what-is-a-w-2

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pink-eye

how-to-use-hsa-as-retirement-account

benefits-of-long-term-hsa

what-is-the-october-effect

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Kate Dore

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how-to-plan-for-healthcare-as-a-small-business-owner

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HRA (Health Reimbursement Account)

Human Resources

Conjuctivitis, or more commonly known as Pink Eye is a common eye infection that if not treated quickly, can develop into further health problems. Learn more about pink eye treatment, and how much that can cost you. 

Common Health Care Expenses: The Cost of Pink Eye

Historically, October has not been a good month for the stock market. What does this mean for your investments?

What is the October Effect?

Employee Benefits

An HSA offers three different tax benefits. This means that you will have to file additional paperwork with the IRS when you do your taxes. Here is some information on the things you will need to share. 

How does a health savings account affect my taxes?

hsa contributions

Taxes

Health Insurance

Personal Finance

Family Coverage

Kate Dore is a Nashville-based freelance personal finance writer and Candidate for Certified Financial Planner™ Certification. She teaches financial literacy with Junior Achievement and serves as Director of Public Relations for the Financial Planning Association of Middle Tennessee. Her work has been published in Business Insider, Financial Planning Magazine, and Simple Money Magazine.

Many companies offer healthcare benefits for employees, but healthcare is not a one-size-fits all program. What can you do to ensure that your healthcare benefits cover as many employees as possible?

Having Diverse Healthcare Plans is Beneficial for Your Employees

If you recently changed to an HSA compatible healthcare plan, there are a few things you need to know about how to make your contributions tax-deductible.

How to take advantage of a health savings account deduction

As a business owner, it's your responsibility to offer your employees healthcare. Or is it? If your business operates as a Limited Liability Corporation, here are the different options you have for paying for health insurance for you, and your employees.

Health Insurance Strategies for LLC Owners

pharmacy

Investing

HSA Investment

Transferring funds from one account to another can be a hassle - even more so when taxes are involved. What can you do to minimize penalties and headaches? 

Trustee-to-Trustee Transfer vs. Direct Rollover: Which is the Safest?

Financial Health

If you're getting ready to file your taxes, the W-2 form is one of the most important forms that you need as a full-time employee. This form covers all of the income you have received from your employer and more.

What is a W-2 form and why do I need it to file my taxes?

Health Savings Accounts

Benefits

If you're looking for a tax-advantaged accounts dedicated for healthcare, there are a few options to consider. HRAs and MSAs are a couple of those accounts, but what's the difference?

HRA vs. MSA: What's the difference? 

am married or getting married?

transfers

HSAs are great tools to use not just for short-term health care expenses, but also to help build long-term savings for the future. Here's how using an HSA can benefit you in the long run.

The Long-Term Benefits of Using an HSA

With all of the tax benefits available with HSAs, it can be easy to go overboard and accidentally over contribute. What do you need to do if that happens?

What should I do if I contribute too much to my HSA?

HSA Eligibility

Savings

Employee benefit packages are important tools for recruiting and employee retention. If you're looking for some inspiration for your employee benefit packages, here are a few of the most popular benefits currently being offered.

The Best Employee Benefit Packages

QSEHRA

When you and your partner decide to tie the knot, there are a few other decisions that need to be made - such as deciding on what to do for healthcare. We detail considerations you'll need to take when choosing a healthcare plan here. 

Average Health Insurance Costs for a Newly Married Couple in 2020

While it's not required to provide your employees with health insurance as a small business, knowing what you can provide can be beneficial. We break down how you can research the right health plans for your small business.

How to Plan for Healthcare as a Small Business Owner 

Family Budgeting

Retirement Planning

investing

Legislation

One of the benefits of a health savings account is that you can use it as a retirement account. While it's not traditionally marketed as such, the triple-tax benefits of it make it a good account to grow funds for retirement. 

How to Use Your HSA as a Retirement Account

HSA (Health Savings Account)

HSAs offer the ability to invest the funds that you have saved from your contributions. But is it better to save that money, or invest it?

Investing vs. Saving: What is the smarter strategy for HSAs?

Health Reimbursement Account

Pink eye can be an uncomfortable problem to deal with, especially when the infection spreads to both eyes. Fortunately, pink eye is common and it may be easy to treat the symptoms. Here are some of the basics to know—including how much it costs to treat and how to save money on these expenses.

## What is pink eye?

Pink eye, a.k.a. conjunctivitis, is a [common eye infection](https://www.mayoclinic.org/diseases-conditions/pink-eye/symptoms-causes/syc-20376355). It happens when the clear membrane lining your eyelids and white part of your eyeballs become inflamed. The small blood vessels may become infected, making the white part of your eyes look red or pink. You may get pink eye from a bacterial or viral infection or an allergic reaction. Although pink eye may not impact your vision, it can be contagious, so early diagnosis and treatment are critical. 

## What is the treatment for pink eye?

It may be possible to get a diagnosis simply by sharing the symptoms with your doctor. You won’t usually need an in-person office visit. Typically, the purpose of the treatment is to ease your symptoms. 

Pink eye is usually a viral infection, which means antibiotics won’t clear it. The one exception may be if pink eye is caused by the herpes simplex virus. For a normal infection, though, you may notice the infection spreads from one eye to the other within a few days. Unfortunately, you may have to wait two to three weeks for the infection to run its course. Over time, your pink eye symptoms will get better. 

Your doctor may suggest some treatments to ease the symptoms in the meantime. These may include artificial tears, using a wet cloth to clean your eyelids, or trying a [cold or hot compress](https://livelyme.com/whats-eligible#Hot-and-Cold-Compress) throughout the day. 

If the infection is caused by an allergic reaction, your doctor may prescribe eye drops for allergies. They may also suggest antihistamines, decongestants, steroids, or anti-inflammatory eye drops. You may avoid future flareups by staying away from known allergens. 

## How much does pink eye treatment cost?

The cost of treating pink eye may vary based on what your doctor prescribes. You may save money by skipping an in-person doctor’s appointment. But if you have to visit in person, you may owe a copayment or out-of-pocket expenses, depending on your health insurance plan. 

You may purchase artificial tears eye drops over the counter for less than $10. Your doctor may also recommend a hot or cold compress for $10-$20. You can use your health savings account (HSA) to pay for either type of compress. Antihistamines and decongestants may cost up to $30, depending on the quantity you buy. Luckily, both products are also HSA-eligible. 

Looking for more HSA eligible products? Check out our [What's Eligible](https://livelyme.com/whats-eligible/) page to see what items are considered a qualified medical expense. 

## Be proactive with pink eye

While it may be tempting to ignore, getting a pink eye diagnosis may be the first step to feeling better. Plus, it may motivate you to steer clear others while you are still contagious. It’s never fun to spend money on over-the-counter remedies for any type of illness. But using pre-tax, health savings account money may make it less of a financial burden.




For most people, tax season is filled with endless amounts of paperwork. You may have to track down tax forms from your employer, retirement accounts, health savings accounts, and it can be difficult to stay on top of everything you need. If you're a full-time employee, you should receive a Wage and Tax Statement—also known as a W-2—sometime in January or February. Here's a closer look at the purpose of this form and why it matters when you are filing your taxes.

## What is a W-2 form?

Your W-2 form is an earnings summary from the previous year. The form covers how much money you made—which may include your salary, wages, or other types of compensation. Your W-2 also includes a breakdown of the taxes your employer withheld and submitted on your behalf. If you’re a full-time employee, you need a W-2 to file your tax return every year.

