HSA Hack - Take Advantage of HSA Benefits Without Pre-Funding an HSA
According to Bend, an HSA administrator out of Boston, over 40% of employees offered an HSA through their employer don't open one! Even if you don’t think you have the extra money to fund the account, Bend thinks it’s still worth it to open one up. We also think its a great idea. We’ll explain why in this post.
Establishing an HSA
The most important thing you can do once you qualify to open an HSA is to establish an HSA. “Establishing” means different things and unfortunately varies state by state. In some states, it’s as simple as opening up an account. See your tax professional for more information. In other states, it means you have to open the account and fund it with as little as $0.01. This is commonly referred to “penny funding” and meets all federal requirements for establishing an HSA.
The importance of establishing an HSA, is that you can use HSA funds for expenses incurred before your account actually had the money in it! That’s right, you can back-date it and reimburse yourself when you do have enough money in your account. Any costs that are incurred post-HSA establish date, are eligible for reimbursement.
Lets run through a scenario…
You open an HSA via an employer plan.
You contribute $1 to establish your HSA.
Your 6 year old daughter falls on concrete and breaks her elbow. You pay the ER a visit.
A month later you get a $1,000 bill from the hospital.
A week later you pay the bill out of pocket since you only had $1 in the HSA.
The bill is paid. All is well. But hold on, you can save yourself some money by simply funneling money in and out of your HSA whenever you incur an eligible expense. First, contribute $1,000 to your HSA and then reimburse yourself $1,000 for your daughters ER visit. If you are in the 25% tax bracket, this could potentially save you $250. That’s how you can save yourself a good chunk of money by working the system.
We are in no way advocating that you shouldn’t consider making payroll contributions, if they are available to you, or using one-time contributions when financially feasible to save more for your future healthcare expenses, but if that route is not workable with your current income levels or situation, retroactive contributions and reimbursements are an option.
Expense Scout and The Bend Advisor
“Non-funders” or “micro funders” or “penny funders“ should look to take advantage of free software / tools from Lively and Bend that find HSA eligible products and services for you. The Bend Advisor and Expense Scout (Lively) automatically scan and alert you to potential HSA-eligible expenses from your external accounts. These two tools provide you with a list of expenses for review, and you have the option to reject or submit them for reimbursement, now or later.