Question: My tax person informed me that when I turn 65 and have Medicare, I can no longer have an HSA. Do you agree, is that correct?

Answer: Questions that start with “My tax person/preparer said …” I rarely answer. When it comes to tax rules, I have very limited knowledge and am aware of that. But in this situation I am willing to step in and offer some advice.

First, I would like to define HSA. A Health Savings Account (HSA) is an account that allows an individual or family a way to save pre-tax dollars to use for paying qualified medical expenses. This HSA is overseen or managed by a bank, credit union or insurance company. For most individuals the HSA is tied to a High Deductible Employee Health Insurance product.

When you (and sometimes your employer) adds money into this HSA, it is pre-tax. You have NOT paid income tax on it. This allows you to save money on taxes and save to pay for medical expenses down the road. In 2017 the maximum amounts you are allowed to put into your HSA is $3400 for an individual and $6750 for a family. If you are over 55 years of age, there is an additional $1000 you can contribute each year to your HSA.

This HSA is YOUR money, it can’t be taken away from you, and it doesn’t evaporate at the end of the year if you don’t spend it. The HSA continues to grow as you add to it and is available to you for the rest of your life. You can use your HSA money after you have Medicare. This HSA offers you an opportunity to save pre-tax to pay for medical expenses that may happen someday.

The question you asked has to do with turning 65 and being eligible for Medicare. Once you are eligible for Medicare AND sign up for Medicare, you can no longer put money into your HSA. So this is important to understand and to plan for when turning 65, if you have an HSA.

If you are eligible for Medicare, but do NOT sign up for either Medicare A or B, you can continue to contribute to your HSA. Once you enroll in Medicare A or B you can no longer contribute to your HSA. That is a law related to the HSA. The money in the HSA is still your money to use in the coming years, but you cannot put in any new money for yourself once you have Medicare A or B. If you are married, you can still contribute on behalf of your spouse, but only to the individual amount of $3400. This rule change happens the first of the month that you turn 65. In planning for this Medicare eligibility, you must decide about Medicare and the HSA contribution. Your contribution can continue up until you are 65, but you cannot put in the full year amount, it would be a pro-rated amount, month by month, up until your birthday month. Then your contributions must stop.

So your tax person is correct on part of their statement, but not completely. You can keep your HSA and the money that is in it. You can continue to contribute to your HSA for your spouse/family. You can continue to contribute to your HSA if you don’t enroll in Medicare. You can continue to use the money in your HSA to help pay for Medical Expenses. You can have the HSA and use the HSA, even if you have Medicare A & B. You are not able to continue to contribute for yourself into the HSA once you have Medicare A or B. Once your spouse becomes eligible for Medicare A & B and signs up for Medicare, then your contributions on their behalf must stop as well.

The next question I usually get about an HSA is, “What can I use the HSA money to pay for?”

The HSA can be used to pay for many medical expenses that we incur. The IRS lists Qualified Medical Expenses in a very concrete list. I will not list them all here but give you some examples. Most of the usual things we think of are included, like; doctor & medical expenses, hospital bills, ambulance rides and related commonly considered medical expenses. Some that may be a surprise would be hearing aids and batteries, smoking cessation programs, Telephone or TV equipment to assist the hearing or visually impaired, eye glasses, lasik eye surgery, weight loss programs, prescription drugs and medications, nursing home care, guide dog, drug addiction, dental care (including braces, dentures, fillings & oral surgeries), chiropractor & acupuncture. The IRS complete list can be accessed on the IRS.gov website to see if what you are thinking of is included. This partial list is simply given to illustrate the type of things that are included.

If you have an opportunity to have an HSA for yourself and your family, I would strongly encourage you to contribute to it. Talk to your employer and see what the rules are for your situation and an HSA. This could be used for the overall and long term financial health of you and your family.

To contact Janell Sluga, GCMC with questions or concerns, please call 716-720-9797 or e-mail her at janells@lutheran-jamestown.org.