meet the intent. Any thoughts here on how I could max HSA but never take distributions, and utilize a FSA somehow?

What if you signed up HSA at one employer and your spouse signed up for FSA at another, both during open season. You then determine it's not acceptable/legal, but neither employer will fix because it's not open season. What can you do?

Also let's say someone went forward with this plan thinking it's acceptable/legal. Let's say the IRS however would disagree. I wonder what the likelihood of being found would be? You don't report FSA distributions on your taxes, but the contribution would be on your W-2 I think, so maybe there could be flags built into the tax return system. What could the fallout be if one spouse had a maxed HSA but never took any distributions, the other spouse had FSA (e.g., the IRS levied X penalty)?

nps
Posts: 711
Joined: Thu Dec 04, 2014 10:18 am

Re: Random HSA Questions

Post by nps » Thu Oct 10, 2019 6:15 am

tormund wrote:
Wed Oct 09, 2019 12:48 pm
With the HDHPs offered to me from FEHB as a Federal employee (i.e., Aetna, GEHA, MHBP), am I able to open up another external HSA and rollover the funds yearly as long as the total contribution is under the limit between them both?
Yes
tormund wrote:
Wed Oct 09, 2019 12:48 pm

I also believe I could signup for the NALC CDHP and NALC Value plan and open an external HSA. You get a personal care account (which is different than a FSA) with these plans. The con here is you can't avoid payroll tax and you have to wait to deduct on your taxes your contributions I would think. Has anyone done this?

Also, selecting the Aetna CDHP would not allow me to open my own HSA since this is a HRA right?
A Personal Care Account is an HRA. You are correct though that HRAs are generally not compatible with HSAs.
tormund wrote:
Wed Oct 09, 2019 12:48 pm
On the topic of having HSAs and FSAs. I read you can suspend HRAs and still contribute to HSA. Or perhaps if you "self-certify" your FSA for post-deductible expenses or limited-purpose items you can meet the intent. Any thoughts here on how I could max HSA but never take distributions, and utilize a FSA somehow?
You can open a LEX HCFSA that would be compatible with an HSA. I wouldn't attempt to suspend an HRA, better to open an HSA under a HDHP.

tormund wrote:
Wed Oct 09, 2019 12:48 pm
What if you signed up HSA at one employer and your spouse signed up for FSA at another, both during open season. You then determine it's not acceptable/legal, but neither employer will fix because it's not open season. What can you do?
You would pay excise taxes if you don't get the HSA contributions removed.
tormund wrote:
Wed Oct 09, 2019 12:48 pm

Also let's say someone went forward with this plan thinking it's acceptable/legal. Let's say the IRS however would disagree. I wonder what the likelihood of being found would be? You don't report FSA distributions on your taxes, but the contribution would be on your W-2 I think, so maybe there could be flags built into the tax return system. What could the fallout be if one spouse had a maxed HSA but never took any distributions, the other spouse had FSA (e.g., the IRS levied X penalty)?
See above. Plus now you already know this, so you hopefully won't make that mistake :D

petulant
Posts: 731
Joined: Thu Sep 22, 2016 1:09 pm

Re: Random HSA Questions

Post by petulant » Thu Oct 10, 2019 7:18 am

If you rollover from a preferred HSA with your work plan to an independent HSA, could you let us know how it goes? I have a preferred HSA from work and I have toyed with the idea of rolling over but haven't so far since I'm concerned about fees and have a couple decent funds in the HSA.

