HSA as an IRA

[compoundinglife]

Been using HSA Bank via my employer with a linked TD Ameritrade account for a couple of years now. Love it! I usually do a transfer every 4 pay periods from the HSA to TD. My employer does not max out the contribution so I will be maxing putting in the difference this year (didn't know I could do that last year). I have not taken anything out of the market yet. I just keep track of medical expenses and plan on taking the reimbursement some day.

 

 

[watsa_is_a_randian_hero]

No issues with hsabank.  They do charge $3.00 a month unless a balance of $4,925 is maintained with the bank.  (that excludes investment account balance maintained at TDA).

 

Seriously? That excludes investment account balance at TDA? My current employer is using hsabank, so I bet they pay the $3 per month admin fee. But if I leave my current employer, I would definitely transfer to another place that doesn't nickle and dime me.

 

I like HSA Bank.  You can write a check to pay the investment fee with non-account funds (which is tax deductible). 

 

I find the $3/month fees to be relatively low.  I keep a minimal amount in the HSA bank account ($50 or so to pay fees) and most of my balance over at TD.  HSA bank is a business, they have to make money somehow.  $3/month for record keeping/custodial services and the ability to link a TD account and buy individual stocks is a good deal I think.  That said, I didn't open an HSA Bank account until the fee would be less than 1% of my balance; before that I kept the money over at a zero-fee Chase HSA account sponsored by my employer.  Now I have almost $20k in mine and $5k in my wife's, so the fees at HSA Bank as a percentage are not punitive.  I transfer money over from my employer-sponsored Chase account every so often once the balance builds up.  Unfortunately my wife's new employer doesn't offer her an HSA option. 

[Gamecock-YT]

So far so good with ELFCU.

 

Thanks.

 

What brokerage is ELFCU's HSA using? And you can buy individual stocks?

 

TDAmeritrade, yes.

[fareastwarriors]

Great. Thanks.

I'll probably help my brother set up his HSA this weekend.

 

[muscleman]

I've been thinking about setting up an HSA account in Eli Lilly credit union. The primary reason is that my employer's fiscal year starts every April 1st, but the IRS fiscal year starts in January. Therefore This April first when I switched from other health plan to HSA and elected to contribute $6550 per year, they simply divide it by 12, and let me contribute $545 per month to the employer sponsored HSA. That means by the end of 2014, my contribution would have been $1600 shy of the IRS $6550 limit. Therefore I would like to open a separate HSA account in Eli Lilly credit union and contribute that amount to it.

 

That $1600 should be tax deductible when I file my tax right?

 

What happens if I over-contribute? Let's say I contributed more than $6550 for 2014. Will this incur penalties?

[cobafdek]

That $1600 should be tax deductible when I file my tax right?

 

Yes, and you'll receive separate IRS Forms 5498 after you make the contributions, one from the prior plan from the employer, and the other from ELFCU.  The maximum allowable (totalling up all Forms 5498) is $6550 for the year.

 

What happens if I over-contribute? Let's say I contributed more than $6550 for 2014. Will this incur penalties?

 

Yes, the penalty is income tax on the excess contribution amount, plus a 6% excise tax.  The income tax portion (on the excess plus associated earnings on the excess) is not avoidable, but the excise tax portion is avoidable if the excess contribution (and associated earnings) are withdrawn in time.

 

(From IRS Publication 969:

Excess contributions.  You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions are not deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return.

  Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account.

  You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions.

-You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made.

 

-You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.)

 

[Ross812]

I've been thinking about setting up an HSA account in Eli Lilly credit union. The primary reason is that my employer's fiscal year starts every April 1st, but the IRS fiscal year starts in January. Therefore This April first when I switched from other health plan to HSA and elected to contribute $6550 per year, they simply divide it by 12, and let me contribute $545 per month to the employer sponsored HSA. That means by the end of 2014, my contribution would have been $1600 shy of the IRS $6550 limit. Therefore I would like to open a separate HSA account in Eli Lilly credit union and contribute that amount to it.

 

That $1600 should be tax deductible when I file my tax right?

 

What happens if I over-contribute? Let's say I contributed more than $6550 for 2014. Will this incur penalties?

 

ELFCU now charges a $24 fee to wire money from your HSA at the credit union to TD.