## Where do you get a W-2 form?

Not all workers receive a W-2 form. In fact, you will only receive one if you earn [$600 or more and your employer withheld taxes for you](https://www.irs.gov/forms-pubs/about-form-w-2). Self-employed folks or contract employees won’t receive W-2 forms because they submit taxes quarterly on their own. Instead, these workers receive 1099 forms from each of the companies they worked with.

When you’re eager to file your tax return—and possibly get your hands on refund money—it can be frustrating to wait around for your W-2 form. Luckily, companies have an annual deadline for these forms. Employers must send you and the IRS a copy of your W-2 form by [January 31st](https://www.ssa.gov/employer/filingDeadlines.htm) every year. This should give you enough time to file your tax return by the deadline, which is usually April 15th. 

As a result of the coronavirus outbreak, the Treasury Department has [__extended the 2019 tax filing deadline to July 15th__](https://livelyme.com/guides/covid19-health-savings-account#federal-tax-and-hsa-contribution-deadline-extended). This new deadline happens for everyone automatically, without filing a separate tax return extension.

## What does your W-2 form include?

Your W-2 form includes some of the key details you need to file your federal and state tax returns. This information includes:

- Your Social Security number
- Employer details (employer identification number, company name, and company address)
- Wages, tips, and compensation
- Federal, Social Security, and Medicare taxes withheld
- Dependent care benefits
- Nonqualified retirement plan compensation

Before filing a tax return, you should always double-check to make sure W-2 information matches your records. Make sure your total income and taxes withheld numbers are accurate. If you need guidance, there are line-by-line instructions on the final page of your W-2 form. But if you still feel confused, don’t be afraid to seek professional guidance from a tax professional. 

## Start getting organized early

Few things are more stressful than scrambling to meet tax filing deadlines. There may be a federal deadline extension this year but you shouldn't wait. Filing your taxes can be tedious—and if you are missing paperwork—it's better to find out sooner than later. By the time July 15th rolls around, you may be relieved to have filed already.


There are many big decisions to make as newlyweds. As you combine lives, you will have to make choices about your home, finances, and your family. You will also have to plan for healthcare—including your health insurance options. There are several things to consider before signing up for a plan, though. Here's what you and your new family need to know to make the right choices. 

## How to choose a health insurance plan

Once you get married, you will have to make some tough decisions about health insurance. You will have three options to choose from: keeping separate health insurance plans, joining your spouse’s plan, or having your spouse join your plan. 

The problem is, not all companies allow spouses to join their employer sponsored healthcare plan. A [2016 study from Mercer](https://www.mercer.com/newsroom/national-survey-of-employer-sponsored-health-plans-2016.html) found 11% of large employers exclude spouses who may have access to another health insurance plan. For companies that allow it, you may see a spousal surcharge, which is usually about $100 per month, according to the study.

You will also have to consider enrollment periods. Getting married is considered a [qualified life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs) that may trigger a special enrollment period. These periods give you 60 days to sign up for a private health insurance plan or 30 days to enroll in an employer's plan. To qualify for a [special enrollment period](https://www.healthcare.gov/glossary/special-enrollment-period/), though, you may have to show proof of a life event—like your marriage certificate.

For single coverage, the average annual premium was $7,188 in 2019, according to the [Kaiser Family Foundation](https://www.kff.org/report-section/ehbs-2019-section-1-cost-of-health-insurance/). Joining the same health insurance plan may be more affordable. But you will need to compare premiums, deductibles, coinsurance, and copayments to find out.

One benefit of joining the same health insurance plan is you may meet the plan’s deductible faster, which could mean fewer out-of-pocket expenses for the year.

## When to consider a family plan

As your family grows—either from combining health care plans with your partner or planning to have children—the cost of health insurance will increase. Last year, the average family paid $20,576 for health insurance premiums, according to the [Kaiser Family Foundation](https://www.kff.org/report-section/ehbs-2019-section-1-cost-of-health-insurance/). The report says premiums have increased by 22% since 2014.

That's a massive financial burden for any family. But you should consider the plan’s full out-of-pocket maximum costs before making a decision. Depending on your deductible, your family could pay a lot more—or a lot less—on out-of-pocket medical expenses. You should also look at co-payments, co-insurance, and see which providers the plan includes.

If you choose a high-deductible health insurance plan, you can see if you can pair it with a [health savings account (HSA)](https://livelyme.com/hsa-guide). These accounts allow you to save pre-tax dollars for qualified medical expenses. Your employer also may offer a flexible spending arrangement (FSA), which could also cut back on out-of-pocket costs.

## Don't wait on health insurance decisions

As newlyweds, it may be more exciting to plan things like trips and dinner parties. But you shouldn't push your family's health insurance to the back burner. By procrastinating, you could miss a key deadline, which could leave you with a gap in health coverage. The sooner you start comparing options, the easier—and faster—the decision will be. 

As a small business owner, finding affordable healthcare is probably high on the list of company concerns. On top of your own family's plan, you may have employees that want to be covered by company insurance. Companies with fewer than 30 employees pay an average of $409 per person for insurance premiums, according to a [2018 eHealth report](https://news.ehealthinsurance.com/_ir/68/20193/Small%20Business%20Health%20Insurance%20Costs%20Trends%20Insights%202018.pdf). Still, over half of small businesses offer a group health insurance plan to try and attract and retain the best employees. Here are some things to consider before choosing your company's health care plan.

## How much health insurance actually costs

You may be reeling from the sticker shock of health insurance premiums, but these premiums aren't the complete picture of how much health insurance will cost your business. The first thing to consider is cost-sharing. Are you planning to split the cost of insurance premiums with your employees? Forty percent of companies share the cost equally, according to eHealth. 

Also, your company may qualify for small business tax credits. The [Small Business Health Care Tax Credit](https://www.healthcare.gov/small-businesses/provide-shop-coverage/small-business-tax-credits/) may cover up to 50% of your employees' health insurance premiums. You may qualify if you have fewer than 25 full-time employees with an average salary of $50,000 or less.

You should also explore small business tax deductions. Your employees’ health insurance premiums are considered a deductible business expense. You can also deduct the contributions you make to your employees' [health savings accounts (HSAs)](https://livelyme.com/hsa-guide)—which can help them offset qualified out-of-pocket costs. 

Even if you don’t provide a group health insurance plan, you may still offer a [Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)](https://livelyme.com/qsehra-and-hsa)—a.k.a. a small business health reimbursement account. These plans allow you to help employees pay for their health care costs, including monthly insurance premiums. You can learn more about QSEHRAs [here](https://www.healthcare.gov/small-businesses/learn-more/explore-coverage/).

## Where to shop for health insurance plans

When it comes to health insurance plans, small business owners have several options. If you prefer to do it yourself, you can start by calling a bunch of health insurance companies directly for quotes. This may be the most difficult and time-consuming option. 

You may also shop for plans through the [Small Business Health Options Program (SHOP)](https://www.healthcare.gov/small-businesses/employers/), the government’s online exchange for small businesses. You can use the website to compare plans and prices, estimate how many full-time employees you have, and review tax credit information.  

If you're looking for some extra guidance, SHOP [offers a tool](https://localhelp.healthcare.gov/#/) to connect with local insurance agents, brokers, and assistors by plugging in your zip code. Another way to narrow down your options is through trade or professional organizations. Depending on your industry—and your professional affiliations—you may have access to discounted group health insurance plans. You may have a lot more leverage with other small businesses than you would on your own.

## Be proactive with health insurance

It may feel overwhelming to choose the right health insurance plan. After all, your decision may impact your family, employees, and prospective employees for years to come. But the sooner you begin, the more time you will have to compare plans, and the less confusing the selection process may be. 

