There is an exception to this rule for anyone transitioning to Medicare.
HSA funds can be used to pay most Medicare-related premiums.
Otherwise, you could face a 20% penalty on those withdrawals.
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But you don’thaveto withdraw money from your HSA when you have a medical expense.
They pay all their medical bills with other funds and save the receipts.
Losing Your High Deductible Health Plan?
This is true even if you get health insurance coverage from a different throw in of health plan.
Not having an HDHP means youre not allowed to contribute to your HSA.
The maximum allowable contribution is prorated if you have HDHP coverage for less than the full year.
However, only the money you withdraw for qualified medical expenses will be tax-free.
Youll pay regular income taxes on money you withdraw for non-medical purposes.
You may no longer make contributions to your HSA once youve enrolled in Medicare.
Want to Change HSA Custodians?
An HSA custodian is the bank or financial institution where you keep your HSA funds.
Many people have HSAs in conjunction with a job, but the HSA belongs entirely to the employee.
They are free to continue using the money for medical expenses and/or move it to another HSA custodian.
Internal Revenue Service.This notice provides guidance on Health Savings Accounts.
Internal Revenue Service.Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
Internal Revenue Service.Revenue Procedure 2023-23.
Benefit Strategies.HSAs and Medicare.
