what to do with an old hsa account

When we hear the words: not eligible, no longer eligible, ineligible, we start to panic. Nosotros retrieve nosotros'll be in trouble if we brand the wrong move. But fright not. If you're no longer eligible for a Health Savings Business relationship (HSA), it but means you're no longer eligible to contribute to an HSA.

Yous can keep the coin that'southward already in your HSA as long equally you like equally they roll over from year to yr.

At present, what to exercise next?

Why are you ineligible for an HSA?

There are several reasons you lot could be ineligible:

1. You changed your health plan from a High Deductible Health Plan (HDHP).

2. You have supplemental health insurance coverage either from a spouse or other source.

3. Yous're aged 65.

4. You're on Medicare.

What tin I practise with my remaining remainder?

Regardless of the reason you're ineligible, you can even so utilize your HSA to pay for qualified medical expenses. And if you lot practice and so, those distributions volition remain revenue enhancement-free. Still, in one case the money is gone, you'll no longer be able to make contributions to the account. You can also however invest the money in your HSA.

If you're ineligible considering of reason one or 2, you can think of your contributions as "on pause". Since, you lot're free to begin contributing to your account once y'all buy an HDHP (and only an HDHP). You tin can keep to use your HSA for qualified medical expenses tax-free and invest your contributions every bit y'all wish.

If you're ineligible because you're age 65 - congratulations! Your HSA at present functions like a retirement account. That means you can utilise your HSA to pay for any expenses you like. Although, keep in mind that the tax-free nature of the distributions only applies to qualified medical expenses. If y'all utilize your HSA for other expenses, yous will pay income tax on those distributions.

If you're on Medicare and younger than age 65, you tin can employ your HSA to pay for qualified medical expenses tax free and invest your contributions as you wish.

The best thing might be to salvage your HSA money for an unexpected medical expense you might otherwise get into debt for.

Can I cash out my balance?

Yeah. Merely it's probably not advantageous to practise so. If y'all're nether 65 and you lot shut your HSA to withdraw the money, you lot volition owe income taxes and an additional 20% penalisation on any of the funds used for not-qualified medical expenses. If you're over 65 and cull to withdraw the funds, yous will just owe regular income taxes. Notwithstanding, all distributions on qualified medical expenses will always be taxation-free.

If you do cash out your HSA, brand sure to fill up out the proper forms when you file your income tax return.

Can I move to some other provider or transfer my funds?

Yes, y'all can. If y'all want to move your HSA, you have several options.

1. A rollover or transfer to some other HSA provider.

If you choose a rollover, the original HSA provider physically sends yous a check or electronically transfers the funds to you. Y'all then have to send the coin to a new HSA provider within 60 days of receipt. You're able to roll over your funds at to the lowest degree in one case in a 12-calendar month menses.

If you lot choose a transfer, yous simply open a new HSA and request the original HSA to send the money straight to the new HSA. You don't take to worry most physically getting the funds to the new HSA, the HSA administrators will handle it for you. There are no limits on how often y'all can transfer coin from ane HSA to some other.

Rolling over or transferring your HSA to another provider could be a adept idea if your current account doesn't allow you lot to invest your contributions. By investing your contributions in the market place, you tin grow your HSA balance even if you're non eligible to deposit money. And yous don't have to worry nigh paying taxes or penalties.

two. Withdraw your HSA balance and put information technology into a Roth IRA.

While this is something you tin do, it doesn't make a lot of sense. Here's why:

HSAs and Roth IRAs function similarly upon retirement in the sense that you tin utilise your distributions on anything you'd like. As mentioned to a higher place, if you use your HSA distribution on qualified medical expenses, you won't pay income taxes on the amount. If yous use it for other expenses, you volition.

While you don't pay income taxes on your Roth IRA distributions, that'due south considering your contributions aren't tax deductible. So if you withdraw your pre-tax HSA contributions to eolith into a Roth IRA, y'all will pay income taxes on the amount drawn. In addition, you'll pay a 20% penalty.

What can't I practise with my HSA when I become ineligible?

Y'all cannot utilise your HSA balance to:

• Pay health insurance premiums.
• Roll it into your 401k or IRA.

No affair the reason you're ineligible to contribute to your HSA, there are still lots of uses for your account. Not least of which is paying for out-of-pocket qualified medical expenses that your new wellness plan doesn't encompass like copays, coinsurance, etc. Y'all can besides keep to invest your contributions and grow your balance! And so don't cash it out. Don't forget about it. Employ your HSA in the way that makes the most sense for your life.

Read more than by Vicky Warren

Vicky Warren, in one case a nurse, now a freelance healthcare author and social media jitney.

mooreusbodleacter.blogspot.com

Source: https://livelyme.com/blog/no-longer-eligible-for-hsa/

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