How far back can HSA Expenses go?

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pghpens
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How far back can HSA Expenses go?

Post by pghpens » Wed Dec 05, 2018 2:10 pm

Hi,

Sorry I know there's been many questions regarding HSA's but I just wanted to confirm one question I had. I am 27 and currently max out my HSA and invest in 100% equities as I plan on taking advantage of the tax free growth as a retirement account. I don't have many medical expenses- maybe $750 per year. Therefore, I easily have the ability to just pay for these out of pocket. The plan is to invest it accordingly to my Retirement Allocation (100% equities) and then upon retirement use the funds to pay for medical expenses, assuming that I will have increased medical bills then. However, I've been worrying lately "What happens if I have more in my HSA than actual medical bills?" Then I've wasted my HSA benefits and will be taxed upon distributions when I could have just paid for year-to-year medical costs tax free.

From what i read online, it seems like there's no limit to how far back you can go to pay off medical bills. So in 40 years when I retire, I could still upload a receipt for my eye exam from 2018 and get reimbursed. That way I would definitely be able to use the funds on medical expenses and get the tax benefit.

Am I thinking about this correctly?

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jhfenton
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Re: How far back can HSA Expenses go?

Post by jhfenton » Wed Dec 05, 2018 2:25 pm

pghpens wrote:
Wed Dec 05, 2018 2:10 pm
Am I thinking about this correctly?
Yes. The medical expenses have to be incurred on or after the day you originally opened your HSA. You can save those receipts for years.

riverguy
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Re: How far back can HSA Expenses go?

Post by riverguy » Wed Dec 05, 2018 3:29 pm

Unless the law changes in those 40 years. Better scan in receipts or something too so you don't have fading issues.

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BL
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Re: How far back can HSA Expenses go?

Post by BL » Wed Dec 05, 2018 3:51 pm

I used my small one for Medicare Part B. Read the list from Schedule A Medical. I think co-pays, eyes, ears, and teeth would add up as well.

clydewolf
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Re: How far back can HSA Expenses go?

Post by clydewolf » Wed Dec 05, 2018 6:14 pm

If you qualify and use a Schedule A medical deduction, you can not use your HSA to reimburse those expenses.

TravelforFun
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Re: How far back can HSA Expenses go?

Post by TravelforFun » Wed Dec 05, 2018 6:51 pm

I wouldn't worry about keeping current medical receipts (you're only 27). When you get old, use your HSA account to pay your big medical bills including medicare premium or long term care expenses.

TravelforFun

Dottie57
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Re: How far back can HSA Expenses go?

Post by Dottie57 » Wed Dec 05, 2018 7:02 pm

TravelforFun wrote:
Wed Dec 05, 2018 6:51 pm
I wouldn't worry about keeping current medical receipts (you're only 27). When you get old, use your HSA account to pay your big medical bills including medicare premium or long term care expenses.

TravelforFun
This.

curmudgeon
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Re: How far back can HSA Expenses go?

Post by curmudgeon » Wed Dec 05, 2018 7:48 pm

TravelforFun wrote:
Wed Dec 05, 2018 6:51 pm
I wouldn't worry about keeping current medical receipts (you're only 27). When you get old, use your HSA account to pay your big medical bills including medicare premium or long term care expenses.

TravelforFun
Well, one special case can be if you retire early and want access to cash to live on without generating taxable income. It's quite probable that tax laws will change significantly over the next 30 years (or the medical insurance/payment environment), but options are valuable. As an example, right now if you retired at 55, being able to pull living expenses from an HSA (based on old receipts) might let you stay under the ACA cliff, or do more Roth conversions, etc. If I were younger and going down this path, I'd probably only save sizable receipts. In addition to on-line storage of receipts, I'd probably do a once-per-year summation and print-out of the bills I was saving for my files. Once the old unclaimed amounts had built up for a while, it might also make a useful tranche of an emergency fund as well. This is mostly a factor if you are using all your tax-deferred space, as discussed in other threads.

exigent
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Re: How far back can HSA Expenses go?

Post by exigent » Wed Dec 05, 2018 8:13 pm

jhfenton wrote:
Wed Dec 05, 2018 2:25 pm
pghpens wrote:
Wed Dec 05, 2018 2:10 pm
Am I thinking about this correctly?
Yes. The medical expenses have to be incurred on or after the day you originally opened your HSA. You can save those receipts for years.
On or after the date that you opened an HSA, or the particular one where your funds reside? My recent switchover from HSA Bank to Fidelity has me wondering if the clock resets when you open a new account, move your funds, and close the old one.

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jhfenton
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Re: How far back can HSA Expenses go?

Post by jhfenton » Wed Dec 05, 2018 8:38 pm

exigent wrote:
Wed Dec 05, 2018 8:13 pm
jhfenton wrote:
Wed Dec 05, 2018 2:25 pm
pghpens wrote:
Wed Dec 05, 2018 2:10 pm
Am I thinking about this correctly?
Yes. The medical expenses have to be incurred on or after the day you originally opened your HSA. You can save those receipts for years.
On or after the date that you opened an HSA, or the particular one where your funds reside? My recent switchover from HSA Bank to Fidelity has me wondering if the clock resets when you open a new account, move your funds, and close the old one.
It's an HSA, as long as you don't have an 18-month period of zero balances at any point. 18 months of zero balances would reset your HSA establishment date.

From Notice 2008-59:
Q-41. On what date is an HSA established if the account beneficiary had previously established an HSA?