As your career takes off, you may be eager to save more money for retirement. Luckily, there are plenty of [savings options](https://livelyme.com/maxing-out-which-retirement-account-should-i-max-out-first) to choose from. You may begin with your company's 401(k) and employer match. If you're looking to save more, you may also open an IRA. These are savvy moves, but there's another account to consider, too—a health savings account. Here are some things to know about this lesser-known, tax-friendly account. 

## How health savings accounts work

If you have a high-deductible health insurance plan, your company may offer a health savings account to go with it. Nearly half of companies make health savings account contributions, according to the [2019 Employee Benefits report](https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/pages/benefits19.aspx) from the Society for Human Resource Management. If your company offers any type of match—which is much like 401(k) matching—you should try to take advantage of it.

You can make health savings account contributions before paying tax on the money. When you're ready to spend it, you can make withdrawals tax-free on qualified medical expenses. The tax break on the front end can make a big difference when you're spending a lot out-of-pocket. Otherwise, you will have to pay taxes on the withdrawal—with a whopping 20% penalty. 

## Consider not spending your health savings account funds

Rather than tapping your health savings account for every healthcare expense, you could allow it to grow in your health savings account.

By making contributions year after year, and skipping withdrawals, you will have more money for medical expenses in the future. Typically, healthcare only becomes more costly as you get older, so you may be grateful the money is there. This may be especially true once you have a fixed income in retirement.

You can always reimburse yourself for qualified medical expenses anytime in the future. You can do this by saving up your receipts and repaying yourself from your HSA for those qualified expenses, as long as you were qualified to contribute to an HSA during the time period you are attempting to reimburse yourself.

## Invest your health savings account balance

Another benefit of health savings accounts is long-term growth. Some companies allow you to [invest the balance of your account](https://livelyme.com/investing-your-hsa-using-compound-growth-to-your-advantage). If you contribute and invest every year, your earnings may compound, and you may have a sizable balance within 20 or 30 years.

As the account grows, you won’t pay taxes on your earnings and they can be used on qualified medical expenses tax-free. After the age of 65, you can withdraw the money for any expense provided income tax is paid on the amount withdrawn for non-qualified medical expenses.

## Always weigh the pros and cons

Your health savings account comes with a built-in set of trade-offs. There are two important decisions to make—spend the money now or spend it later. By leaving the balance alone, you will pay more out-of-pocket now. This could be a financial burden if your family's budget is already tight. But if you're able to make it work—and pay for medical expenses without your health savings account—you will have the ability to invest and grow the money for years to come. And once you turn 65, you can use the money for any purpose.


When you're ready to start saving for retirement, it's easy to focus on your 401(k) or IRA. But there's another account you should prioritize, too—your health savings account. These accounts offer three unique tax benefits, along with the opportunity for long-term growth. 

While it's easy to spend health savings account money on your current medical expenses, you may be missing out on the account’s future potential. Before swiping your card for medical expenses, consider these long-term benefits. 

## Max out your health savings accounts every year for tax breaks

As you start earning more money, you may be looking for ways to reduce your family’s taxable income. One way to achieve this is through tax deductions. There are several ways to score a tax deduction, including annual contributions to your health savings account. 

This is considered an “above-the-line” deduction—not to be confused with “itemized deductions”—which happen later on your return. Above-the-line deductions are more popular because you subtract them from your gross income. But if you choose the standard deduction—and most people do, according to the [Urban-Brookings Tax Policy Center](https://www.taxpolicycenter.org/briefing-book/what-standard-deduction)—you won’t be able to claim any itemized deductions.  

With an eligible high-deductible health insurance plan, you can contribute up to $3,550 per year as an individual or $7,100 with a family plan in 2020. In 2021, you can contribute up to $3,600 per year as an individual or $7,200 for families. You can deduct the full amount on your tax return every year, regardless of how much money your family makes.

## Opportunity to invest and grow the balance

Another benefit of health savings accounts is portability. You can take the entire balance with you when you change jobs, which gives you the ability to grow your balance every year. Some health savings account providers allow you to invest the balance so you can grow your funds even more. 

You can invest and grow the money tax-free and make withdrawals anytime for qualified medical expenses. As you may imagine, you could grow a sizable balance over time if you decide not to spend the money within your HSA. 

For example, let's say you open a health savings account for the first time at 30-years-old. You can use our health savings account [calculator](https://livelyme.com/calculator/) to see how much money you may have after 30 years if you don’t spend any money from it,

If you contribute and invest the maximum amount every year, you could have $199,270 after 30 years, assuming a 4% return. Best of all, you won't owe income taxes on the earnings—or withdrawals—once you need to spend it. Income taxes on investments varies by state, so be sure to check your state laws or consult a tax professional to identify the amount of savings you’ll have.

## Investing vs. spending your health savings account money

When you have a high-deductible health plan, it may feel like a visit to the doctor’s office can overwhelm you. One quick visit to the doctor or small procedure can easily turn into large medical bills—often for hundreds of dollars or more. 

Not everyone can afford to pay out-of-pocket for expenses like these. But if there is any wiggle room in your budget, it could pay off to leave your health savings account untouched. 

By maxing out your contributions every year and investing the balance, you could have a solid nest egg by retirement. Because let’s face it—there’s nothing cheap about healthcare in retirement. The average couple may need $285,000 for healthcare and medical expenses alone, [according to Fidelity](https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/healthcare-price-check-040219.pdf), so you may be relieved when the money is there.


It's no secret that health care is expensive. The average family spends $8,200 per year—or 11% of their income—on health care, according to the [Kaiser Family Foundation](https://www.kff.org/health-costs/press-release/interactive-calculator-estimates-both-direct-and-hidden-household-spending/). That’s a good portion of a budget for any family. But luckily, tax-advantaged health accounts may offset some of the out-of-pocket costs. Medical Savings Accounts (MSAs) and Health Reimbursement Arrangements (HRAs) are a couple of options to consider. Here's a closer look at each one—including the pros and cons of each type of account.

## Medical Savings Accounts (MSAs)

__The basics:__ Medical savings accounts (MSAs) are a type of tax-advantaged health account. There are two types of MSAs: Archer and Medicare Advantage. Archer MSAs started as a pilot program for small companies in 1996. Health savings accounts (HSAs) arrived in 2003, making MSAs obsolete. Although the MSA program ended in 2007, some companies may still offer their original MSA plans. 

Medicare Advantage MSAs still exist for folks with a Medicare-approved high-deductible healthcare plan. The money may grow tax-free and you can withdraw it to pay for qualified medical expenses.

__How to qualify for an Archer MSA:__ You must be part of a pre-2007 Archer MSA plan. You need to be self-employed or work for a small company with 50 or fewer employees with a high-deductible health insurance plan. Your spouse may qualify, too.

__The benefits of an Archer MSA:__ 

- You can claim a deduction for contributions, even if you don't itemize.
- Earnings grow tax-free.
- Withdrawals are tax-free for qualified medical expenses.
- Your balance rolls over from year to year.
- The account is portable if you decide to change jobs.

__The downsides of an MSA:__ Since January 2008, it's not possible to establish a new MSA.

## Health Reimbursement Arrangements (HRAs)

__The basics__: Health reimbursement arrangements (HRAs) are company-owned plans, funded only by your employer. These contributions are pre-tax, so they won’t be part of your gross income. You can use this money to reimburse yourself for qualified medical expenses. These reimbursements are tax-free. If you don’t spend the balance, you can carry it forward for the future.

__How to qualify for an HRA:__ You may only qualify for an HRA through an employer’s plan. Self-employed folks aren’t eligible for an HRA. 

__The benefits of an HRA:__ 

- Employer contributions aren't taxable income.
- Qualified reimbursements are tax-free.
- You may save the balance for the future.

__The downsides of an HRA:__

- Only your employer can contribute to an HRA.
- Your employer owns the HRA.
- An HRA isn’t portable if you change jobs.

