When can you use HSA dollars?

[markubig]

Hello -

After years of participating in HMO/PPO plans, I am considering my company's offer of a HDHP with HSA for 2009. With the HSA, my company will deposit a generous amount to the account on a monthly basis. I can also contribute to the HSA on a bi-weekly basis via pre-tax dollars. Preventative care is 100% covered.

My wife is due with with our 2nd child in February. My 1st child tends to catch viruses/colds, develop ear infections, etc. in the winter months. Basically, I expect health-related expenses in the early part of 2009.

So my question is: Can I use the HSA dollars before they are in the account? Obviously, there will not be a lot of money there by February, so can I draw from it as long as the expenses occur in the calendar year coverage and don't exceed the "mine+employer" amount that is supposed to total by the end of the year? I really will not be able to afford forking out $$$ out of pocket and waiting to get reimbursed for them.

For the past few years, I've had a Flex Spending Account, which allows you to draw from your account beginning January 1st because you are contributing throughout the year.

Thanks for your help!

Regards,

Mark in NJ

[ecmst12]

From the small amount af reading I have done, HSAs do not work exactly like FSAs. There is no "use it or lose it" limitation, and you can't boriow against future contributions.

[TIMMAAYY]

You can "pay yourself back" from your HSA funds if you spend money that is not directly in the HSA account.

But that's extra legwork, putting it in, then drawing it back out form something you've already paid for. You get the tax savings regardless, as the HSA is pretax savings.

[markubig]

thanks for your responses.

I spoke to the hospital where my wife will deliver. They said that we can set up a payment plan for up to a year to take pay off the delivery costs. So I guess that answers my question as to how to use the HSA dollars without having to dip additionally into our pocket. As the money is deposited throughout the year, I can pay down the hospital bill.

So why would someone not want to have an HDHP w/ HSA?

1. HSA contributions are tax-deductible
2. You can carry-over of funds (this is huge because I'm scrambling to spend all of our FSA dollars this year)
3. As long as your contribution and your employer's contribution cover the annual-out-of-pocket maximum, there's no additional cost.

I will be putting the same amount of money into my HSA in 2009 that I put into my FSA in 2008 (actually, a little more) and the contribution plus my annual premium will be less in 2009 than I paid in 2008.

Am I missing something?

[TIMMAAYY]

You're not missing anything. You're one of the few who get it.

Load up the HSA fund with as much as you can. Even if you decide later on that you don't want an HSA plan, you can still use the HSA funds as intended, you just can't contribute anymore funds to the HSA account.

Also, once you reach retirement, you can use the funds for LTC premium.

For further tax savings, a list of things that are deemed an "eligible medical expense", look up IRS Section 213d and Publication 502. These things are all tax deductible "medical expenses" under IRS rulings.

[markubig]

Can you use HSA dollars in the same way that one would use FSA dollars? For instance, can I purchase contact lens solution, tylenol, otc allergy medication, etc?

If I can't, Is it legal for my wife contribute to an FSA with her employer, so that we can use the fsa for the above items?

Thanks.

[TIMMAAYY]

The same rules apply to what you can and can't spend funds on with an HSA and FSA.

I wouldn't bother putting money in the FSA unless you know you are going to spend it over and above the HSA. Load up the HSA... even if you don't spend it, you have the tax savings from the entire amount you put into the HSA.

Sec. 213d and Pub 502 apply to the same type of expenses; FSA's and HSA's are just different types of accounts that utilize the funds set aside for out of pocket spending.