Spirit Rider
Posts: 11509
Joined: Fri Mar 02, 2007 2:39 pm

Re: Random HSA Questions

Post by Spirit Rider » Thu Oct 10, 2019 8:07 am

tormund wrote:
Wed Oct 09, 2019 12:48 pm
On the topic of having HSAs and FSAs. I read you can suspend HRAs and still contribute to HSA. Or perhaps if you "self-certify" your FSA for post-deductible expenses or limited-purpose items you can meet the intent. Any thoughts here on how I could max HSA but never take distributions, and utilize a FSA somehow?
If you have "coverage" from a general purpose health FSA, by either you or your spouse enrolling in such FSA coverage. You are not an HSA eligible individual. It does not matter if you ever receive a single penny of reimbursement. Not to mention only dental or vision reimbursement. They must be an actual limited purpose FSA or post-deductible FSA.
What if you signed up HSA at one employer and your spouse signed up for FSA at another, both during open season. You then determine it's not acceptable/legal, but neither employer will fix because it's not open season. What can you do?
You can remove the excess HSA contributions and earnings by your tax filing deadline (4/15) including extensions (10/15). If the excess contributions were by salary deduction, the must be included as income in the year of contribution. If the excess contributions were by direct contribution you may not take the deduction. In both cases the earnings are taxable in the year the excess contributions are returned

If you do not do remove the excess contributions by 10/15, you will have to file Form 5329 and pay 6% excise taxes on the excess contributions. The excess contributions will continue to be subject to the excise taxes until you have HSA eligibile contribution space, not make contributions and file Form 5329 to reconcile the two. A $0 balance in all HSA accounts will also remove the excess contributions.
Also let's say someone went forward with this plan thinking it's acceptable/legal. Let's say the IRS however would disagree. I wonder what the likelihood of being found would be? You don't report FSA distributions on your taxes, but the contribution would be on your W-2 I think, so maybe there could be flags built into the tax return system. What could the fallout be if one spouse had a maxed HSA but never took any distributions, the other spouse had FSA (e.g., the IRS levied X penalty)?
FSA contributions are not reported on your W-2 and distributions are not reported on any Form 1099. Failure to take the proper steps would be tax evasion of the excise taxes. There is NO statute of limitations (SOL) on the failure to report and pay the 6% excise taxes on Form 5329.

The probability of getting caught is irrelevant. It is still tax evasion subject to penalties and interest. The IRS could come after you decades in the future. If you knowingly do so, it is also tax fraud subject to criminal penalties. This forum has a strict policy against discussing how to commit tax evasion/fraud.

Topic Author
tormund
Posts: 15
Joined: Fri Oct 04, 2019 4:26 am

Re: Random HSA Questions

Post by tormund » Sun Oct 13, 2019 8:07 pm

nps wrote:
Thu Oct 10, 2019 6:15 am
tormund wrote:
Wed Oct 09, 2019 12:48 pm
With the HDHPs offered to me from FEHB as a Federal employee (i.e., Aetna, GEHA, MHBP), am I able to open up another external HSA and rollover the funds yearly as long as the total contribution is under the limit between them both?
Yes
tormund wrote:
Wed Oct 09, 2019 12:48 pm

I also believe I could signup for the NALC CDHP and NALC Value plan and open an external HSA. You get a personal care account (which is different than a FSA) with these plans. The con here is you can't avoid payroll tax and you have to wait to deduct on your taxes your contributions I would think. Has anyone done this?

Also, selecting the Aetna CDHP would not allow me to open my own HSA since this is a HRA right?
A Personal Care Account is an HRA. You are correct though that HRAs are generally not compatible with HSAs.
tormund wrote:
Wed Oct 09, 2019 12:48 pm
On the topic of having HSAs and FSAs. I read you can suspend HRAs and still contribute to HSA. Or perhaps if you "self-certify" your FSA for post-deductible expenses or limited-purpose items you can meet the intent. Any thoughts here on how I could max HSA but never take distributions, and utilize a FSA somehow?
You can open a LEX HCFSA that would be compatible with an HSA. I wouldn't attempt to suspend an HRA, better to open an HSA under a HDHP.

tormund wrote:
Wed Oct 09, 2019 12:48 pm
What if you signed up HSA at one employer and your spouse signed up for FSA at another, both during open season. You then determine it's not acceptable/legal, but neither employer will fix because it's not open season. What can you do?
You would pay excise taxes if you don't get the HSA contributions removed.
tormund wrote:
Wed Oct 09, 2019 12:48 pm

