Eligibility

Wage Up! Smart spending on qualified expenses

One of the great things about an HSA is that the funds never expire, so you aren't forced to spend them before a certain date. If you don't spend your HSA money, it will roll over and remain available for you to use at a later date - there are no penalties and you'll never lose your funds. Unfortunately, many people don't realize this and rush to spend their funds on things they don't really need.

So if you want to get smart about spending your HSA funds, take some time to think about the things that you already want or need instead of making extra doctors' appointments or unnecessary purchases. There are more qualified expenses than most people are aware of, and it's likely you can use your HSA funds for things you were already planning to spend your money on.

Just keep in mind that you need to spend your money on qualified expenses only. If you choose to spend your HSA funds on an unqualified expense, you could be charged a 20% penalty if you're audited, and you may have to pay income tax, as well. That means if you spend $500 on an unqualified expense, you'll be charged an additional $100 penalty and if you fall into the 15% income tax bracket, another $75 in taxes.

Check out a few "off-the-cuff" eligible expenses, and get smart about your HSA spending.

Travel essentials

If you're going on vacation - or even a short road trip - it's always a good idea to load up the suitcase or car with a few essentials and emergency items. Use your HSA funds to pick up a travel sized first aid kit, sunscreen, acupressure wristbands to stop nausea, and an orthopedic neck pillow to make the trip more comfortable.

Medical travel expenses

If you need to travel frequently to medical appointments, the cost of getting there can add up fast. But did you know that your HSA can actually be used to cover some of these expenses? Fuel, public transportation costs, tolls, and parking fees related to qualified medical care are all considered eligible expenses.

But if you're planning to reimburse yourself for these expenses, make sure you keep documentation that shows you were traveling for medical purposes - like a bill that has the date of the procedure on it.

Family planning

If you're planning on having a baby, your HSA can help you cover some of the associated expenses. Eligible items include pregnancy tests, ovulation predictors, and fertility kits. And if you have a newborn already, you can use your HSA to pay for items like baby breathing monitors, breastfeeding supplies, and thermometers.

Glasses

Eye care isn't cheap, so many people skip out on purchasing more than the bare minimum when it comes to their eyewear. Are you constantly leaving your glasses at home only to realize you need them when you get to the office? Use your HSA funds to get a backup pair. You can even use the money to purchase prescription sunglasses and non-prescription reading glasses.

Acupuncture

Acupuncture is a popular form of pain relief, but many people shy away from trying it because of the out-of-pocket cost. But acupuncture is actually an HSA eligible expense, provided it's doctor-recommended. So take advantage of its many benefits and worry less about the bill.

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Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Accounts

Compound It! Can HSAs and Medicare go together?

If you're nearing age 65 or just trying to get a jump-start on planning ahead, you've probably started to think about Medicare and how it will affect your future finances - especially those related to health care.

Navigating HSAs and Medicare can be a bit confusing on their own, so trying to sort out how the two interact with each other can be overwhelming for many people. But, in order to make the most of your money, it's important to have a good understanding of what changes, and what doesn't.

So, can these two entities go together? It's not a question that can be wrapped up with a simple "yes or no" answer, so let's take a closer look at the relationship between the two.

Making contributions

When you reach age 65 and become eligible for Medicare, the biggest change you'll come across is that when you enroll in Medicare, you won't be able to make contributions to your HSA anymore. This is because in order to contribute to an HSA, you need to be enrolled in a qualified high-deductible health plan (HDHP) and Medicare doesn't meet that requirement.

But that doesn't mean all of your previously contributed dollars have gone to waste! You're not going to lose your previous contributions or the ability to put the money to work for you.

Your medical expenses

While your monthly contribution will be zero dollars, you'll still be able to withdraw your funds tax-free to pay for your out-of-pocket medical expenses. This includes any deductibles, copays, coinsurance or eligible items. You'll also find that there are qualified expenses that Medicare doesn't cover, but are HSA-eligible expenses, like dental care and hearing aids.

And unlike Medicaid, Medicare doesn't cover any long-term care options like nursing homes or in-home health aides. This type of care is often very costly, but you can use your HSA funds to offset some (or all) of the cost.

Your other expenses

Turning 65 changes completely changes how you can spend your HSA funds on other expenses. If you want, you can use your HSA as a retirement account and enjoy all of the money you contributed for any purpose you wish without penalty.