## Seek guidance from a tax professional

Before opening any type of tax-advantaged account, it's important to know the basics. While there may be a wealth of financial information at your fingertips, it's easy to get confused by all the rules to qualify, contribute, or withdraw—especially as the tax code changes. When in doubt, try to work with an experienced tax professional. They may be able to offer specific tips for your family’s unique tax situation. You may rest easier knowing exactly what is allowed, and what may cause trouble at tax time. 



*Editor’s note: Because you need to know the safest and easiest way to change HSA providers, and the difference between an HSA transfer and rollover, we’ve written a [newer blog post](https://livelyme.com/hsa-transfer-vs-rollover): “HSA Transfer vs Rollover: Which is the Safest and Easiest Method?” *

---

Are you ready for a new health savings account, but nervous about making the switch? It's normal to feel uneasy about the logistics of moving accounts, especially when the stakes are high. One wrong move could trigger an unexpected tax bill—with a costly penalty, to boot. The best way to avoid trouble from Uncle Sam is through a health savings account transfer or rollover. We’ll cover two options to help you decide which is best for you. 

## Pay attention to the 60-day rule

Health savings accounts are popular because of their triple-tax benefits. You can make contributions before taxes, grow the money tax-free, and make withdrawals anytime for qualified medical expenses. But if you use the money for any other purpose, you will have to pay regular income taxes on the withdrawal, plus an extra 20% penalty.

When changing health savings accounts, you'll have the task of moving the money to a new company. Your original provider can send you a check with the balance, but you’ll have to open the new account quickly. As long as the transfer happens within 60 days, the IRS won't consider it a withdrawal. But if it takes any longer, you'll owe income tax and a 20% penalty on the balance.

Luckily, you can bypass this risk—and avoid a mandatory 20% tax withholding from your original company—by completing a trustee-to-trustee transfer. 

## What is a trustee-to-trustee transfer?

Changing from one health savings account to another is a major decision. When you're finally ready to move the money, you can do it with a trustee-to-trustee transfer. This is one way to avoid the risk of taking longer than 60 days to move the money—and paying income tax and penalties on the transaction.

With a trustee-to-trustee transfer, your first health savings account provider makes a direct payment from your original account to the new one. The transaction will be faster than depositing the money yourself with a direct rollover. Plus, there won't be a mandatory 20% tax withholding.

## What is a direct rollover?

A direct rollover, which involves receiving a check, is another way to move the money. This can be a hassle, because it is noe entirely in your responsibility to transfer these funds to a new provider - which can easily be forgotten. 

Once you receive the check, it's your responsibility to deposit the money within 60 days. If you miss the deadline, you can expect to pay income taxes plus a 20% penalty on the remaining balance. If you decide to take the risk of a direct rollover, contact your health savings account provider for the complete instructions.  

## Which option is the safest?

While it may be tempting to do it yourself, it's always better to rely on a trustee-to-trustee transfer. Not only will it happen faster, but you can skip the frustration of a mandatory 20% tax withholding. Plus, you may rest easier knowing the task of moving the money is out of your hands.


Winning the lottery is the ultimate get rich quick fantasy. You may dream of ways to spend the money, even before hitting it big. Your new home, fancy car, trendy wardrobe, or luxury vacation may be top priorities—but not before the IRS takes their cut.

Earning money means the government wants their share, except when it comes to health savings accounts. These accounts offer triple tax benefits—making them the unicorn of the tax world. 

If you have a high-deductible health insurance plan (HDHP), you are eligible to contribute to an HSA. Here's everything you need to know about health savings accounts and how they may affect your taxes.

## How to save on taxes with a health savings account

While budgeting with a high deductible health plan may seem like a challenge, partnering them with health savings accounts (HSA) can ease that burden. HSAs help those with HDHPs by offering them three specific tax savings:

### 1. Health savings account funds are contributed pre-tax.

When you contribute to your HSA, the money goes in before you pay taxes. A portion of your paycheck goes into your HSA and then you pay taxes on the rest of your income. This strategy lowers your taxable income. If you choose to contribute to your HSA post-tax, those contributions are tax deductible. 

__Note:__ *Qualified medical expenses—which you may deduct on your tax return if you itemize deductions and exceed 10 percent of your adjusted gross income—are different than HSA contributions. HSA contributions are an adjustment to gross income and are always allowed, whether you choose to itemize or not.*

### 2. Health savings account investments grow tax-free.

One of the perks of your health savings account is the balance carries over from year to year. This offers the unique opportunity to grow your money for the future. Another perk of the HSA is that you can invest the funds within your account without paying taxes - even for the invested portion! Many HSA providers partner with investing partners so you can easily manage your funds in one place.

### 3. Health savings account withdrawals for qualified medical expenses are tax-free.

As long as you withdraw the money for qualified medical expenses, you won’t have to pay federal income tax on your earnings. This is different from a brokerage account, where you may owe capital gains tax.

__Note:__ This applies to federal income taxes only. Every state treats health savings accounts differently, so it’s important to [check your state tax laws](https://thehsareportcard.com/the-hsa-report-card-1/2017/12/2/any-bank-basiconlinecom) regarding the matter. 

These breaks may offer a significant amount of income tax savings. Let's say you're a single taxpayer earning $100,000 per year. If you contribute the maximum amount to your HSA, you could save $840 on income taxes for the year. Couples earning $100,000 and contributing to the limit may save $1,500 on federal taxes each year. 

The exact amount of savings depends on your income, tax brackets, family size, and HSA contributions. Either way, your health savings account could lead to major income tax savings, and these tax benefits may add up to thousands of dollars over the course of your lifetime.

## The downsides of a health savings account
HSAs may seem too good to be true. The problem is, not everyone has the right type of health care plan to qualify. You must have an eligible high-deductible health plan (HDHP) to contribute to your HSA, and once you apply for Medicare at 65, you will no longer be eligible to contribute.

You may score lower monthly insurance premiums with a high-deductible health plan. But your deductible will be higher than other plans—at least $1,400 for individuals and $2,800 for family coverage in 2020 and 2021. 

HSAs offer the opportunity to save money for healthcare expenses in retirement. The low annual contribution limit could make it difficult to build a large nest egg, which is why it shouldn’t be your only retirement account. For the 2020 tax year, the annual HSA contribution limits are $3,550 for an eligible individual and $7,100 for a family. For the 2021 tax year, the annual HSA contribution limits are $3,600 for an individuals and $7,200 for families. There's also a $1,000 catch-up contribution for folks 55 and older.

Instead, consider it like an individual retirement account (IRA). These plans also have lower contribution limits, but may still be an excellent supplement in retirement. You should talk to your financial advisor for in-depth retirement planning advice.

Another downside of a health savings account is you must use the money for qualified medical expenses. There are plenty of things that qualify—like visiting the doctor, going to the hospital, dental expenses, and medications. They can also be used for things such as eyeglasses, orthodontics, and acupuncture. 

The final drawback is record-keeping. It’s important to save copies of your receipts for qualified medical expenses throughout the year. You will have to submit Form 8889 with your tax return for a record of your HSA contributions and withdrawals. Some of this will be available on your W-2 from your employer. You’ll also receive Form 1099-SA from your plan administrator. You can see the complete details at [IRS Publication 969 here](https://www.irs.gov/forms-pubs/about-publication-969).

## Should I open a health savings account (HSA) or flexible spending account (FSA)?

It's easy to get confused by the differences between HSAs and FSAs. These two medical savings accounts have a similar name but there are some key differences. You're more likely to see an FSA, especially if you work for a small business. If you do, here are some of the key characteristics to watch for.

