I Thought I Had a HDHP

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Bassman
Posts: 32
Joined: Sat Jan 19, 2019 4:12 pm

I Thought I Had a HDHP

Post by Bassman »

So for the last 2 1/2 years I have had an HSA with Lively because I thought I had a HDHP from Oxford through work. I am switching Employers and the new job has a CFO/HR person. My old job was a smaller company. Anyway, I was talking to the CFO person and discussing the 401k they have, and I mentioned my HSA. She said, the new health plan doesn't qualify as a HDHP, so no HSA. She was savvy as to what I was doing with a personal HSA and had one from a previous job. So I looked at the new plan and old plan, and didn't see a difference in terms of deductable. I called Oxford, twice in fact. They said my old plan was not a HDHP. My deductible was $2500, which is fine. But the out of pocket was $7900, which is too high. Like I said, I called twice to get 2 different people.

I called Lively and they said they could help me resolve this, but they also suggested I talk to my tax preparer. I use Turbo Tax and I get the CPA option. Basically this is what I have to do:

Sell my ETFs in TD Ameritrade
Move the cash back to Lively
Then call Livey to get the necessary documents

For the Tax part once I do the above:
For 2018 I will amend my taxes, pay the past tax on the money I deducted and capital gains, and a penalty.
For 2019 I will amend my taxes, pay the taxes on the money I deducted and capital gains, but no penalty if I do this by July 15th
Any capital gains I made so far in 2020 will apply next year.

So I feel like an idiot, but it is confusing. I do not understand why Lively doesn't do a better job at making sure you have a HDHP.

Any advise, other than do a better job next time you invest?
champion_ham
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Re: I Thought I Had a HDHP

Post by champion_ham »

The IRS defines what is considered “high deductible” each year. Looks like for 2020, the deductible for a family to qualify for an HSA is $2,800. I agree that it would have been nice if the HSA company would have at least asked your annual deductible, but I guess they assumed you did your due diligence beforehand. Best of luck straightening it all out.
jebmke
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Re: I Thought I Had a HDHP

Post by jebmke »

I think the place to look is the employer & health insurance company. Mine always gave me a confirmation sheet during open enrollment that I had enrolled in an HSA qualified plan -- along with a coverage summary. I kept these every year in my files; two years in a row I had inquiries from the IRS in which I needed to provide the proof of qualified coverage.
When you discover that you are riding a dead horse, the best strategy is to dismount.
mhalley
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Re: I Thought I Had a HDHP

Post by mhalley »

It’s not Lively’s responsibility to investigate whether you have an Hsa qualified plan, just as it is not Vanguard’s to ensue you are eligible to contribute to a Roth. The specifications for what qualifies as an Hsa compatibles plan is confusing, and should be simplified but asking the govt to do something that makes sens is a pipe dream.
02nz
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Re: I Thought I Had a HDHP

Post by 02nz »

Generally the plan will very prominently advertise that fact it's an HSA-compatible HDHP. As in, those words are often right in the plan name. It's not something you can easily miss, and if you have to dig further than that it probably isn't actually an HSA-compatible HDHP.
aristotelian
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Re: I Thought I Had a HDHP

Post by aristotelian »

This is not Lively's fault at all. They do not have anything to do with your employer. That is the risk you take when you don't use your employer's plan vetted by HR. When you enroll annually, your employer documents will state what kind of plan it is. They will usually offer HSA if the plan is an HDHP. I think the resolution you have stated is correct.
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MP123
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Re: I Thought I Had a HDHP

Post by MP123 »

Yes, your health plan should say "HSA" in the name of the plan.

As you've found out unfortunately it's possible for a HDHP to have an out of pocket that's too high to qualify for an HSA. To be HSA compatible for 2020 the deductible must be at least $1400 ($2800 for family), but the max out of pocket can't be more than $6900 ($13,800 for family). I'm not sure why a company would offer a plan that met the deductible condition but was too high on the out of pocket but it happens.
Katietsu
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Re: I Thought I Had a HDHP

Post by Katietsu »

MP123 wrote: Fri Jul 03, 2020 11:37 am Yes, your health plan should say "HSA" in the name of the plan.