Before you turn 65, if you decide to spend your HSA funds on an unqualified expense you not only have to pay income taxes on the funds, but you're also subject to a 20% penalty. But once you turn 65, the 20% penalty is no more, so you're free to spend the money on anything you want. Much like a traditional IRA, any withdrawals you make will still be subject to income tax.

Whether or not you should use your HSA funds for non-medical expenses really depends on your individual financial situation. Since medical expenses can get more and more costly as you get older, it can be a wise decision to save your HSA funds strictly for medical expenses or financial emergencies.

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Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.


Eligibility

Wage Up! Smart budgeting for single parents

Making a budget can be daunting, and even more for single parents. So you need to make sure you're making smart budgeting choices to have enough money to take care of your child's needs. And a big part of creating that budget is to utilize all the tools available to you to the fullest extent - including your HSA.

You probably think of your HSA simply as money you set aside to use when you need to pay for medical expenses, but did you know that you can also use it as a budgeting tool?

With a few savvy strategies in place, you can use your HSA to put tax-free dollars towards qualified medical expenses (including everyday health needs), as well as save for the future.

Saving your funds

You probably already know that your HSA money can be used to pay for qualified medical expenses, but the great thing about HSA's is that you don't need to spend the money by a certain point if you don't want to. Your HSA money will never expire. So one of the best things you can do to help your budget in the future is to save as much HSA money as possible.

If you're financially able to pay for your family's medical expenses out-of-pocket, don't touch the money - contribute as much as possible, and save it for the future. Though everyone's financial situation is different so it might not make sense for you to make the maximum contribution.

(To estimate exactly how much money you can save with your HSA, use our tax savings calculator.)

Reimburse yourself for earlier expenses

Did you know that you can use your HSA funds to reimburse yourself for earlier expenses?

As long as the expense was incurred after your HSA was established, you can claim reimbursement for it at any time. As a single parent, you know that unexpected expenses come up all the time, some of which can cause severe financial hardship. Having the funds available for past expenses can help ease some of the financial strain.

Of course, the strategy of saving until you absolutely need your funds requires some preparation on your part. Keep the receipts for all of your qualified expenses, as well as any other documentation. Take pictures of these documents and save them in a dedicated folder, along with a spreadsheet that documents the details of each expense, to make your life easier down the road. Document everything.

Using your HSA for essentials

Of course, you shouldn't ignore your own health needs for the sake of budgeting. If you or your family need medical care and are struggling to pay for it, use your HSA for any and all qualifying expenses. After all, that's what it's there for!

Especially as a single mom, the cost of caring for a newborn can really take a toll on your wallet. But your HSA can help you cover these costs. Eligible items include baby breathing monitors, breastfeeding supplies and accessories, thermometers, and baby sunscreen.

Just remember that if you do plan on using your HSA money, make sure you're only spending it on qualified expenses since they're the only type of expenses your funds can be handled tax-free. If you need your funds distributed for anything else before you reach retirement age, you'll have to pay income tax, as well as the 20% penalty.

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Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

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Basics
Photo by Alexis Brown on Unsplash

Compound It! HSA use for family and friends

The question people with HSAs often ask is whether or not they can use their account to pay for the expenses of family and friends.

The answer is "yes" when it comes to specific family members, and a big "no" when it comes to friends. (Well, just to keep things interesting, there is one exception to that rule.)

But first, let's take a quick look at the ways in which the IRS lets you use your HSA to pay for the healthcare costs of those closest to you.

Who exactly is covered under an HSA?

The IRS has the following requirements for individuals to qualify for an HSA:

  • Enrolled in a high deductible health plan (HDHP) with no other disqualifying health coverage that pays for treatment before a deductible is reached.
  • Not enrolled in Medicare
  • Not claimed on another person's current year tax return

The following people are eligible for reimbursement for qualified medical expenses under IRS rules:

  • You and your spouse
  • Any dependents you claim on your taxes
  • Anyone you could have claimed as a dependent on your taxes but didn't because that person either filed a joint return, earned more than $4,050 during the year, or could claim you or your spouse as a dependent on their tax return

Your spouse and your dependents are covered under your HSA, even if they aren't covered under your HDHP.

Based on these rules, however, only family members who are classified as your spouse OR as dependents that you claimed on your most recent tax return OR that you could have claimed on your tax return would be eligible for coverage under your HSA.