<ul>
  <li><strong>You don’t need a high-deductible health insurance plan for an FSA.</strong> To qualify for an HSA, you must have an eligible high-deductible health insurance plan (HDHP). Luckily, FSAs don't have the same strict eligibility rule.</li> 
  <li><strong>Your employer owns your FSA.</strong> You can't open an FSA without your employer, which isn't the case with an HSA. The downside of opening your own HSA is you won’t qualify for a tax deduction because your contributions will be after taxes.</li>
  <li><strong>FSAs don’t allow you to maintain a balance from year to year.</strong> FSAs are more restrictive than HSAs. You can’t roll over tax-exempt money from year to year. Depending on your employer, you may have one of two options: roll over $500 or have a grace period of two and a half months to use the money.
  <li><strong>FSAs have a lower annual contribution limit.</strong> Another downside of FSAs is the lower annual contribution limit. On the plus side, this may make it easier to spend the money on qualified expenses before the deadline.</li>
  <li><strong>Both FSAs and HSAs are different from an HRA.</strong>  A Health Reimbursement Account (HRA) is a plan that reimburses employees for the out-of-pocket medical expenses (and sometimes their plan premiums) when they make qualified medical expenses. While you may be reimbursed for qualified expenses like an FSA or HSA, you are unable to manage those funds as you would with those accounts.</li>
</ul>

## Take advantage of tax savings with an HSA.

If you choose to go with a high-deductible health plan, don't skip the opportunity to pair it with an HSA. Even if your company doesn't offer one, there are plenty of providers you can choose from. You can check major financial institutions or online options like Lively. Our plan stands out with no fees, competitive investment options, and a world-class user experience.



After ringing in the New Year, you may be ready for a fresh start with your money. Sticking to a budget, saving more, and paying off debt are all worthy resolutions. You should also prepare for your income tax return. It may be tempting to ignore it until April, but putting it off could increase your chances of mistakes.

By starting earlier in the tax year, you may uncover more opportunities for federal tax deductions. If you qualify, consider opening a health savings account. You may be eligible for a deduction on your federal income tax return, which could mean paying less in taxes to the Internal Revenue Service (IRS). Here's what to know about the health savings account deduction—and how to get ahead for next year's tax season.

## How to qualify for a health savings account contributions

If you have a high-deductible health insurance plan, you may have already experienced some costly medical bills. These out-of-pocket expenses can be tough to predict—especially when you receive the bills weeks or months after seeing the doctor. The unpredictability can make a high-deductible health plan difficult to budget for.

One way to soften the financial blow is by opening a health savings account. These accounts offer three ways to save on taxes—but you will have to qualify every year to make annual contributions. Here are some guidelines to keep in mind.

## You need an HSA-eligible high-deductible health plan (HDHP).

Not all high-deductible health insurance plans are HSA-eligible. Before making any contributions, you should check with your insurer to make sure your plan qualifies. Otherwise, you may have to answer to the IRS later.  

You need to have insurance coverage with an annual deductible of at least $1,350 for an eligible individual or $2,700 for family coverage in 2019. These amounts may adjust every year. As an individual, you won’t pay more than $6,750 for out-of-pocket expenses with in-network providers. The maximum out-of-pocket for a family plan is $13,500.

Your high-deductible health plan may cover some preventative care before you meet the deductible. This may include things like annual physicals, immunizations, and screenings for cancer or heart disease.

## You must have a private insurance plan

You won’t qualify for health savings account contributions if you’re currently enrolled in Medicare. You need to have an employer-provided high-deductible health plan—or one of the Marketplace plans through the Affordable Care Act.

## You can’t be a dependent on someone else’s tax return.

If you’re considered a dependent on your  another person’s tax return, you won’t qualify for health savings account contributions.

## If you make contributions, you may qualify for a tax deduction

Once you qualify for health savings account contributions, you may also be eligible for a tax break. There are two ways to get a deduction for putting money into your HSA account.

If your employer makes a contribution, the money goes into your health savings account before income taxes. This means it won't be part of your gross income—and you won't owe federal income tax for your employer’s contribution. You should check to see how your state treats health savings account contributions, though. There may be different state-level tax laws.

You can also deposit money into your health savings account after paying income taxes. The HSA contribution will still impact your taxable income because your deposit is tax-deductible. To claim the tax deduction, you can submit Form 8889 with your tax return. 

The maximum 2019 contribution is $3,500 for individuals and $7,000 for families. You may also qualify a $1,000 catch-up contribution if you're 55 or older, too.

If you're self-employed and own a small business, you may also benefit from a health savings account—and the perks that come with it. You should speak with a tax professional to see which type of plan is the best fit for your company's health insurance. Your company may be eligible for tax savings from a health savings account or a medical savings account.

## Health savings accounts offer additional tax savings

Tax deductions are one reason for health savings accounts’ popularity. But there are more perks than your tax-deductible HSA contributions. You may also enjoy two additional tax advantages, as well.

The second benefit of your health savings account is tax-free growth. If your health savings account allows you to invest, you won't owe income taxes on your earnings. Your HSA balance rolls over every year, and there is no deadline to use the money. If you contribute and invest every year, you could amass some extra retirement savings.

The third health savings account perk is tax-free withdrawals. You can use the money anytime for qualified expenses. These may include out-of-pocket health care costs like seeing the doctor or dentist. You may also use HSA funds for prescriptions, hospital visits, co-insurance, and co-payments.

## Watch for these health savings account rules

Health savings accounts can be a great deal if you follow the IRS guidelines. You may avoid paying income tax or a tax penalty by following these rules.

- __Stick to your annual HSA contribution limit.__ It may be tempting to deposit extra money for a bigger tax deduction—but this could be a costly mistake. It’s up to you to keep track of your contributions every year. Be careful to stay within the annual limit, or you may owe an excise tax of 6%. You can avoid this penalty by withdrawing the extra contribution money by your tax deadline.
- __Only withdraw money for qualified medical expenses.__ You can spend HSA money or reimburse yourself for qualified medical expenses anytime. But if you withdraw money for something else, you may have to pay income tax—plus a 20% penalty. Once you turn 65, you won't owe the 20% penalty for non-qualified withdrawals. 

## Save on taxes with a health savings account

There's nothing like the triple-tax advantage of a health savings account. You may qualify for annual tax deductions, tax-free growth, and tax-free withdrawals—which can be a powerful combination. It's a great way to reduce your taxes while also saving for future health care costs.


For most employees, compensation is a lot more than a competitive salary. With the country’s unemployment rate hovering around [3.5 percent](https://www.bls.gov/news.release/pdf/empsit.pdf) , competition for the best talent is fierce. Top employees may expect to receive popular benefits like health insurance, paid time off, retirement savings plans, wellness and family benefits, and more. If you're planning to add team members in 2020, it may be time to review your employee benefits package—and see how it stacks up against your competitors. These are some of the most popular benefits to consider.

## Health Insurance

If you're looking to attract top talent, your company’s health insurance plan must be a priority. Fifty-five percent of employees say it's the most important benefit, according to a [recent survey from Clutch](https://clutch.co/hr/resources/employers-should-offer-health-insurance-employee-benefits).

Most companies have a health insurance plan, with 85 percent offering PPO plans, according to [SHRM’s annual employee benefits report](https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/SHRM%20Employee%20Benefits%202019%20Executive%20Summary.pdf). But high-deductible health plans (HDHPs) are also gaining popularity. More than half of companies offer their employees at least one HDHP option.

High-deductible health plans can be more expensive for employees, so many companies pair them with a health savings account (HSA) or a flexible spending account (FSA). These accounts give employees the option to save pre-tax money for out-of-pocket medical expenses.