As you've found out unfortunately it's possible for a HDHP to have an out of pocket that's too high to qualify for an HSA. To be HSA compatible for 2020 the deductible must be at least $1400 ($2800 for family), but the max out of pocket can't be more than $6900 ($13,800 for family). I'm not sure why a company would offer a plan that met the deductible condition but was too high on the out of pocket but it happens.

An HSA eligible HDHP pays nothing prior to reaching the deductible with the exception of certain specific preventative items. I wonder if the OP has a plan like mine. There is something like a $2500 deductible but has things like prescriptions and physician office visits have only a co pay even prior to the $2500 deductible being met. Mine is therefore not an HDHP even though it does have a high enough deductible. I do not know if the OOP in my plan would meet the HDHP requirements since it is irrelevant in my case.
TIAX
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Re: I Thought I Had a HDHP

Post by TIAX »

Get your certificate of coverage and see if it mentions that it's an HDHP or HSAs. Others are correct that HSA is often in the name.
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neurosphere
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Re: I Thought I Had a HDHP

Post by neurosphere »

MP123 wrote: Fri Jul 03, 2020 11:37 am I'm not sure why a company would offer a plan that met the deductible condition but was too high on the out of pocket but it happens.
I had a health insurance plan once that was ineligible for an HSA because one of the limit, deductible or OOP max (I forget which) was too high by only FIFTY dollars. HR was clueless about whether this was intentional, or an oversight. And it was not resolved, as the next year the difference became $100 and the plan remained ineligible for an HSA. It just seemed no one cared. That was about 5 years ago and I'm no longer with that job, and I sure hope someone wised up. :)
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
niceguy7376
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Re: I Thought I Had a HDHP

Post by niceguy7376 »

Bassman wrote: Fri Jul 03, 2020 6:37 am So for the last 2 1/2 years I have had an HSA with Lively because I thought I had a HDHP from Oxford through work.
Did the employer who offered the Health Ins tell you where to open the HSA account?
Gufomel
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Re: I Thought I Had a HDHP

Post by Gufomel »

neurosphere wrote: Fri Jul 03, 2020 12:54 pm
MP123 wrote: Fri Jul 03, 2020 11:37 am I'm not sure why a company would offer a plan that met the deductible condition but was too high on the out of pocket but it happens.
I had a health insurance plan once that was ineligible for an HSA because one of the limit, deductible or OOP max (I forget which) was too high by only FIFTY dollars. HR was clueless about whether this was intentional, or an oversight. And it was not resolved, as the next year the difference became $100 and the plan remained ineligible for an HSA. It just seemed no one cared. That was about 5 years ago and I'm no longer with that job, and I sure hope someone wised up. :)
I have seen the same things as well with my employer plans. The OOP max is only a few dollars too high to make it eligible for an HSA (the deductible is high enough, but the OOP is a few dollars too high). It’s like it’s intentionally set just above the OOP threshold to be eligible for an HSA. I’ve assumed there must be a reason for it to be set like that, but I have no earthly idea why.

Anyone have knowledge about this?
Topic Author
Bassman
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Re: I Thought I Had a HDHP

Post by Bassman »

Thank you all for the comments.

The company I am leaving is a small company that offered health insurance, we paid 50% pre-tax. My mistake was not doing due diligence and going beyond the deductible number. In other words, calling Oxford. What alerted me now was that I was talking to the new job CFO who said that we are not getting a HDHP. I remembered that our current employer, who is selling the business to the new job, said the new health plan is similar.

As I said, I feel pretty stupid. But at the end of the day it won't be horrible.
jebmke
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Re: I Thought I Had a HDHP

Post by jebmke »

Bassman wrote: Fri Jul 03, 2020 5:06 pm Thank you all for the comments.

The company I am leaving is a small company that offered health insurance, we paid 50% pre-tax. My mistake was not doing due diligence and going beyond the deductible number. In other words, calling Oxford. What alerted me now was that I was talking to the new job CFO who said that we are not getting a HDHP. I remembered that our current employer, who is selling the business to the new job, said the new health plan is similar.