Also let's say someone went forward with this plan thinking it's acceptable/legal. Let's say the IRS however would disagree. I wonder what the likelihood of being found would be? You don't report FSA distributions on your taxes, but the contribution would be on your W-2 I think, so maybe there could be flags built into the tax return system. What could the fallout be if one spouse had a maxed HSA but never took any distributions, the other spouse had FSA (e.g., the IRS levied X penalty)?
See above. Plus now you already know this, so you hopefully won't make that mistake :D
I really appreciate the reply! I was looking outside of the LEX HCFSA because I expect to retire soon and you can't continue FSAFeds unfortunately.

And I can't ever see a situation where strategic over contribution would make paying excise taxes worthwhile so no need to look into that :)

Topic Author
tormund
Posts: 15
Joined: Fri Oct 04, 2019 4:26 am

Re: Random HSA Questions

Post by tormund » Sun Oct 13, 2019 8:10 pm

Spirit Rider wrote:
Thu Oct 10, 2019 8:07 am
tormund wrote:
Wed Oct 09, 2019 12:48 pm
On the topic of having HSAs and FSAs. I read you can suspend HRAs and still contribute to HSA. Or perhaps if you "self-certify" your FSA for post-deductible expenses or limited-purpose items you can meet the intent. Any thoughts here on how I could max HSA but never take distributions, and utilize a FSA somehow?
If you have "coverage" from a general purpose health FSA, by either you or your spouse enrolling in such FSA coverage. You are not an HSA eligible individual. It does not matter if you ever receive a single penny of reimbursement. Not to mention only dental or vision reimbursement. They must be an actual limited purpose FSA or post-deductible FSA.
What if you signed up HSA at one employer and your spouse signed up for FSA at another, both during open season. You then determine it's not acceptable/legal, but neither employer will fix because it's not open season. What can you do?
You can remove the excess HSA contributions and earnings by your tax filing deadline (4/15) including extensions (10/15). If the excess contributions were by salary deduction, the must be included as income in the year of contribution. If the excess contributions were by direct contribution you may not take the deduction. In both cases the earnings are taxable in the year the excess contributions are returned

If you do not do remove the excess contributions by 10/15, you will have to file Form 5329 and pay 6% excise taxes on the excess contributions. The excess contributions will continue to be subject to the excise taxes until you have HSA eligibile contribution space, not make contributions and file Form 5329 to reconcile the two. A $0 balance in all HSA accounts will also remove the excess contributions.
Also let's say someone went forward with this plan thinking it's acceptable/legal. Let's say the IRS however would disagree. I wonder what the likelihood of being found would be? You don't report FSA distributions on your taxes, but the contribution would be on your W-2 I think, so maybe there could be flags built into the tax return system. What could the fallout be if one spouse had a maxed HSA but never took any distributions, the other spouse had FSA (e.g., the IRS levied X penalty)?
FSA contributions are not reported on your W-2 and distributions are not reported on any Form 1099. Failure to take the proper steps would be tax evasion of the excise taxes. There is NO statute of limitations (SOL) on the failure to report and pay the 6% excise taxes on Form 5329.

The probability of getting caught is irrelevant. It is still tax evasion subject to penalties and interest. The IRS could come after you decades in the future. If you knowingly do so, it is also tax fraud subject to criminal penalties. This forum has a strict policy against discussing how to commit tax evasion/fraud.
Thanks for your detailed reply. I can't ever see a situation where the excise tax would make sense to purposefully pay it. My question was merely along the lines if it was a gray area, not from an evasion perspective. Given the responses here of the confidence of there being no gray area, I now clearly see you either have a HDHP with HSA/HRA and no FSA, or non HDHP with no HSA/HRA and FSA.

