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HDHP Newbie Q&A


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I don't generally use healthcare.  If something breaks or stops working, I get assistance via the emergency room.  My wife is deceased.  My youngest child is about to get his own healthcare.  This year I decided to switch to a High Deductible Healthcare Plan and open a Healthcare Savings Account.  HDHP went into effect the first of the year.  On March 14th, I fully funded the HSA ($8300).  I expect to use the account to pay my deductible and other expenses like dental.  I found Publication 502 which I believe lists covered expenses for the HSA.  I have just a few expenses this year...

  • OPTUMRX, April 05, 2022, $883.01
  • OPTUMRX, March 18, 2022, $2.62

  • DENTALCARE, March 15, 2022, $50.00 (date of 2/5/22)

  • MASS GENERAL, February 04, 2022, $798.94 (date of service 12/23/21 and 12/28/21)

Does date of service or date of billing determine whether cost of a service can be reimbursed from my HSA?  Can charges incurred prior to the creation of the HSA be reimbursed?  What kind of documentation do I need to keep as evidence of eligibility?

Also, my company's HDHP is not 'creditable'.  My understanding is that people who delay Medicare past 65 who do not have creditable coverage face penalties when they enroll in Medicare.  Should I switch to a creditable plan the year before enrolling or enroll on the first day of eligibility?

 

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You can't use your HSA for expenses prior to your eligibility. Only for those occuring after your account opened. If you are Medicare eligible, that may be cheaper than what you have now.  You can enroll in Medicare and still work. 

4 out of 3 people struggle with math

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The general rule is that only expenses incurred after you first funded the HSA will be eligible for tax-free medical reimbursement.

Full details: 

https://www.newfront.com/blog/hsa-establishment-date

General HSA Establishment Rule: Ability to Incur Expenses That are Eligible for Tax-Free Medical Distributions Does Not Begin Until HSA is Funded

Individuals may take a qualified tax-free medical distribution from an HSA only for medical expenses incurred after the individual established the HSA.

State trust law determines when an HSA is considered “established.”  Most state laws require that a trust be funded to be established.  This means that in most cases an HSA is not established until a contribution is deposited.

Example 1:

– Aaron is hired November 15 by Cheese heads, Inc. with date of hire coverage.

– Aaron enrolls in the company’s HDHP medical plan option.

– Aaron did not establish an HSA previously.

– On November 20, Aaron incurs $250 in deductible expenses under the Cheese heads, Inc. HDHP medical plan option.

– The first deposit into Aaron’s HSA is made by Cheese heads, Inc. in December.

Result 1:

– Aaron’s HSA is established in December.

– Aaron cannot use the HSA to pay for his $250 deductible expenses on a tax-free basis because they were incurred prior to the December establishment of the HSA.

– Important Note: Aaron also is not HSA eligible (i.e., eligible to make or receive HSA contributions) in November because he was not covered by the HDHP as of the first day of the calendar month.

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