HSA's - I Didn't Know This!

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ThePrune
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HSA's - I Didn't Know This!

Post by ThePrune » Sat Mar 11, 2017 10:55 am

Here's the Learning: Starting at age 65 you can use Health Savings Account (HSA) funds to pay for your portion of premiums associated with employer sponsored retiree health insurance.

Based on IRS Publication 969 (Health Savings Accounts and Other Tax-Favored Health Plans) I previously knew that you could use HSA funds to pay for:
Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).
I had "assumed" that the exclusion of Medigap policy insurance premiums would also extend to employer provided retiree medical insurance.

Bad assumption!

In the Internal Revenue Bulletin 2004-2 (January 12, 2004) there is a more detailed discussion of HSA rules. In section IV on Distributions from HSAs you find the following:
Q–27. Are health insurance premiums qualified medical expenses?
A–27. Generally, health insurance premiums are not qualified medical expenses except for the following: qualified long-term care insurance, COBRA health care continuation coverage, and health care coverage while an individual is receiving unemployment compensation. In addition, for individuals over age 65, premiums for Medicare Part A or B, Medicare HMO, and the employee share of premiums for employer-sponsored health insurance, including premiums for employer-sponsored retiree health insurance can be paid from an HSA. Premiums for Medigap policies are not qualified medical expenses.
Since I will be age 65 soon and am receiving employer sponsored retiree medical insurance, this new insight will allow me added flexibility in paying my medical expenses.

Edited - I have added this information to the Health Savings Accounts Wiki article.
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