What is the "friend" exception?

The only time you can use your HSA to pay for the healthcare costs of a friend is if you have named that person as a dependent on your most recent tax return, provided they qualify under the non-relative qualifications (detailed below).

It's important to understand that we're providing you with IRS definitions of individuals who are eligible for HSA expenses, and we don't advise or recommend that you list a friend (or any non-relative) as a dependent on your tax return simply to pay for that person's healthcare expenses.

For a non-relative to be claimed as a dependent, they must:

  1. Live with you all year, in your household (that's 365 days, with minor exceptions made for temporary absences such as school, illness, business, vacation, military service)
  2. Have a gross income for the year of less than $4,050 (tax-exempt income, such as certain social security benefits, is not included in gross income)
  3. Receive more than half of their total financial support from you.
  4. Not file a joint return with anyone else.

One thing that's not up for debate is that the IRS is strict about the people considered eligible under an HSA. We also should not be confused with legal or tax advisers. If you have any doubts about paying for the expenses of anyone who isn't your spouse or a dependent, you should consult with your HSA administrator, or with a tax professional, before you take action.

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Compound It! is your update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.

Eligibility
Photo by Tanja Heffner on Unsplash

Wage Up! Dental care services that qualify under an HSA

As more and more research comes out linking healthy mouths to healthy bodies, proper dental hygiene is taking an increasingly more important role in preventative maintenance and overall health awareness. In fact, a recent survey found that 95% of adults in the U.S. said that they wanted to be better about keeping their mouths healthy.

If you have an HSA, you may be wondering what types of dental services are actually covered. And if so, you're not alone.

While dental services and HSA eligibility isn't quite a black and white discussion, there are some common -- and necessary -- dental procedures that are eligible. In this week's Wage Up, we give this topic a routine cleaning and get to the root of the matter.

(Yes, we know that was corny. Let's brush it off and move on.)

Common dental services covered with your HSA

With an HSA, there's a big difference between services that diagnose, treat, mitigation, cure or prevent a disease or treatments affecting a function of the body and services that fall under the category of general health.

Some of the most common types of HSA-qualified dental care procedures include:

  • Fillings – This is a common procedure to "fill" a cavity after your dentist has cleaned it out.
  • Root canals – This procedure involves your dentist removing the infected parts of the root of your tooth and filling in that area with a hard, protective material.
  • Extractions – When your tooth is so damaged that it can't be saved.
  • Crowns – Artificial dental material that dentists use to replace broken or cracked teeth. Unlike dentures, they are permanent and can't be removed.
  • Dentures – Artificial teeth that are removable. Full or partial dentures are covered with your HSA, as are accessories like cleaning supplies and sealants.
  • Bonding – A procedure that fixes chips and minor cracks in your teeth. Dentists apply a resin that's the same color as your tooth to the area that's chipped or cracked, and bond it with an ultraviolet light.

Your HSA also covers expenses for standard dental cleanings and dental check-ups. One thing to keep in mind is that some of these procedures may have a co-payment, so it's important that you check with your dental insurance provider to find out exactly what you'll have to pay out of pocket.

Dental services that aren't covered

Dental expenses for items like toothpaste, toothbrushes, dental floss, and mouthwash are considered general health services and are not eligible for reimbursement. In other words, though we all know these products and practices are crucial for good dental hygiene, they're not HSA-eligible.

And, on that note, teeth whitening, despite its many benefits, is considered a cosmetic procedure and isn't covered.

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Having healthy teeth and gums probably means that you're pretty healthy overall. Bad oral health could mean that you have other lingering health problems that you may not even know about. By using your HSA, you can stay on top of your dental checkups, and address problems before they become serious enough to affect your entire body.

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Whether you're spending steadily or saving for something, our Wage Up! column is where we highlight the latest services available to buy with your HSA. It appears on Mondays, exclusively on the HSA Learning Center. And for more information about your health savings, be sure to follow us on Facebook and Twitter.

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Eligibility

Wage Up! Can I cover expenses with HSA funds before they're in my account?

Medical expenses can pop up at any time, and if you have an HSA, you probably want to use those tax-free dollars to cover the cost of any eligible items.

But sometimes, you might not have enough money in your account to cover the cost and might find yourself wondering if there's any way to borrow from the account before you make your contributions.