 

http://thefinancebuff.com/elfcu-adds-monthly-fee.html

 

HSA Bank was the cheapest I've found with $66 in fees per year. (2.5 account fee + 3 TD acct fee).

 

You can write off the out of pocket contributions this year to avoid state and federal taxes. The advantage of having your employer take the money out of your pay roll is to avoid SSI and medicare taxes (~7.3%). This isn't an issue if you are making more than the SSI cutoff.

[muscleman]

I've been thinking about setting up an HSA account in Eli Lilly credit union. The primary reason is that my employer's fiscal year starts every April 1st, but the IRS fiscal year starts in January. Therefore This April first when I switched from other health plan to HSA and elected to contribute $6550 per year, they simply divide it by 12, and let me contribute $545 per month to the employer sponsored HSA. That means by the end of 2014, my contribution would have been $1600 shy of the IRS $6550 limit. Therefore I would like to open a separate HSA account in Eli Lilly credit union and contribute that amount to it.

 

That $1600 should be tax deductible when I file my tax right?

 

What happens if I over-contribute? Let's say I contributed more than $6550 for 2014. Will this incur penalties?

 

ELFCU now charges a $24 fee to wire money from your HSA at the credit union to TD.

 

http://thefinancebuff.com/elfcu-adds-monthly-fee.html

 

HSA Bank was the cheapest I've found with $66 in fees per year. (2.5 account fee + 3 TD acct fee).

 

You can write off the out of pocket contributions this year to avoid state and federal taxes. The advantage of having your employer take the money out of your pay roll is to avoid SSI and medicare taxes (~7.3%). This isn't an issue if you are making more than the SSI cutoff.

 

Thank you! I wasn't aware of the account fees change in ELFCU.

For HSA bank, my current employer's HSA plan uses HSA bank and they waived the 2.5 account fee per month for me. I am not aware of the TD acct fee either so I will check with them on that.

My employer is using ConnectYourCare as the HSA admin, which links to the HSA Bank's hsa account. I am not sure about the relationships between them. I can click "Make a contribution" in ConnectYourCare's website, and it will request a money transfer from my linked bank account.

 

When I make this out of pocket contribution, I will receive some tax form later, which will allow me to deduct this from my taxable income, right? That's great.

[cobafdek]

When I make this out of pocket contribution, I will receive some tax form later, which will allow me to deduct this from my taxable income, right? That's great.

 

Actually, that tax form (Form 5498) is what you'll receive from the HSA account trustee as a record of what they report to the IRS for tax-advantaged contributions.  It's the same form used for IRA contributions.  You won't need it to fill out your tax return.  I usually receive my Forms 5498 several months after filing my taxes.

 

Anyway, kudos to all on this thread who have HSAs.  I don't know how I missed this thread earlier this year (actually, I do:  I'm not the best at systematically reading everything on this board).

 

My family started with the MSAs back in 1998, close to the time the IRS recognized them.  We began with one of the pioneers of this idea, Golden Rule Insurance Co. in Indiana.  Maximum contribution in the early years was something like $2,000 per family per year, and there was only a CD-type accounts available. 

 

I've always kept our HSA account in the most conservative and laziest portion of our household portfolio.  With the passage of time and the liberalization of investment options available for HSAs, we have 40% in Vanguard funds and the rest in CD rates.  I'm sure the IRR since 1998 is quite modest, but the account now has about $100,000, enough to pay for 10-15 years of deductibles should we ever need to.

 

 

 

 

[Ross812]

Muscleman,

 

You may want to check and make sure you are eligible to contribute the full amount for 2014.

 

From the IRS: http://www.irs.gov/instructions/i8889/ch02.html

 

http://www.irs.gov/instructions/images/37971y01.gif

 

Your $1600 will not be tax deductible. Your max tax deductible contribution would be $4912 assuming you are were signed up for the HDHP on April 1. Your employer is withholding correctly with $545/month.

[muscleman]

Your $1600 will not be tax deductible. Your max tax deductible contribution would be $4912 assuming you are were signed up for the HDHP on April 1. Your employer is withholding correctly with $545/month.

 

Thanks a lot! I just requested an emergency cancellation of that contribution. I hope it can go through. :)