## Retirement Plans

Many employees worry about their financial future. But luckily, most companies offer ways to save and invest for retirement. Ninety-three percent of employers offer a traditional 401(k) plan and almost two-thirds offer their employees a matching contribution. They may also offer investing and retirement planning advice. One in five companies even offers credit counseling for their employees.

## Paid Time Off

Work-life balance is a priority for many employees. Almost all companies offer some type of paid time off and sick leave. And companies of all sizes are offering employees the chance to work from home. More than one-quarter of companies allow full-time employees the option to telecommute. It's also becoming more common to offer flexible work hours.

## Wellness and Family Benefits

Although employees appreciate family and wellness benefits, most companies haven't been increasing their budgets to pay for them. But these benefits are often low cost, and may be worth considering. Fifty-eight percent of companies offer some type of wellness program. Investing in these programs may pay off. According to SHRM, they have a proven track record for improving certain health conditions and fitness levels. 

Companies also offer a number of family-friendly benefit options. Twenty-five percent of companies allow parents to bring their kids to work during an emergency. Some also offer discounted child care or referrals for providers. There has also been an uptick in services for mothers like on-site lactation rooms and support services. Some companies offer programs to assist parents who are returning to work. Elder-care benefits are growing, but still not prevalent at most companies.

## Be proactive with your company's employee benefits package

As competition heats up, it's important to consider your company's total compensation package. Providing the best employee benefits package offers more than bargaining power. You may also experience greater levels of job satisfaction and higher retention rates. 


As a small business owner, offering employees affordable health insurance may be one of your biggest concerns. The expense of covering employees—including your own family—can be costly. Paying for health insurance can be challenging, but as a business owner, there are many other things you have to consider. The government has different regulations you must follow depending on the structure of your business. If you have a limited liability corporation (LLC), here are some specific details you should know.

## What is a limited liability corporation (LLC)?

When you launch a business, you have several options on how to structure the company. Each of these business structures may have various legal and tax implications, depending on where you live. 

One popular business structure is a limited liability corporation or LLC. This is for people who want legal separation from their business—without the higher costs of other business entities. It’s easy to form an LLC, and you may enjoy the flexibility of filing taxes as a single-member LLC (basically a sole proprietor), partnership, S corporation, or C corporation. Each of these options impacts your company’s options for health insurance.

### Health insurance options for LLC owners

After setting up your company's business structure, you may be wondering if you can qualify for health insurance through your LLC. 

The short answer: it depends. 

The company’s tax filing will impact your options. They may fall into one of two categories—either you buy health insurance individually or qualify for a company group health insurance plan. 

Here’s a breakdown of each option:

- __LLC filing as a sole proprietor__ - If you're a single-member LLC, taxed as a sole proprietor, you personally won’t qualify for a group health insurance plan through your company. However, you can still purchase a policy on your own. It can be expensive to cover the premiums, but fortunately, you can deduct 100% of the cost on Schedule 1 of your tax return.

- __LLC filing as a partnership__ - If the company is a partnership with two or more owners, also called “members”, you may have the option of qualifying for the company’s group insurance plan—or, you can buy health insurance on your own. If you purchase insurance on your own, you may deduct 100% of the cost like sole proprietors. The tax deduction for a company plan happens on Form 1065 and Schedule K and K1. 

- __LLC filing as an S corporation__ - For S corporations, the company may deduct health insurance premiums for employees or shareholders. If shareholders own more than 2 percent of the company, the business must add the cost of premiums to the shareholder’s W-2. If the shareholder qualifies, they may also deduct the expense on Schedule 1.

- __LLC filing as a C corporation__ - If you file taxes as a C corporation, the company may deduct the full cost of employee health insurance on Form 1120. Employees may enjoy the benefit of health insurance tax-free. 


## Seek guidance for your company’s health insurance 

Most small business owners don't have tax or legal expertise, which is why you may need local guidance. Before choosing a business entity, speak with a local attorney who can share state-specific advice. After that, you can work with a local tax professional on the best options for filing taxes as an LLC. They can walk you through your company's health insurance goals—and how each option may impact your taxes.


One of the biggest challenges of operating a business is managing employees. Often this includes recruiting new team members. One way to attract qualified prospects is by offering employee benefits. For some prospects, a company’s health insurance plan could motivate them to accept your job offer or they may decide to continue their job search elsewhere if it doesn’t fit their needs. Designing an attractive and affordable benefits package isn’t easy. Here’s how to decide what to offer your employees—and why more healthcare options could make a difference.  

## What most companies offer for healthcare plans

When it comes to employer-provided health insurance, most companies don’t offer a lot of options. According to a [new report from the Kaiser Family Foundation](https://www.kff.org/report-section/ehbs-2019-section-4-types-of-plans-offered/), most companies only have one healthcare plan. This is especially true for smaller firms. Companies offering one plan are most likely to offer access to a PPO—also known as a “preferred provider organization”. They aren’t likely to offer indemnity insurance. Twenty-seven percent of the companies with only one healthcare plan offers their employees a high-deductible health plan.

## How to pick the right type of healthcare plan

Choosing your company's healthcare plan is a big decision. It may impact your family and employees’ families' well-being for the foreseeable future. Before making a plan selection, here are some things to consider:

- __What is your healthcare budget?__ As a business owner, every dollar matters. You will need to decide how much you are willing to spend on healthcare and how much your employees will need to chip in. There’s a big difference in the monthly premiums between plans, which will have a big impact on whoever pays. 
- __What are your employees' healthcare needs?__ Although every family has a unique set of health needs, you may find a range of healthcare spending based on age. For example, older employees or young families with children may spend more. If you’re not sure, you could speak with your employees to learn more about their situation and what they would need.
- __How close are local hospitals and doctors?__ If you work in a bigger or mid-sized city, you may have plenty of hospital networks and doctors to choose from. But companies located in rural areas may have less access. 

## There is no one-size-fits-all for healthcare

Regardless of age, your employees may have a wide range of healthcare needs. By offering more than one plan, you will offer employees the chance to pick the best fit for their family. For example, younger employees without a family may opt for a high-deductible plan. They may prefer to save on premiums and use the extra money to fund a health savings account (HSA). For employees with ongoing health issues, a lower deductible plan may be ideal.

## Why offering multiple healthcare plans could pay off

In a tight job market, it’s not easy to hire and keep top talent engaged. If you're trying to stand out from the competition, consider your employee benefits. Offering more than one healthcare plan is one way to make an impact. It tells employees the company cares about their health and well-being. It also shows you want them to stick around for years to come.


There's a lot to like about your health savings account (HSA). You may be looking to score a triple-tax break or you may want to invest your HSA money to grow a decent-sized nest egg for healthcare expenses in retirement. With all of these financial perks, you may catch yourself overcontributing. Here's why contributing too much to your HSA is an expensive problem—and how to fix it.

## How much can I contribute to my HSA?

Before you start making HSA contributions, it's important to make sure you are eligible. To qualify, you need an HSA-eligible, high-deductible health insurance plan. Your health insurance must have a deductible of at least $1,350 if you are single or $2,700 for your family’s plan.

If you're still not sure if you qualify, don't be afraid to speak with your company's HR department. Or, you can contact your health insurance company to confirm your plan is qualified. Once you have the green light, you can start making contributions—as long as you stay within these limits for 2019:

- Single - $3,500 
- Family - $7,000

If you’re 55 or older, you can deposit another $1,000 for a [catch-up contribution](https://livelyme.com/hsa-catch-up-contributions). These limits include annual contributions from both you and your employer. As long as you stick with an eligible health insurance plan, you can keep making 2019 contributions until next year’s tax deadline — April 15, 2020.

## What happens if I contribute too much to my HSA?

One of the biggest perks of an HSA is getting access to three different tax breaks. You may qualify for a tax deduction when the money goes in. You can invest and grow the money tax-free. When you need the money, you can withdraw it anytime, penalty-free, for qualified medical expenses.

