an Opportunity for Mutual Benefit HSAs, By Steve Christenson, CHSP, CIP, CISP, Executive Vice President, Ascensus As summer comes to a close, employers are in the midst of selecting next year’s benefit options for both themselves and their employees. They’re deciding whether to offer retirement plans, health insurance plans, and other benefits, such as flexible savings accounts and health savings accounts (HSAs). It is the HSA part of this equation that we need to take a closer look at. HSAs can be a critical element of an individual’s entire financial plan. Very few savings arrangements offer the same advantages as HSAs – tax-deductible contributions, tax-deferred earnings, and tax-free distributions if used properly. This HSA triple tax advantage is extremely attractive, one reason financial organizations offer HSA programs. Even so, many financial organizations continue to ask the question: “Should we offer this to our clients – and if so, what are the service and education considerations?” Why do individuals open HSAs? To answer this question, it’s important to understand that many individuals open their first HSA through their employer as part of open enrollment. Employers will generally select a health insurance provider and use the suggested HSA provider paired with the insurance plan. This may make it easier for employees to open an HSA and for the employer to make contributions. And knowing that they can receive an HSA contribution from their employer may further encourage employees to open an HSA. Can an individual have multiple HSAs? It’s common for employers to periodically change health insurance and HSA providers. This may require an employee to open an HSA with the new HSA provider. When this occurs, the employee holding the original HSA may wonder what will happen next. The answer – possibly nothing. Because the employee is the HSA owner, he can keep the HSA open even if he’s not contributing to it. And all prior HSA contributions belong to the HSA owner – regardless of the source. Although the employee may keep the original HSA open, the employer will likely stop covering any fees associated with the original HSA. This may subject the employee to minimum balance requirements and fees. The employee may choose to: • Continue using the original HSA in combination with the new HSA, but be subject to potential fees; • Roll over or transfer the assets from the original HSA to the new HSA or another HSA he owns elsewhere (similar to rolling over IRA assets); • Pay for outstanding qualified medical expenses or reimburse himself for past qualified medical expenses paid out of pocket; or • Distribute assets in the original HSA to pay for nonqualified expenses (these distributions would be subject to tax and a possible penalty tax). Continued on page 8 September • October 2022 7
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