A-41. If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at any time during the 18-month period ending on the date the later HSA is established.

Example 1. An account beneficiary established an HSA on March 1, 2007. On June 15, 2007, he withdrew all the funds from the HSA, resulting in a zero balance. On November 21, 2008, he established a second HSA.

Because the second HSA was established within 18 months of June 15, 2007, the second HSA is deemed to be established on March 1, 2007.

Example 2. The same facts as Example 1, except that the account beneficiary establishes a third HSA on January 1, 2009. On that date, the second HSA has a balance greater than zero.

The third HSA is deemed to be established on March 1, 2007.

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BL
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Re: How far back can HSA Expenses go?

Post by BL » Wed Dec 05, 2018 8:45 pm

clydewolf wrote:
Wed Dec 05, 2018 6:14 pm
If you qualify and use a Schedule A medical deduction, you can not use your HSA to reimburse those expenses.
You are right, but those are the types of expenses that could be used for HSA reimbursements.

justsomeguy2018
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Re: How far back can HSA Expenses go?

Post by justsomeguy2018 » Wed Dec 05, 2018 8:59 pm

TravelforFun wrote:
Wed Dec 05, 2018 6:51 pm
I wouldn't worry about keeping current medical receipts (you're only 27). When you get old, use your HSA account to pay your big medical bills including medicare premium or long term care expenses.

TravelforFun
Bad advice, if he keeps the receipts and has some kind of crazy emergency later in life, he can use the receipts to withdraw the money from the HSA to help during the emergency.

I'm sure some will blast me and say "You should never pull money from your retirement accounts!" but you never know what kind of situation you will find yourself in in the future. If it's between drawing down an HSA and having a roof over my head and food in my belly, I'm drawing down the HSA to survive if I have to.

GreenGrowTheDollars
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Re: How far back can HSA Expenses go?

Post by GreenGrowTheDollars » Thu Dec 06, 2018 12:50 am

jhfenton wrote:
Wed Dec 05, 2018 8:38 pm
exigent wrote:
Wed Dec 05, 2018 8:13 pm
jhfenton wrote:
Wed Dec 05, 2018 2:25 pm
pghpens wrote:
Wed Dec 05, 2018 2:10 pm
Am I thinking about this correctly?
Yes. The medical expenses have to be incurred on or after the day you originally opened your HSA. You can save those receipts for years.
On or after the date that you opened an HSA, or the particular one where your funds reside? My recent switchover from HSA Bank to Fidelity has me wondering if the clock resets when you open a new account, move your funds, and close the old one.
It's an HSA, as long as you don't have an 18-month period of zero balances at any point. 18 months of zero balances would reset your HSA establishment date.

From Notice 2008-59:
Q-41. On what date is an HSA established if the account beneficiary had previously established an HSA?

A-41. If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at any time during the 18-month period ending on the date the later HSA is established.

Example 1. An account beneficiary established an HSA on March 1, 2007. On June 15, 2007, he withdrew all the funds from the HSA, resulting in a zero balance. On November 21, 2008, he established a second HSA.

Because the second HSA was established within 18 months of June 15, 2007, the second HSA is deemed to be established on March 1, 2007.

Example 2. The same facts as Example 1, except that the account beneficiary establishes a third HSA on January 1, 2009. On that date, the second HSA has a balance greater than zero.

The third HSA is deemed to be established on March 1, 2007.
Yeah, well, maybe one day Wage Works will read that. DH had an HSA established for years, joined an employer who administered the employer's HSA through WageWorks, and despite much argument, Wageworks resolutely refused to process any withdrawals related to expenses dated before the WW account was opened. (WageWorks required that all expenses be validated by WageWorks even for HSA expenses. They were a total PITA.) DH's current HSA manager is Payflex, and they make it clear that it is DH's responsibility to ensure that the expenses are legit.

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jhfenton
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Re: How far back can HSA Expenses go?

Post by jhfenton » Thu Dec 06, 2018 9:21 am

GreenGrowTheDollars wrote:
Thu Dec 06, 2018 12:50 am
Yeah, well, maybe one day Wage Works will read that. DH had an HSA established for years, joined an employer who administered the employer's HSA through WageWorks, and despite much argument, Wageworks resolutely refused to process any withdrawals related to expenses dated before the WW account was opened. (WageWorks required that all expenses be validated by WageWorks even for HSA expenses. They were a total PITA.) DH's current HSA manager is Payflex, and they make it clear that it is DH's responsibility to ensure that the expenses are legit.
WageWorks was clearly confused. HSA custodians are not supposed to verify the expenses. That is entirely on the taxpayer. You are completely free to withdraw the money whenever you want and pay taxes and penalties if they apply. I would guess that WageWorks had experience with Health FSAs and transferred their processes onto HSAs.

bberris
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Re: How far back can HSA Expenses go?

Post by bberris » Thu Dec 06, 2018 10:33 am

I am a retiree using an HSA that I built up by deferring reimbursements while working. I can tell you that this concern about keeping receipts forever is a non-issue. First, I used a substantial portion of the HSA to fund COBRA premiums. Then high deductibles, dental, glasses, easily eat up the rest. I keep "contributing" in retirement; while withdrawing what I put in.

And you don't need to keep receipts, except for glasses and dental that aren't insured; the end of year explanation of benefits suffices. I can't imagine that you would be audited only for HSA withdrawals, but I guess it's possible. IRS has much bigger targets.

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