Now to crunch the numbers with our medical situation on if I want to go the HDHP/HSA route, or non-HDHP/FSA route.

Spirit Rider
Posts: 11509
Joined: Fri Mar 02, 2007 2:39 pm

Re: Random HSA Questions

Post by Spirit Rider » Sun Oct 13, 2019 10:26 pm

tormund wrote:
Sun Oct 13, 2019 8:10 pm
I now clearly see you either have a HDHP with HSA/HRA and no FSA, or non HDHP with no HSA/HRA and FSA.
This not entirely correct. An HSA eligible individual's or spouse's HRA and/or FSA coverage have the same exact impact on their HSA eligibility. An employer generally only has one or the other, but an HSA eligible individual might have one and their spouse the other.

With an HDHP, HSA eligible individuals can only have coverage from a limited purpose (dental/vision) FSA/HRA, post-deductible FSA/HRA, suspended HRA or retirement HRA. They can not have coverage from their or their spouse's employer general purpose (health) FSA or HRA and remain HSA eligible.

Topic Author
tormund
Posts: 15
Joined: Fri Oct 04, 2019 4:26 am

Re: Random HSA Questions

Post by tormund » Tue Oct 15, 2019 6:12 pm

Spirit Rider wrote:
Sun Oct 13, 2019 10:26 pm
tormund wrote:
Sun Oct 13, 2019 8:10 pm
I now clearly see you either have a HDHP with HSA/HRA and no FSA, or non HDHP with no HSA/HRA and FSA.
This not entirely correct. An HSA eligible individual's or spouse's HRA and/or FSA coverage have the same exact impact on their HSA eligibility. An employer generally only has one or the other, but an HSA eligible individual might have one and their spouse the other.

With an HDHP, HSA eligible individuals can only have coverage from a limited purpose (dental/vision) FSA/HRA, post-deductible FSA/HRA, suspended HRA or retirement HRA. They can not have coverage from their or their spouse's employer general purpose (health) FSA or HRA and remain HSA eligible.
I'm not sure I follow.

I plan to go with non-HDHP plan from my employer for both myself and my spouse. My spouse will have FSA with her employer. My only other options I see are (a) I get HDHP/HSA plan and my spouse gets no FSA since it's not permitted or (b) I get non-HDHP plan and we do not get FSA by choice.

Are we doing something wrong?

Spirit Rider
Posts: 11509
Joined: Fri Mar 02, 2007 2:39 pm

Re: Random HSA Questions

Post by Spirit Rider » Tue Oct 15, 2019 7:55 pm

tormund wrote:
Tue Oct 15, 2019 6:12 pm
Spirit Rider wrote:
Sun Oct 13, 2019 10:26 pm
tormund wrote:
Sun Oct 13, 2019 8:10 pm
I now clearly see you either have a HDHP with HSA/HRA and no FSA, or non HDHP with no HSA/HRA and FSA.
This not entirely correct. An HSA eligible individual's or spouse's HRA and/or FSA coverage have the same exact impact on their HSA eligibility. An employer generally only has one or the other, but an HSA eligible individual might have one and their spouse the other.

With an HDHP, HSA eligible individuals can only have coverage from a limited purpose (dental/vision) FSA/HRA, post-deductible FSA/HRA, suspended HRA or retirement HRA. They can not have coverage from their or their spouse's employer general purpose (health) FSA or HRA and remain HSA eligible.
I'm not sure I follow.

I plan to go with non-HDHP plan from my employer for both myself and my spouse. My spouse will have FSA with her employer. My only other options I see are (a) I get HDHP/HSA plan and my spouse gets no FSA since it's not permitted or (b) I get non-HDHP plan and we do not get FSA by choice.
general
Are we doing something wrong?
There is nothing wrong with this last bolded statement.

I was clarifying that a general purpose health HRA is treated the same as a general purpose health FSA. Either is "other coverage" that will make someone with a HDHP ineligible to make HSA contributions.

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