But if you deposit more than your annual HSA contribution limit, you can't claim a tax deduction for the extra amount. In the eyes of the IRS, your excess contribution becomes taxable income. To make matters worse, you will have to pay an extra 6 percent tax on your excess contribution.

To avoid paying a 6 percent excise tax, you can withdraw the extra contribution money. But this fix is only allowed if you meet the following rules:

- You need to withdraw your excess contribution before your deadline for tax returns—including extensions.
- If you earned money on your excess contributions, that money needs to come out, too. You will need to claim the earnings as "other income" on your tax return.

## How to be proactive about your HSA contributions

We get it—it's tough to keep track of HSA contributions throughout the year. It can be especially confusing if you’re trying to stay on top of your company deposits—along with your own. Rather than laboring over yet another spreadsheet, you can rely on us to do the heavy lifting. The Lively dashboard offers an at-a-glance look at exactly where you stand year-to-date. The contributions tracker makes it easy to see how much you have deposited—right above your annual limit. By keeping the information at your fingertips, you will have one less thing to worry about at tax time.





When you have a high-deductible health plan, out-of-pocket expenses are the norm. It's tough to predict when you will receive a bill and estimating the cost may feel impossible. Luckily, you may qualify for a health savings account, or HSA, to cut back on expenses.

HSAs are an excellent way to save on the short-term costs of healthcare. You can also invest the money to build a tax-free nest egg for retirement. It's not easy to decide between saving and investing. If you're struggling to make the choice for your family, here's what you need to know.

## The tax benefits of a health savings account (HSA)

If you have a high-deductible health plan, it's worth the time to see if your plan qualifies for an HSA. These accounts are portable and the money is yours for life. HSAs are like the unicorn of the tax world—offering three different ways to save.

First, you can deposit money into your account before taxes. If you invest the money, your earnings grow tax-free. You can withdraw the money anytime, tax and penalty-free, for qualified medical expenses. You can find out what the IRS considers a “qualified medical expenses” [here](https://livelyme.com/whats-eligible/). If you're still not sure, don't be afraid to speak with a tax professional.

## Should you keep your HSA money in cash?

If you're looking for flexibility, you may prefer to keep your HSA money in cash. With a high-deductible health plan, you may receive unexpected medical bills. By keeping your HSA money in cash, you can easily access it as needed. This could be handy if you are expecting a major medical expense—like surgery or another costly procedure.

The biggest downside of keeping your money in cash is the missed opportunity for growth. Your money could be earning interest, and by leaving it in cash, it may not keep pace with inflation. As the cost of living gets more expensive, your money’s purchasing power declines. The longer your money is stagnant, the more purchasing power you have to lose.

## Should you invest your HSA money?

Are you hesitant to invest HSA money? You're far from alone. According to a [recent report](https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_463_hsa_long-29oct18.pdf?sfvrsn=31783e2f_2), 95 percent of HSA account holders keep their money in cash. While it's easy to see the appeal of the quick access to cash, you could be missing out on major growth potential.

With a few keystrokes on our [Future Growth Calculator](https://livelyme.com/calculator/), you can see the power of investing over time. For example, if you start from scratch and contribute $3,500 every year, you may wind up with almost $200,000 after 30 years. This assumes you earn a four percent return on your money. This extra money could go a long way in paying for healthcare expenses in retirement. 

Best of all, you can withdraw the money for qualified medical expenses without paying extra taxes or fees.

## Think about the big picture

Before you decide to save or invest, think about your family's needs. Both your current and future money goals matter. It's tough to argue against investing, but you shouldn't bypass your other priorities to do it.

If you're struggling to make ends meet, it may be better to skip a high-deductible health plan for now. You won't qualify to contribute to an HSA, but it may be easier to plan for out-of-pocket medical expenses. If you are stuck with your company’s high-deductible plan, you may prefer to keep your HSA in cash for your family’s short-term needs.


After a long, hot summer, you may embrace the fall with open arms. October ushers in cooler weather, colorful leaves, fall fashion, pumpkin spice lattes, and of course, Halloween. October is less popular in the finance world, though. Some people even fear October and its potential impact on their investment portfolio. The October effect is a long-feared phenomenon. 

Here's where it came from and what to expect with your investments:

## What is the October effect?

While there is no way to predict what is going to happen in the stock market, some think it tends to decline in the month of October. Investment advisors call this the October effect. 

Over the past 100 years, several major stock market meltdowns appear to support this theory. These events include the [Panic of 1907](https://www.federalreservehistory.org/essays/panic_of_1907), [Black Monday, Tuesday, and Thursday in 1929](https://www.federalreservehistory.org/essays/stock_market_crash_of_1929), and the [Stock Market Crash of 1987](https://www.federalreservehistory.org/essays/stock_market_crash_of_1987). Some also remember the stock market decline in October 2008—the biggest single-day drop within 20 years. This meltdown is a painful reminder of the Great Recession. 

While these stock market drops were devastating for the economy, their connection to October is merely a coincidence. Over the past 100 years, there is no specific evidence that October is a bad month for the stock market overall—and some of the [worst dips](https://us.spindices.com/indexology/djia-and-sp-500/sizzlers-and-fizzlers) have actually happened in other months. In fact, there have been [53 months of positive October returns since 1928](http://www.yardeni.com/pub/stmktreturns.pdf). This compares to 38 months of October declines. 

## Should I worry about dips in the stock market this month?

Although October has been good for the stock market on average, there is no way to know what may happen next. Many factors impact swings in the market. These may include the government’s fiscal and monetary policies—like the Fed’s increase or decrease of interest rates or Congress deciding when to spend money. It may also be linked to what is happening internationally. You may also see stock market movement based on how consumers view the economy or basic supply and demand. There are many factors at play, so it’s impossible to try and time the market.

## How to plan for the October effect

It's easy to feel panicked by changes in the stock market, especially when the media reports on every single move. But you should try to avoid making any fear-based, impulsive investing decisions. Dips in the stock market are going to happen—and it's impossible to predict when. 

If you look at [a chart showing the history of the stock market](https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart), you will notice there is a consistent upward trajectory—even with short-term temporary dips. By keeping the big picture in mind, it may soothe your nerves when things start to go array. 

Instead of reacting emotionally to stock market shifts, or the perceived October effect, stick with your original investing plan. Regardless of the current market climate, your investing strategy should focus on your individual goals, risk tolerance, and investing timeline. If you are investing for the long haul—like retirement in 20 or 30 years—this month’s stock market activity will be small blips over the course of your investing timeline.  


To lower your healthcare costs you enroll in a high-deductible health plan (HDHP). That's because HDHPs have lower insurance premiums (but higher deductibles).

Since HDHPs have higher deductibles, you can help keep your healthcare costs low by using preventive care and a medical savings account (known as an HSA).

1. Most HDHPs cover preventive care (like a physical exam) with zero out-of-pocket. So keeping up with preventive care is a smart way to avoid costly illnesses (and to feel good!).

2. You can continue to lower your healthcare costs by using a health savings account. In fact, a high-deductible health plan works best in combination with a health savings account.

Read this guide if you want to learn how to use a tax-advantaged health savings account (HSA) to pay for qualified medical expenses, save money, and lower your taxes.

<h2>Who should read this</h2>

This material applies to individuals & families that want to lower their healthcare costs and be financially effective with their high-deductible health plan (HDHP).

It’s important that you learn about HSAs if you have (or plan to enroll in) an HDHP. It will help you save big.

