How Much Do You Know About Your Health Savings Account?
Take This Short Quiz and Find Out
True/False
1. The funds in your Health Savings Account expire at the end of the year
2. Once you decide how much to contribute each month or pay period, you are committed to that amount for the entire year
3. Anyone is eligible to contribute to a Health Savings Account
4. Your Health Savings Account funds stay with your employer when you leave
5. Your Health Savings Account can be used to pay for any expenses, penalty free, once you turn 65
6. Similar to your 401(k), you must use the Health Savings Account provider selected by your employer
7. Your Health Savings Account can be invested into mutual funds, often the same ones found in your 401(k), and become part of your retirement savings portfolio
8. Unlike 401(k)’s and IRA’s, contributions to Health Savings Accounts are payroll tax free
9. You cannot use your Health Savings Account debit card unless the health provider accepts your insurance
10. If your Health Savings Account debit card is accepted by the health provider you do not need to keep a receipt
Answers
1. False. Unlike health care Flexible Spending Accounts, your Health Savings Account balance does not expire at the end of the year
2. False. You can increase or decrease your payroll contributions to your Health Savings Account at any time, subject to your employer’s policy
3. False. You must be enrolled in a qualified High Deductible Health Plan to contribute to a Health Savings Account. Some exceptions apply (e.g., dependent children, individuals enrolled in Medicare, etc.)
4. False. The Health Savings Account stays with you even if you change jobs or move to another state. Further, any funds remaining in your Health Savings Account when you die transfers tax-free to your spouse (if named the beneficiary). Otherwise, the assets become part of your estate.
5. True. You only pay ordinary income tax on the withdrawals, as you would with a traditional 401(k) or IRA
6. False. If you want to receive the contributions your employer makes to your Health Savings Account, you will probably need to use the Health Savings Account provider selected by your employer. However, after the money has been deposited, you can roll over your balance to a new Health Savings Account provider at any time,
7. True. Just like with IRAs and 401(k) plans, funds in your Health Savings Account can be invested in stocks, bonds, mutual funds, CDs, etc. Often there are minimum balance requirements to meet before you can invest, so check your plan’s specific requirements or ask your HR representative or financial advisor for more details.
8. True. This is one of the many advantages of Health Savings Accounts. For families who contribute the maximum per year ($6,650 for 2015), this is an additional ~$500 of savings each year, taxes that are not being withdrawn from your payroll. Note your employer also saves ~$500, for a total savings of $1,000.
9. False. You can use your Health Savings Account debit card at any provider accepting debit cards regardless of whether they accept your insurance.
10. False. You should keep all receipts. You are responsible for maintaining appropriate record keeping of your withdrawals, even for payments made with your debit card. This is a departure from your Flexible Spending Account, where the FSA provider is tasked with verifying that the purchase conforms to IRS guidelines for reimbursable medical expenses. While unlikely, an IRS audit may require you to substantiate withdrawals from your Health Savings Account with appropriate receipt documentation. Any withdrawals for things not considered “qualified medical expenses” by the IRS are subject to income tax plus a 20% penalty (no penalty after you turn age 65).
Scoring
0–3 Correct — Well, we appreciate you reading this, we really do. Please check out the learn section in our free app. We think you will be pleasantly surprised by the potential for Health Savings Accounts.
4–6 Correct — Solid effort. You are well on your way. Stick with it. We suspect you will be better prepared for retirement when the time comes. Check our learn section inside our app for more.
7–9 Correct — Well done, over-achiever. We will design a harder quiz for you next time. Might we interest you in a free app to keep track of your health documents and medical receipts?
Perfect ten — Wow. Wait a minute. Mr. HSA, is this you?
HSA Coach. Health is Wealth.
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10 Reasons why you should store your health documents here.
