Is an HSA required if one has HDHP?

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jeffyscott
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Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 10:54 am

I understand that in order to be qualified to have an HSA, one must have only coverage through a HDHP.

I just want to verify that the opposite is not a requirement, one can have a HDHP but not have the HSA? I think I know that it is not, but just want to be 100% sure before complaining to my former employer.

I am allowed to keep the insurance as a retiree, but the employer no longer contributes to the HSA. Despite this, the employer requires that retirees have the HSA from their vendor and pay a fee of $3 per month. It's not really a big deal, but I want to complain on principle...what business do they have dictating where I have my HSA (or even that I have one at all), if they are not contributing one cent to it.
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mhalley
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Re: Is an HSA required if one has HDHP?

Post by mhalley » Tue Oct 03, 2017 11:17 am

It is no more required by federal law that you have an hsa than it is that you have an Ira or contribute to a 401k. Can an employer require an hsa at a specific provider if they do not contribute to it? I dunno, but it SEEMS wrong. Certainly they can have an hsa that they contribute to, but I think that generally you are able to move the money after a year. Are you saying you are not allowed to move the money out of its current hsa? This pamphlet seems to say that the fiduciary rule may apply to hsa. Aside from the monthly fee, do you have access to investments? What exactly would happen if you moved the money? You would still have an account with a balance of zero. Would they then cancel your insurance, or move you from the hdhp to regular insurance plan?

http://www.hsabank.com/~/media/files/wh ... tandards-2
. This does not mean that they need to pick the lowest cost alternative, but they should make sure that the fees and components are at least in line with similar vendors, and that the vendor is taking the appropriate steps to disclose this information to participants.

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Re: Is an HSA required if one has HDHP?

Post by financeidiot » Tue Oct 03, 2017 11:30 am

jeffyscott wrote:
Tue Oct 03, 2017 10:54 am
I understand that in order to be qualified to have an HSA, one must have only coverage through a HDHP.

I just want to verify that the opposite is not a requirement, one can have a HDHP but not have the HSA? I think I know that it is not, but just want to be 100% sure before complaining to my former employer.

I am allowed to keep the insurance as a retiree, but the employer no longer contributes to the HSA. Despite this, the employer requires that retirees have the HSA from their vendor and pay a fee of $3 per month. It's not really a big deal, but I want to complain on principle...what business do they have dictating where I have my HSA (or even that I have one at all), if they are not contributing one cent to it.
You're not required to have an HSA. Your employer may require you to have their HSA so they can pay into it when you are an employee, but you choose what to do with those funds after you receive them. You own your HSA and your funds, so you can place them where you like. If the employer is no longer contributing to the HSA, keep the insurance, close the HSA, and transfer to a better one.

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 11:47 am

I might be able to move some money out, but they say if your HSA can not cover the $3, you are no longer eligible for the HDHP.

They say to be eligible for the HDHP plan (their bold), "You must be covered by High Deductible Health Plan (HDHP) and enrolled in a Health Savings Account (HSA).
and
"Retirees enrolled in HDHP/HSA benefit option must keep HSA open and active, and pay $3.00 monthly service fee."
and
"An HSA is an account you must entroll in if you enroll in one of the High Deductible Health Plans."
and
"Retirees are required to have an active State HSA if they are enrolled in an HDHP. Retirees are responsible for the $3 per month account maintenance fee. Retirees must keep adequate funds in the account to cover the $3 monthly fee. HSAs with a zero balance for 90 days will be closed automatically. If the account is not active, you will no longer be eligible for the HDHP."

In their faq they say enrollment in both is required by state statute for public employees, which may be the case but the question remains, why?
press on, regardless - John C. Bogle

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Re: Is an HSA required if one has HDHP?

Post by financeidiot » Tue Oct 03, 2017 12:07 pm

Ugh. It's stupid, and it doesn't look right. BUT, $36 per year isn't worth losing healthcare for, and you'd have to convince a government agency their healthcare policy is wrong. Not how I'd want to spend my retirement.

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Re: Is an HSA required if one has HDHP?

