HSA Eligibility

[MG]

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

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[zvkmpw]

> 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.

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.

[Pico Rico]

"MG" <mauro_...@earthlink.net> wrote in message
news:VsmdncuhPKbn4r_M...@earthlink.com...

> 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

one of the requirements to be eligible for an HSA is that you are NOT
enrolled in Medicare

[Alan]

On 2/20/13 10:06 PM, D. Stussy wrote:
> "Pico Rico" wrote in message news:kfup78$reh$1...@news.mixmin.net...

>
>
> "MG" <mauro_...@earthlink.net> wrote in message
> news:VsmdncuhPKbn4r_M...@earthlink.com...
>> 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
>
> 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.

--
Alan
http://taxtopics.net

[Alan]

On 2/23/13 8:45 AM, D. Stussy wrote:
>
> 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 http://www.medicare.gov/Pubs/pdf/11206.pdf