Are Health Savings Accents open only to Employees?
I just retired and will receive SS and Medicare. My wife has 3 years to go before Medicare and needs private medical insurance.
We do not have any earned income, but have taxable investment income, my taxable pension income and my SS.
Can I, or my wife, fund her HSA and take a deduction for it?
Thanks
Mauro Gaetano Austin TX
An individual can open an HSA. I was in your situation, and my wife opened one at a bank.
Details are in IRS publication 969; for example: "A health savings account (HSA) is a tax-exempt trust or custodial account that you set up ... You must be an eligible individual to qualify for an HSA. No permission or authorization from the IRS is necessary to establish an HSA."
To be "eligible" there are a few conditions. Significantly, the person must must be covered under a high deductible health plan (HDHP), as described in Pub 969.
The HSA is a financial account, typically separate from the health plan provider, but there could be plans that lump the two together.
one of the requirements to be eligible for an HSA is that you are NOT enrolled in Medicare
one of the requirements to be eligible for an HSA is that you are NOT enrolled in Medicare ============ Not quite correct. A better statement: One cannot CONTRIBUTE while on Medicare, but one can open a zero-balance HSA (e.g. for rollovers) or continue to have distributions from an existing account and can even pay (or reimburse) Medicare premiums from it.
If your wife gets a high-deductible plan (one which qualifies), then she can open and contribute to her account.
My reading of the law says that you can not open an HSA if you have other insurance unless it is permitted insurance. Medicare is not listed as permitted insurance (Sec. 223(c)(3)). So... once you enroll in Medicare, you can't open a new HSA nor can you contribute to an HSA that you already have. If you already have an HSA, Parts A, B, C & D Medicare Premiums would be qualified expense. A medicare supplement plan premium would not be a qualified expense.
My reading of the law says that you can not open an HSA if you have other insurance unless it is permitted insurance. Medicare is not listed as permitted insurance (Sec. 223(c)(3)). So... once you enroll in Medicare, you can't open a new HSA nor can you contribute to an HSA that you already have. If you already have an HSA, Parts A, B, C & D Medicare Premiums would be qualified expense. A medicare supplement plan premium would not be a qualified expense. =================== ...Which if one unwinds 26 U.S.C. 223(c)(3), through (b) into (a), that applies to the ability to contribute and deduct that contribution to an account. It says nothing about opening an account. One can open a new account, but funding it can only occur by rollovers, not contributions, when there is no qualified high-deductible insurance.
Note also the interesting quirk: (b)(8)(B)(ii) - A person who dies or becomes disabled doesn't have to reverse the deduction for contributions (by including the excess in gross income) nor pay the 10% excise tax on it for any period the contribution is prepaid which falls after the date of death or disability (e.g. when a person contributes for the full year all in the first month of the tax year, believing that they will qualify for the entire year).
I agree, the code does not prevent one from opening an HSA if you are enrolled in Medicare. But... to open an HSA you have to have a high deductible health plan. Who on Medicare has a high deductible health plan? I couldn't find any company that offers a high deductible health plan to a medicare enrollee. What you can find are companies offering a Medicare MSA (Medical Savings Account) Plan. This combines a special Medicare Advantage Plan (Part C with high deductible, no Part D) and a medicare savings account that is "similar" to an HSA. Medicare deposits the funds into the savings account. See
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