Post by inbox788 » Tue Oct 03, 2017 12:10 pm

jeffyscott wrote:
Tue Oct 03, 2017 11:47 am
They say to be eligible for the HDHP plan (their bold), "You must be covered by High Deductible Health Plan (HDHP) and enrolled in a Health Savings Account (HSA).
...
"An HSA is an account you must entroll in if you enroll in one of the High Deductible Health Plans."
...
"Retirees are required to have an active State HSA if they are enrolled in an HDHP. Retirees are responsible for the $3 per month account maintenance fee. Retirees must keep adequate funds in the account to cover the $3 monthly fee. HSAs with a zero balance for 90 days will be closed automatically. If the account is not active, you will no longer be eligible for the HDHP."

In their faq they say enrollment in both is required by state statute for public employees, which may be the case but the question remains, why?
What state?

I would have thought "no", but the wording sure means you do. If there isn't a state statue, I'm guessing some administrator or lawyer went overboard and created their own rule.

Is there an employer contribution to the HSA? If this were so, and most or all employees received the benefit, then I could see that as a reason for the rule. Otherwise, I'd expect there should be a way to waive the HSA, but you're dealing with bureaucracy.

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Re: Is an HSA required if one has HDHP?

Post by MI_bogle » Tue Oct 03, 2017 12:14 pm

financeidiot wrote:
Tue Oct 03, 2017 12:07 pm
Ugh. It's stupid, and it doesn't look right. BUT, $36 per year isn't worth losing healthcare for, and you'd have to convince a government agency their healthcare policy is wrong. Not how I'd want to spend my retirement.
especially since the tax benefits of an HSA are so great

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 12:45 pm

MI_bogle wrote:
Tue Oct 03, 2017 12:14 pm
financeidiot wrote:
Tue Oct 03, 2017 12:07 pm
Ugh. It's stupid, and it doesn't look right. BUT, $36 per year isn't worth losing healthcare for, and you'd have to convince a government agency their healthcare policy is wrong. Not how I'd want to spend my retirement.
especially since the tax benefits of an HSA are so great
Oh, I'll still keep it and add ~$8000 per year. It is just dumb. :sharebeer

I wouldn't lose healthcare would just have to take the non HDHP plan, which costs $3000 per year more for a deductible that is only $2500 less.

I don't really want to use it as an investment account, anyway. I only use Vg intermediate bond as that is the safest cheap option available, other than cash with no or very low yield.
press on, regardless - John C. Bogle

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jeffyscott
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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 12:59 pm

inbox788 wrote:
Tue Oct 03, 2017 12:10 pm
What state?

I would have thought "no", but the wording sure means you do. If there isn't a state statue, I'm guessing some administrator or lawyer went overboard and created their own rule.

Is there an employer contribution to the HSA? If this were so, and most or all employees received the benefit, then I could see that as a reason for the rule. Otherwise, I'd expect there should be a way to waive the HSA, but you're dealing with bureaucracy.
Wisconsin

Yes, active employees get $1500 per year in the HSA and don't get the $3 per month charge. Retirees get no contribution to HSA (or actually -$36) and no contribution to health insurance (value of accumulated sick leave can pay premiums for limited time).

They only started HDHP a couple years ago and did it in a rush with insufficient planning. I was one of very few (it was like 2% of employees, IIRC) who took it the first year, even though contribution was only something like $385 that year. So I imagine very few retirees have it, if any.
press on, regardless - John C. Bogle

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Re: Is an HSA required if one has HDHP?

Post by Spirit Rider » Tue Oct 03, 2017 1:00 pm

  1. There is no IRS requirement that requires an HSA in order to have an HDHP.
  2. The wording of that statement does not say it is a state law/regulation requiring this. Only that there must be an "active State HSA", whatever that means. I think this is more likely a stupid and unjustifiable employer policy.
  3. To my view this appears to violate the fiduciary rule. It is mandating a fee that is of no benefit to the employee. In fact, by mandating the minimal HSA balance be available to pay the fee, the are guaranteeing a negative return. You can't get something more against the benefit of the employee than this.
  4. I realize this might be a small amount if money and maybe they can legally do this, but I would most certainly file a DOL complaint United States Department of Labor How to File a Complaint You can visit a DOL office or call 866-487-9243 and the complaint can be anonymous.

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Re: Is an HSA required if one has HDHP?