So, can your HSA funds be used before they're actually in your account?

The short answer is "no." You can't borrow funds in advance from your HSA, even if you incur a qualified medical expense. But that doesn't mean you won't be able to use your funds to reimburse yourself for the expense later on.

With HSAs, you (or your employer or any other generous person you know) contribute money to the account throughout the year, and get to choose the amount you contribute along with how frequently you make those contributions. But you can't use them until they're in the account. Once they're there, they stay there until you invest or spend them on qualified medical expenses.

Though these accounts are often confused with FSAs, your HSA doesn't have a "use-it-or-lose-it" policy -- a big point of confusion for some FSA holders -- and the funds remain in your account even if you switch jobs or become unemployed. And since you never lose them, you can always use them.

And there's absolutely no time constraints on when you can reimburse yourself for a medical expense incurred after the account is opened. As long as you're able to prove it was an eligible expense, you can reimburse yourself years later - that's why it's always a good idea to keep those receipts.

So for example, let's say you open your account in March and contribute $50 every month. But then the unexpected happens and you incur an expense for $150 while you only have the $100 in your account.

So, you can't borrow the extra $50 from a future contribution, but you can pay the $150 expense out-of-pocket, keep the receipt, and reimburse yourself tax-free once you have enough money in your account (you could also pay a portion and submit the rest for reimbursement later, or wait to pay the bill until you have enough money, if the provider will allow).

Using this approach, you can let the account grow while paying for medical expenses out of pocket choosing to reimburse yourself months, or even years later. As long as you keep the right documentation (read: save those receipts), you'll always be able to benefit from the same tax savings that you would if you used your HSA to pay for the medical expense.

What about an FSA?

If you're on the fence about the type of account you should sign up for, and like the idea of having available funds right at the start of your plan year, consider a plan that allows for a flexible spending account (FSA). With an FSA, things are a little different. Instead of contributing to the account on a regular basis, the full amount of your FSA is immediately available from the first day your plan is active.

Unlike an HSA, you won't be able to roll those funds over to the next calendar year or keep them if you leave your job (with limited exceptions). You have a limited amount of time to use these funds - if you have anything left over at the end of the year and after your deadlines are exhausted, all or a portion of the money will go back to your employer.

And when it comes to billing for past expenses, you're limited to using the current year's funds to expenses that were incurred in the plan year (or within your deadline extension, if provided). You won't be able to reimburse yourself for expenses you incurred in previous plan years, with the exception of during the grace period or run out period, even if you had an FSA.

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Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Eligibility

Wage Up! The benefits of reef-safe sunscreen (for Earth Day and every day)

Sunscreen is an important part of preventative healthcare. But, while we might not think of it when enjoying some time in the ocean, sunscreen can wash off of your skin and into the water where it can affect the marine life. Several common ingredients in sunscreens like oxybenzone and octinoxate have been shown to disrupt and bleach coral reefs.

So if you're planning on taking a dip, you might want to consider using a sunscreen that doesn't contain ingredients that are harmful to the environment. There are plenty of sunscreens available that are specially formulated to be reef safe while still protecting you from the harmful rays of the sun. Plus, these reef-safe sunscreens are HSA-eligible.

A few options available right on HSAstore.com include:

What are the benefits?

If you're someone who's been using sunscreen without much thought about ingredients, you might be wondering why you should make an effort to find and use environmentally friendly brands.

Well, the biggest benefit is that you're playing a small part in saving the delicate ecosystem that house coral reefs. While the task of saving the oceans is far too big for any one person to tackle, a lot of people making small changes can make a serious impact.

Coral reefs around the world are dying at a rapid rate - studies have shown that about half of the coral in the Great Barrier Reef died over a two-year period between 2016 to 2018. And while there are many factors contributing to this, water pollution is one of the main causes.

Even if you don't plan on swimming in the ocean, you should still consider picking out a reef safe sunscreen the next time you make a purchase. When you wash it off at the end of the day in a sink or in the shower, the residue can still make its way into the water and affect marine life there.

Going beyond sunscreen

Purchasing reef-safe sunscreen isn't the only way to help out the planet when it comes to making healthcare purchases. Many companies are making a real effort to produce environmentally friendly products that will lessen our impact on the Earth. And as we celebrate Earth Day, it's an excellent time to assess the products your purchasing to see if there might be more sustainable options.

