HSA Enrollee Checklist

If you’ve enrolled in HSA-qualified medical coverage for the first time, your work is only half-done! This checklist can help ensure that you get the most out of your new coverage.

1. Make sure you’re HSA-eligible. Refer to IRS Publication 969 for more information. The most common situation that makes you ineligible to open and contribute to an HSA, even when you’re enrolled in an HSA-qualified plan, is enrollment in any part of Medicare or your own or your spouse’s participation in a traditional health FSA.
2. Open an HSA. If you have employer-based coverage, then your employer may send enough information directly to its chosen HSA administrator to set up the account. Be sure to check with your benefits office. You may have to complete a paper application or enroll online.
3. See whether your employer offers a limited-purpose health FSA. You can remain eligible when you participate in a health FSA that reimburses dental and vision expenses only. This option may make sense if you need funds early in the year (you can spend your entire annual balance at any time) or if you want to maximize tax savings or preserve HSA balances. These are annual accounts, which means that you may forfeit unused balances. Some employers offer limited-purpose health FSAs to their employees enrolled in HSAs, while others don’t. See whether this is an option, and determine whether it makes sense for you.
4. Set up payroll deductions. The best way to build your HSA balance is through regular deposits. Many people start by contributing the difference in premium between their old coverage and their new plan(s). Some who can no longer contribute to a health FSA divert those elections to their new HSA(s). In both cases, the contributions merely reroute money from one pre-tax deduction to another, so that your net paycheck doesn’t decline.
5. Name a beneficiary who will inherit your balance. You may have completed this step with paper or online enrollment. Be sure you name someone. If you designate your spouse as the beneficiary, then the HSA passes intact as a tax-advantaged account to your spouse. If you name anyone else, then the account is liquidated before being passed to the beneficiary, who may incur a tax liability.
6. Set up online access. Your HSA administrator offers an online portal through which you can manage your account, track deposits and withdrawals, monitor debit card activity, and manage investments (which you may begin to make after your account reaches a certain cash balance).
7. Check for fees. Read your account documents, which are probably posted online. Some administrators automatically send monthly paper statements and may charge a fee for this service. You can provide your email address to receive statements electronically at no charge. You may be able to set up notifications whenever your administrator receives a deposit or you use your debit card.
8. Download your HSA mobile app. You can have instant access to your account activity on your smartphone. It’s a great way to stay connected to your HSA and provides real-time information wherever you are (for example, in line at the pharmacy) and whenever you need it.
9. Manage your pretax payroll contributions. You can change your contributions prospectively during the year. See your employer for details. If you need more money to reimburse an unexpected expense, then you can increase your contribution. If you have accumulated a sufficient balance and want to reduce or stop your contributions to increase your paycheck, you can do so (note this isn’t recommended as it’s tough to start again).
10. Decide how you want to use your HSA. Many people use their HSAs as they did a health FSA, making regular withdrawals to fund all eligible expenses. Some consciously decide to become HSA savers, either by contributing up to the maximum allowed ($3,450 for self-only coverage and $6,900 for family coverage in 2018, plus an additional $1,000 if age 55 or older) or by not reimbursing eligible expenses immediately. It’s possible for many HSA owners, particularly those who begin in their 20s or 30s, to build a six-figure HSA balance to spend in retirement on Medicare premiums and out-of-pocket medical, dental, and vision expenses.
11. Remain engaged as a consumer. You assume additional financial responsibility when you’re covered on an HSA-qualified plan. You’re spending your own money from your HSA to cover many expenses. You can preserve your funds without impacting the quality of your care if you shop for price and quality (most insurers have tools to help), ask more questions of your doctor (“Would every doctor recommend the same course of treatment, or might others suggest an alternative treatment?”) and consider the site of service (retail clinic versus Urgent care center versus emergency room) when making treatment decisions. Your job isn’t to practice medicine, but rather to apply to your medical care the same principles that you consider when you buy other complex consumer products like a mortgage, vehicle, or life-insurance policy.

That’s it. The list isn’t onerous. And many of these items are one-and-done activities that you don’t need to think about again. The key to success with an HSA is to understand how to use your account, both mechanically and strategically. In time, most HSA owners accumulate balances, as contributions exceed distributions. This gives them a sense of security, with less fear of a sudden high medical expense – and potentially the ability to enter retirement with additional assets.

William Stuart

William G. (Bill) Stuart is director of strategy and compliance at benefit Strategies, LLC, an independent third-party administrator located in New Hampshire. An expert on Health Savings Accounts, he is a member of the American Bankers Association HSA Council. You can check his biweekly blog at www.benstrat.com/hsagps.