6 Land Mines to avoid when leaving a Health Savings Account

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Switching Health Plans due to a ‘Life Changing Event’, change in Employment, or FEHB Open Season?  Here’s some land mines to avoid as they apply to High Deductible Health Plans (HDHPs) and their linked Health Savings Accounts (HSAs).

1) Your New Deductible.  Starting a new health plan resets the contributions you have made towards your plan’s deductible amount to Zero.  You’re starting from scratch.

2) Billing Errors.  We’ve already had 3 billing errors in 6 weeks on a new plan.  These take place when the clerk inputs the wrong insurance card.  This seems to happen even though I insist on the clerk touching and reading the new insurance card when we check in.  Watch your bills carefully!

3) Over contributing to your HSA for the Calendar/Tax Year.  This is an IRS land mine.  You can only contribute to an HSA while you are a participant FOR THE ENTIRE MONTH in a HDHP.  In my case I started the HSA the second week in January and terminated in early September.  Therefore I can only contribute a pro-rated amount to the HSA for the 7 months of February through August.  To be specific, the total amount maximum in my case was 7/12 X $6450 = $3762.  Note that this limit includes employer contributions to the HSA for the year.  US Bank has a sample calculator on its HSA webpage.   Make sure you read the HSA portion of IRS Publication 969 carefully- there are all kinds of confusing exceptions, exemptions, and caveats!

4) Termination of your HSA Contribution Eligibility Altogether.  You may get away with a few days of ‘Overlap’ between your old employer’s insurance plan coverage and your new employer’s plan, but once your new health plan starts, your eligibility to contribute to the HSA ends (assuming the new plan is not an HSA-linked HDHP).

5) HSA admimistrative fees.  The HSA portion of the FEHB Aetna HDHP is actually administered by Chase Bank.  I recently received a letter informing me that I will receive a ‘new’ Chase HSA account, with a new and improved sheet listing all of the fees.  One of the fees is a $4/month ‘account maintenance fee’.  This is not a fee that you are slapped with for having actual investments, but a monthly fee just for the privelige of letting the HSA bank to hold on to the money you have contributed.  So while your HSA funds can technically last forever, in reality they may not if your account gets whittled down by $4 every month.

6) FSA eligibility.  If your new employer’s plan is Medical FSA-eligible, You have full eligibility to contribute to your new FSA.  The FSA contribution limit your your new health plans ‘plan year’ is not pro-rated for the plan year- you can contribute the full limit of $2500 per  family to the new medical FSA.

Reference: IRS Revenue Procedure 12-26: http://www.irs.gov/pub/irs-drop/rp-12-26.pdf

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