Here are a few options to consider:

  • When you're purchasing electronic devices, consider choosing rechargeable units or units that include long-lasting batteries to reduce the number of batteries you throw away like this Caring Mill Wireless Tens Therapy Kit or this Electromagnetic Massage Unit.
  • Use natural products that are made specifically to reduce harmful waste. If you can buy it, there's probably an environmentally friendly version of it out there. As an example, these nursing pads are made from eco-friendly and sustainable bamboo and you can choose to use cloth tape or bandages instead of synthetic options.

And don't forget to recycle empty containers, packaging, and products whenever possible. Remember, small changes made by a lot of people can add up to make a substantial impact on the world.

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Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Eligibility

Wage Up! Adding hi-tech health to your 2019 health planning

If one thing on the healthcare industry is certain, it's that the future of healthcare is tied to new technology. Even over the course of the past few years, the advances made have been life-changing and saved the lives of many people.

And it isn't just about the hi-tech diagnostic and treatment options available in hospitals. While those are certainly groundbreaking in their own right, there are many hi-tech personal care options available for everyday use that are changing the way people live their lives.

Blood sugar monitoring

It wasn't that long ago that blood sugar monitoring and managing diabetes was a difficult undertaking. Now the technology available allows people to monitor their blood sugar levels and keep their diabetes under control in only a few minutes a day. And many of these monitors are eligible expenses.

Thermometers

Remember being a kid and having your temperature taken - sitting still with a glass thermometer under your tongue for what felt like an eternity? Those days are long gone. Hi-tech thermometers can now get an accurate reading in only a few seconds. Many are also Bluetooth-enabled and can sync the data right to your smartphone, where you can track body temperature alongside symptoms and medications. These eligible monitors made being sick a little less tedious.

Acne treatments

You'll be hard-pressed to find a person who hasn't had to deal with acne. For a long time, the most common treatments involved rubbing various creams and lotions on your face to prevent and fight breakouts. Today, that's a different story. New technology allows you to fight acne with non-invasive, over-the-counter light treatments.

Plus, these treatments are HSA-eligible. It doesn't matter if you only have occasional breakouts or you're regularly battling severe acne - this treatment is available to everyone without a prescription (unless you're using a treatment with an active medical ingredient, which would require an Rx for HSA eligibility). .

Pain relief

For years, pain relief for many people has meant taking a variety of different pills, visiting a lot of doctors, and maybe even undergoing some invasive treatments. Modern medicine has completely transformed this tedious regimen. Pain relief is now as simple as wrapping a brace or heat wrap around your joint or muscle.

These hi-tech devices are able to stimulate joints, nerves, and muscles to alleviate pain in a drug-free and noninvasive manner. This is a huge breakthrough for people who who deal with chronic pain that affects their everyday lives. And the good news is that many of these treatments are eligible without a prescription.

Baby breathing monitors

Adults aren't the only ones who can benefit from high-tech advances in healthcare. For many years, a monitor meant that you'd have a fuzzy-quality walkie-talkie available to listen to so that you knew when your baby struggled a bit at night.

HSA-eligible baby breathing monitors can help track development by recording words, tracking movements, and allowing you to keep an eye on sleep patterns. And many baby monitors now provide apps so that you can also track notes and details of your own in sync with with the baby monitor picks up.

This makes tracking your baby's everyday health development as simple as any other app. Tracking your babies health from the get go can help you keep a close eye on their quality of life and alleviate the nerves you have about leaving your new baby alone for the night.

Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Eligibility

Wage Up! Winter preparedness with your HSA funds

Don't be fooled by the calendar (and don't ignore those "Game of Thrones" previews) ... winter is coming. And as the weather changes, our bodies need to adapt to the new conditions. There are plenty of steps you can take to give yourself the best chance of staying healthy over the colder months. To make things even easier, you can use HSA funds to cover the costs of many winter health essentials.

So as winter draws near, keep these steps in mind to stay ahead of the season.

Schedule your annual physical

People lead busy lives and it's common to put off routine appointments to make way for other obligations. Before you know it, winter is here and you'll realize you never did get around to scheduling your annual physical. So now is the perfect time to give your doctors office a call to set up the appointment - and you can always use your HSA funds for any copay expenses you might need to cover.