Post by aristotelian » Tue Oct 03, 2017 1:14 pm

Did you sign a form to open the account? If you had not signed, would you have not been enrolled in their plan?

It is weird and possibly illegal, but I am curious, why do you not want the HSA? Assuming you have health expenses, wouldn't you want the expenses to be tax-free?

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 1:25 pm

I do want HSA, but it appears that I could get that elsewhere for $0 per month.

And as I recall last year, as an active employee, they did say something about if you didn't sign up for HSA you would not be enrolled in the HDHP (they'd then put you in the non-HDHP, I assume). But actives get $1500 (family) free money and don't pay $36 per year admin. fee.
press on, regardless - John C. Bogle

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Re: Is an HSA required if one has HDHP?

Post by WL2034 » Tue Oct 03, 2017 1:34 pm

The $3 / month fee seems pretty standard for an HSA. But at most HSA's that I have encountered, you can have the fee waived as long as you keep a certain amount of cash in the account (usually $1000-$5000), rather than having it all in the investment account. Are you sure that's not available at your current HSA?

If not, and assuming you don't have other issues with your HSA, I would probably just keep paying the $36 / year and consider it a slight increase in the ER of your HSA investment. If you were to close the account, there would likely be fees involved and the fee structures of other HSA's have been known to change from time to time. You might move to a new HSA to find the grass isn't necessarily greener for long. All in all, I would not bother with the hassle for $36 / year.

I agree that it doesn't sound right, though. You should be able to change to a different HSA while keeping the same insurance.

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 2:51 pm

AFAIK, no fee waiver no matter what balance is or where you keep it.

Besides the $36, they have also been an annoying PIA, one way or another, every year.
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Re: Is an HSA required if one has HDHP?

Post by inbox788 » Tue Oct 03, 2017 3:19 pm

jeffyscott wrote:
Tue Oct 03, 2017 12:59 pm
Wisconsin

Yes, active employees get $1500 per year in the HSA and don't get the $3 per month charge. Retirees get no contribution to HSA (or actually -$36) and no contribution to health insurance (value of accumulated sick leave can pay premiums for limited time).

They only started HDHP a couple years ago and did it in a rush with insufficient planning. I was one of very few (it was like 2% of employees, IIRC) who took it the first year, even though contribution was only something like $385 that year. So I imagine very few retirees have it, if any.
I googled and found this state code, but doesn't seem to mandate a HSA with the HDHP, so I'm guessing it's an administrative decree, not legislated.
http://law.justia.com/codes/wisconsin/2 ... ion-40.515

And like you say, maybe they're unaware of the issue if no retirees are complaining. Anyway, aren't most retirees going on Medicare, which disallow the HSA (presumably adding to one or opening a new account, since many folks will have saved up funds in their HSA; come to think of it, that shouldn't preclude you from opening up an account to transfer in existing HSA funds.).
To be an eligible individual and qualify for an HSA, you must meet the following requirements.

You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
You have no other health coverage except what is permitted under Other health coverage , later.
You aren’t enrolled in Medicare.
https://www.irs.gov/publications/p969

In any case, it's a nuisance fee that isn't likely going to impact most folks in any significant way. And if you have an HSA, you should be looking to put monies in as long as possible up to the last minute (like continuing contributing to 529 while student is in college while withdrawing it all to pay tuition so you can get a few more years of state tax breaks if that applies).

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 4:29 pm

Yep, I read the statute, too.

Also they now have sent me a form that says on p. 1, "Note: I understand retirees are required to have an active HSA if enrolled in an High Deductible Health Plan (HDHP) and are also responsible for the $3 per month account maintenance fee..."

and then on p 10:
"You acknowledge that establishment of your HSA is completely voluntary on your part and that, to the best of your knowledge, your employer does not (i) limit your ability to move funds to another HSA beyond restrictions imposed by the Code;..."
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Re: Is an HSA required if one has HDHP?

Post by Spirit Rider » Tue Oct 03, 2017 4:44 pm

An HDHP/HSA plan is a very useful option in a retiree health plan. Remember a significant number (maybe even the majority) of those in the public sector are early retirees, especially because retiree health coverage is a major benefit. So they may have many years of HDHP/HSA coverage available to them before Medicare.