As I said, I feel pretty stupid. But at the end of the day it won't be horrible.
This is the right attitude. In the scheme of things it is a very small "error." It would be a framing error to look back and consider the tax hit you will take on the amendments as a "cost" of the error. But they aren't. Had you detected this up front you would not have made the deduction and received the tax break so in that respect, it is a wash. The actual cost will only be interest and penalty.
When you discover that you are riding a dead horse, the best strategy is to dismount.
wordsmith11
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Re: I Thought I Had a HDHP

Post by wordsmith11 »

How does the IRS actually verify that you didn't have an HDHP? Why wasn't this caught earlier?
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MP123
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Re: I Thought I Had a HDHP

Post by MP123 »

wordsmith11 wrote: Fri Jul 03, 2020 6:03 pm How does the IRS actually verify that you didn't have an HDHP?
I don't think they do outside of an audit. The 1095 series forms don't indicate whether your health coverage is HSA compliant, just that you had it. Of course it's your responsibility to complete your return correctly.
Spirit Rider
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Re: I Thought I Had a HDHP

Post by Spirit Rider »

wordsmith11 wrote: Fri Jul 03, 2020 6:03 pm How does the IRS actually verify that you didn't have an HDHP? Why wasn't this caught earlier?
As @MP123 pointed out for many things in the tax code, there is no IRS reporting for what amounts to be eligibility. The income tax system is largely by the honor system unless audited.
JonnyB
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Re: I Thought I Had a HDHP

Post by JonnyB »

Bassman wrote: Fri Jul 03, 2020 6:37 am So I looked at the new plan and old plan, and didn't see a difference in terms of deductable.
It is a common misunderstanding that qualification for a High Deductible Health Plan depends only on the deductible. It also means that the plan pays for absolutely nothing before the deductible is met except:

wellness and preventive care (e.g., checkups, mammograms, smoking cessation, weight loss)
expenses resulting from accidents
dental expenses
vision expenses

Some high deductible plans will bundle in a prescription coverage plan that provides first-dollar coverage. Or the plan may have partial co-pays for office visits. That makes the plan unqualified for an HSA.

Also, some plans will have a different deductible for an individual and the family as a whole. If either of these do not meet the high deductible limit, the plan is unqualified.

It isn't just about the deductible.
Topic Author
Bassman
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Re: I Thought I Had a HDHP

Post by Bassman »

Spirit Rider wrote: Fri Jul 03, 2020 8:11 pm
wordsmith11 wrote: Fri Jul 03, 2020 6:03 pm How does the IRS actually verify that you didn't have an HDHP? Why wasn't this caught earlier?
As @MP123 pointed out for many things in the tax code, there is no IRS reporting for what amounts to be eligibility. The income tax system is largely by the honor system unless audited.
I did think that it would only be an issue if I got audited, but I did not want to chance it. I think that it would be bad if a few years down the road, and close to retirement, that I found out I owe past due taxes and penalties.
Spirit Rider
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Re: I Thought I Had a HDHP

Post by Spirit Rider »

Bassman wrote: Fri Jul 03, 2020 8:34 pm
Spirit Rider wrote: Fri Jul 03, 2020 8:11 pm
wordsmith11 wrote: Fri Jul 03, 2020 6:03 pm How does the IRS actually verify that you didn't have an HDHP? Why wasn't this caught earlier?
As @MP123 pointed out for many things in the tax code, there is no IRS reporting for what amounts to be eligibility. The income tax system is largely by the honor system unless audited.
I did think that it would only be an issue if I got audited, but I did not want to chance it. I think that it would be bad if a few years down the road, and close to retirement, that I found out I owe past due taxes and penalties.
This the correct way of thinking about it, not to mention it is the right thing to do.

Your concerns are relevant. Excess contributions not removed by the tax filing date are subject to a 6% excise tax penalty every year until removed. Form 5329 that reports excess contributions and assesses the penalty have no statute of limitations (SOL).
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