In addition to seeing your primary care provider, you should also schedule HSA-eligible dental cleanings and eye exams if you haven't had them over the past year. Having a clean bill of health will set you up for a healthy winter and send you into the new year at the top of your game.

Get your flu shot

While you're at the doctor's office, make sure you get your annual flu shot. Taking this small step to prevent illness will keep you on your feet throughout the colder months. Not only will this save you money by preventing you from needing to purchase flu remedies, you also won't need to miss work or holiday festivities.

If you do come down with the flu or a cold, the medicine to alleviate your symptoms will be an eligible expense if you obtain a prescription from your doctor.

Stay active with the right supplies

Many people use the cold weather as an excuse to sit inside on the couch until spring comes around. But staying active is one of the best ways to keep yourself feeling great through the winter months. So get your body what it needs for you to exercise comfortably and safely.

If you're going to be participating in outdoor activities, pick up sunscreen (make sure it's at least SPF 15+ and broad spectrum). Even if it's cold out, the sun can still be strong enough to burn you, especially if it's reflecting off the snow.

And if you usually use a knee brace or similar equipment while working out, take the time to check that it's in good condition. Things like supports and insoles wear out over time and you'll need to replace them to prevent discomfort and injury. These items for the most part are eligible for HSA reimbursement.

Take care of your mental health

Many people find that the winter months exacerbate mental health conditions and struggle to feel like themselves. If you find that you struggle with mental health over the winter, remember that counseling and therapy are eligible expenses. Your mental well-being is just as important as your physical health, so it shouldn't be neglected.

These appointments can be with a psychiatrist, psychologist, or even a social worker. In some cases your administrator may require a letter of medical necessity, so check in with them before making an appointment.

Whether you're spending steadily or saving for something big, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

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Accounts

Wage Up! Your HSA reimbursement cheat sheet

If you have an HSA, you've likely heard the word "reimbursement" more times than you can count. But knowing exactly what reimbursements are, and figuring out exactly how the process works, can be downright confusing.

When you want to use your HSA funds to pay for a qualified expense, you have two options of how to go about it. You'll either be paying for your expenses with funds directly from your HSA, or by paying out-of-pocket and reimbursing yourself later.

Paying directly from your HSA

Paying for expenses directly with your HSA funds is often a convenient option, and there are several different payment methods available, depending on personal preference:

  • HSA debit card - Whether it's at the doctor's office, the store, or online, you'll be using your HSA debit card just like you'd be using your regular debit card. When you use it to pay for an expense, the money will be withdrawn directly from your HSA (but always keep your receipts just in case the IRS ever audits you).
  • Checks - You can order checkbooks and use the checks to pay for expenses, just as you would with checks that are tied to your regular checking account.
  • Online payments - Many HSA administrators offer an online bill payment option that will allow you to pay a bill directly from your HSA in the online members portal.

Reimbursing yourself later

There may be times when you find that need to pay for an expense out-of-pocket and then reimburse yourself for the associated cost at a later date. For example, you might have to undergo an expensive procedure and not have enough money in your account at the time to cover it. Or you might just be facing multiple expenses in a short period of time.

There may also be times when you decide you'd like to reimburse yourself for an expense you incurred at a previous date that you initially paid for out-of-pocket.

Whatever the case, you'll need to request reimbursement through your HSA administrator or HSA bank custodian. The specific steps you need to take may vary depending on your administrator, but the reimbursement process is generally quite simple. Typically, reimbursing yourself for out-of-pocket expenses doesn't require detailed documentation or claim forms, and administrators offer several easy reimbursement methods.

  • HSA debit card - You can use your debit card to withdraw funds from any ATM. But you may want to do this sparingly as some ATMs will charge you a transaction fee, and those can add up quickly.
  • Online bank transfers - You may be able to sign in to your HSA web portal and transfer money from your HSA to your own checking or savings account.
  • HSA checks - If you have a checkbook for your HSA account, you can write checks to yourself and deposit the money in the account of your choice.

Keep in mind that you can reimburse yourself for any expense at any point, as long as it was incurred after your HSA was established. So if you had an expense that you paid for out-of-pocket last year after your HSA was established, but want to reimburse yourself for it this year, you can do so without penalty.