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Re: Is an HSA required if one has HDHP?

Post by grabiner » Tue Oct 03, 2017 10:11 pm

It isn't required that you have an HSA with your HDHP, but the tax benefits make it worthwhile if it is allowed.

In particular, you are allowed to have an HDHP when other rules make you ineligible to contribute to an HSA. For example, if you are covered by Medicare, you could use an HDHP as additional coverage, and that might be a good deal if your employer subsidizes the HDHP.
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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Tue Oct 03, 2017 10:32 pm

inbox788 wrote:
Tue Oct 03, 2017 3:19 pm
I googled and found this state code, but doesn't seem to mandate a HSA with the HDHP, so I'm guessing it's an administrative decree, not legislated.
http://law.justia.com/codes/wisconsin/2 ... ion-40.515
I now think they are simply misinterpreting that statute. They specifically state that this is a statutory requirement that one must have both HDHP and HSA.

The statute says:
"...the group insurance board shall offer to all state employees the option of receiving health care coverage through a high-deductible health plan and the establishment of a health savings account."

My interpretation of that is that the board will offer the option of HDHP and (will offer the option of) establishment of an HSA (if one is eligible for it). Theirs must be that the "and" means you cannot have one without the other.

I plan to contribute max to HSA for 7-8 years. I'd just like one without fees and better service.
press on, regardless - John C. Bogle

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Wed Oct 04, 2017 12:39 pm

I think I may be allowed to escape my former employer's plan. The custodian has now told me I am free to go elsewhere, now I just have to get the agency to see their error.

Perhaps the custodian will tell them they can not require me to use them. I am thinking the statement in their form that "You acknowledge that establishment of your HSA is completely voluntary on your part and that, to the best of your knowledge, your employer does not (i) limit your ability to move funds to another HSA beyond restrictions imposed by the Code;..." is reflecting some Federal rule/statute.

WRT to fees, in addition to the $3 per month, they pay about 0% on the cash balance (0.07% currently) and then charge 0.25% per year on the investment account. These fees do not seem to be worth it just to invest in Vg intermediate bond with an expected average balance of about $18,000 next year.

Now looking for suggestions here: viewtopic.php?f=2&t=229040
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Re: Is an HSA required if one has HDHP?

Post by an_asker » Wed Oct 04, 2017 1:06 pm

I am curious to see the final outcome, though it definitely is a 1% of the First World problem! I don't think many employers permit retired employees to even have the health insurance plan that they offer employees.

That said, I wonder what use it is to you to be able to contribute to the HSA if you are retired? Are you working elsewhere? If not, does an HSA even offer you a tax break?

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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Wed Oct 04, 2017 1:19 pm

1040 line 25, Health savings account deduction.
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Re: Is an HSA required if one has HDHP?

Post by Spirit Rider » Wed Oct 04, 2017 2:01 pm

This is far from a 1% of the first world problem. Actually, most employees that are covered under a pension will also be covered under a retiree health insurance plan. This might becoming rarer with the private sector (13%), but many public sector employees (75% state/local) have pensions and are eligible for retiree health insurance plans. As I said earlier these are extremely beneficial for early retirement.

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Re: Is an HSA required if one has HDHP?

Post by grabiner » Wed Oct 04, 2017 8:44 pm

an_asker wrote:
Wed Oct 04, 2017 1:06 pm
I am curious to see the final outcome, though it definitely is a 1% of the First World problem! I don't think many employers permit retired employees to even have the health insurance plan that they offer employees.
The US government does this, and it also has very good HDHPs, so this is a real issue for retired government employees.
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Re: Is an HSA required if one has HDHP?

Post by jeffyscott » Wed Oct 04, 2017 9:38 pm

I have discovered the reason for the statement of things I am to acknowledge. It is intended to keep it exempt from ERISA.

https://www.shrm.org/resourcesandtools/ ... erisa.aspx

Seems like they are making at least two of the misteps listed there by telling me that I must have at least some funds held by their chosen custodian (enough to cover the $3 per month). Unless they can say it is voluntary because I do not have to choose the HDHP plan in the first place.
press on, regardless - John C. Bogle

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