One of the most important things you can do for yourself during the reimbursement process is keep detailed records of all of your qualified expenses, regardless of whether you plan on reimbursing yourself for it now or later. Keep dated copies of all bills and receipts. You may even find it helpful to make a spreadsheet to keep track of all of these expenses.

You'll be reporting your total withdrawals to the IRS every year on a 1099-SA form. So, when you're doing your taxes you'll be responsible for reporting all of your reimbursed expenses, qualified or non-qualified. If you're ever audited by the IRS, you'll need those receipts to prove that you spent the funds on qualified expenses. The more organized you are, the better off you'll be.

Remember that if you use your HSA to pay for non-qualified expenses, you'll be subject to a 20% penalty, as well as any applicable income taxes for the distribution. If you're over the age of 65, you can withdraw money for non-qualified expenses without fear of the 20% penalty, but the money will still be considered taxable income.

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Accounts

Compound It! Know the differences between HRAs and HSAs

Acronyms. Oh how we love acronyms. Except when they cause confusion among readers, who might make the wrong decision about their healthcare spending because of a simple misunderstanding.

So let's cut through the jargon, the acronyms and the confusion, and get down to deciphering health reimbursement arrangements (HRAs) and how they compare to health savings accounts (HSAs). These are two account types that are designed to give you financial support for healthcare needs, but which differ in some key ways.

First, a brief review of HSAs

HSAs are tax-free health savings accounts that allow consumers to set aside tax-free dollars to purchase medical products and services. Plus, consumers can take advantage of the triple tax advantage offered with an HSA (contributions, qualified distributions and interest are all done tax-free).

More importantly, an HSA is an account you own, not your employer. Wherever you go, it goes with you. And it serves as a rock solid supplement for your retirement.

(Of course, this is a very basic overview of HSAs -- for a much more thorough look at everything HSAs offer, start here.)

Alright, so what's an HRA and how does it compare?

An HRA is an account designed to pay for medical expenses you incur that your standard health insurance plan does not cover.An annual allowance on spending from the account is established by your employer, which is then used to reimburse you for eligible out-of-pocket medical expenses, after they happen.

Employers also often define what you can use your HRA on, so you may be limited to more common costs like copays and coinsurance, or you may have an HRA that's wide-open to all eligible medical expenses including over-the-counter items.

Payments made into an HRA are tax-deductible to your employer, while the reimbursements are tax-free to you.

But here's the hook -- much like flexible spending accounts (FSAs), HRAs are owned by your employer. In other words, if you take a new job with a different employer, your HRA isn't making the trip with you. And if you don't use the allotted HRA funds within the defined calendar year, they won't carry over into the following year. In fairness though, HRAs are funded solely by your employer; you're unable to contribute as with an HSA or FSA.

To draw a comparison, an HSA is something you own. With an HSA, if you switch jobs, you take the account with you. All funds within the account remain yours, and rollover from year to year. HSAs can be used for all IRS-approved healthcare expenses.

This includes your deductibles, copays and coinsurance, alongside other types of medical expenses that are not covered under your regular health insurance plan like vision and dental care. Just remember, they can't be used to pay your monthly insurance premiums.

How do HRAs work, exactly?

Company-owned HRAs are paid into solely by your employer and the rules around how and when they can be used are also defined by your employer.

With an HRA, only out-of-pocket medical expenses are eligible for reimbursement. This may include out-of-pocket expenses your health plan doesn't cover, as well as other qualified expenses that are defined by the IRS and approved by your employer.

Worth noting: Something listed as an IRS-approved expense won't necessarily be an employer-approved expense. So, you'll want to check with your plan administrator regarding the specifics of what your HRA actually covers.

This is a stark contrast to an HSA, where, in addition to your financial contributions, your employer and family members can make contributions. HRAs are real money accounts that accumulate interest over time.

It all comes down to preference

Like we mentioned, employers are the only ones that can contribute to an HRA, and the reimbursement can only happen after the expense is made. HRAs do offer some areas of flexibility because they can be used with most types of health insurance plans, unlike HSAs, which require an HDHP to qualify. Plus, current HRA employer contribution limits are higher than they are for HSAs.

Ultimately, HSAs and HRAs are two account types designed with the same goals in mind. And both offer significant advantages depending on your health and financial outlook. If you're considering adding either of these account types to your health insurance plan this coming year, be sure to speak with a financial professional to find the account that best suits your family's needs.

Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.