If you’re in the process of enrolling in an HDHP then choose a plan that is compatible with an HSA. The IRS defines an HDHP as having:

- $1,350 minimum annual deductible for self-only health care coverage and $2,700 for family coverage (both unchanged from 2018)

- $6,750 maximum for self-only health care coverage (a $100 increase from 2018), and $13,500 for family coverage (a $200 increase from 2018)

Jump to:

- [Health Plan Terms](#health-plan-terms)
- [Definition of an HSA](#definition)
- [HSA vs FSA](#hsa-vs-fsa)
- [HSA vs PPO](#hsa-vs-ppo)
- [Benefits of an HSA account](#benefits)
- [How to qualify for an HSA account](#how-to-qualify)
- [How to maximize your savings](#how-to-maximize)
- [How to use your HSA funds](#how-to-use)
- [How to open an account account](#how-to-open)
- [Frequently asked questions](#faq)

<h2 id="health-plan-terms">Some Health Plan Terms</h2>

Before we move forward, let’s define a few terms you’ll come across when shopping for health plans. If you know these feel free to skip to the next section.

- Deductible: This is what you pay upfront for your medical care before your insurer’s coverage kicks in. Once you meet your deductible your insurer covers a large part of the bill. It resets every year.

- Premium: This is what you pay every month to the insurance company to have health insurance whether you use it or not.

- Copay: Predetermined rate you pay to access healthcare services. With your plan, you could have to pay $20 every time you go to the doctor’s office or a $10 copay for your monthly medication.

- Coinsurance: Once you meet your deductible, your health insurer takes up the bulk of your medical bills. But not all of it. Your co-insurance is the percentage of a medical bill you pay for after you meet your deductible. For instance, with a 25% coinsurance, you would pay 25% of each medical bill, and your health insurance provider will cover the remaining 75%.

- Out-of-pocket limit: But you can’t just keep paying for your healthcare, otherwise in a bad health year even with the best plan you would become bankrupt. Your out of pocket limit is the absolute maximum you would need to pay for your healthcare in a year before your health provider covers 100% of the bill.

<h2 id="definition">What is an HSA?</h2>
Health care costs for Americans have been skyrocketing. And an HSA can help you (and your family) plan for and beat the rising costs.

So what exactly is an HSA?

A Health Savings Account (HSA) is an easy and smart way to pay for qualified medical expenses for you and your dependents. With its tax-advantages, easy access to savings, and future growth potential it’s an effective savings vehicle that provides benefits today and in the future.

You can [open an HSA easily and in only a few minutes with Lively](https://livelyme.com/). Then you can contribute to your account (which is FDIC insured) with pre-tax dollars. As a result, you’ll lower your income tax (which is a significant tax benefit).

Using your HSA funds is also easy. We cover it below in the ‘[How to use your HSA funds](https://paper.dropbox.com/doc/2019-Guide-to-HSA--AR5sdUz22mf7__AoRI1xvIORAg-EtPIRt4gBzgxqKMnnuDyY#:uid=463786104738843322001399&h2=How-to-use-your-HSA-funds)’ section.

<h2 id="hsa-vs-fsa">HSA vs FSA</h2>

Health savings account versus a flexible spending account

FSA stands for flexible spending account. It’s an account your employer makes available to you so you can pay for medical expenses with pre-tax dollars.

With both an HSA and an FSA, you can pay for out-of-pocket medical expenses—like copays, medical bills, and vision expenses—while __lowering your taxable income.__

But an FSA is different than an HSA. Read our HSA vs FSA blog post to find out which account is better for you.

<h2 id="hsa-vs-ppo">HSA vs PPO</h2>

It's not a choice between an HSA plan and a PPO plan.

__An HSA account helps you save for medical expenses. It’s not a form of health insurance.__

__A PPO, on the other hand, is a form of health insurance.__ PPO stands for Preferred Provider Organization and refers to the type of network you can access for healthcare.

PPO plans are traditional plans that tend to have lower deductibles and higher premiums. Other healthcare plans like a health maintenance organization (HMO) have lower premiums and low or almost no deductibles, but you have a smaller choice of providers.

The question isn’t whether an HSA is better than a PPO. The question is do you want a high-deductible plan, or do you want a low deductible plan? And if you opt for a high-deductible plan then you’ll be financially efficient if you also enroll in a health savings account.

Our [HSA vs PPO blog post](https://livelyme.com/hsa-vs-ppo/) helps you decide if a PPO or an HDHP + an HSA is right for you.

<h2 id="benefits">Benefits of an HSA account</h2>

An HSA is like a supercharged IRA. It’s approved by the Internal Revenue Service (IRS). And it’s great for your federal tax and state tax returns.

That’s because your HSA contributions are tax-deductible from your income tax, __meaning you can lower your tax burden.__

An HSA offers triple tax savings:


- Pre-tax or tax-deductible contributions
- Tax-free interest and investment earnings
- Tax-free distributions, when used for qualified medical expenses

HSAs are also portable. This means that you always keep your HSA. This is true even if you change employers or stop working. Unlike a [Flexible Spending Account (FSA)](https://livelyme.com/hsas-vs-fsas/), there is no “use-it-or-lose-it” rule with HSAs. If you don’t use funds, they remain in your HSA each year. They also continue to earn tax-free interest.

So take control of your healthcare costs and plan for your future by [opening an HSA](https://livelyme.com/).


__1. Save more for your health__

Contributions to an HSA are tax deductible. Paying with these funds means you’ll pay less for health expenses.

__2. Health safety net__

Rollover your HSA funds from year to year. Unlike a flexible spending account, your contributions don’t have to be used within the year.

__3. Put your money to work__

From day 1, you can establish an investment account using your HSA contributions, with a variety of mutual funds to choose from.

__4. The 401(k) of healthcare__

After age 65 you can use your HSA money for non-health related expenses and just pay income taxes on your withdrawals. No penalty!

<h2 id="how-to-qualify">Qualifying for an HSA account</h2>

To qualify for an HSA you need to a health insurance plan known as an HDHP.

High-deductible health plans have lower premiums and higher deductibles. And to qualify for an HSA,the HDHP must satisfy certain IRS requirements with respect to deductibles and out-of-pocket expenses.

Based on 2019 IRS specifications, qualifying HSA health plans must have minimum deductibles of $1,350 for individuals and $2,700 for families. In addition, qualifying plans must have maximum out-of-pocket amounts of less than $6,750 for individuals and $13,500 for families.

With an HDHP, you generally pay more up front for medical expenses before the plan begins to pay for covered services. In return, you will generally pay less in premiums than in other medical plan options. Otherwise, an HSA-eligible health plan is much like a traditional health care plan.

For more information on if you qualify for an HSA check out [IRS publication 969](https://www.irs.gov/forms-pubs/about-publication-969%5d).

__Not sure if you qualify? Use our free calculator__

Lively created the industry’s first [HSA eligibility calculator](http://livelyme.com/signup-eligibility/). It algorithmically calculates hundreds of HSA contributions scenarios to show you exactly how much you can contribute. You can see it live here.

<h2 id="how-to-maximize">Maximizing your savings (2019 contribution limits)</h2>

To take full advantage of tax savings and to build a reserve for the future, it is suggested that you make the maximum contribution as set by the IRS. So there are HSA contribution limits? Yes.

For those of you who want the quick answer: the HSA contribution limits for 2019 are __$3500 for an individual__ and __$7000 for a family__. If you are 55 or older your catch-up contributions are limited to an __extra $1000 a year__.

Read our [2019 HSA Contribution Limits](https://livelyme.com/2019-and-2018-hsa-contribution-limits/) blog post for a complete look at contribution limits and to learn how to maximize your savings.


<h2 id="how-to-use">How to use your HSA funds</h2>

You can use your HSA funds as you would the funds in your bank account: with your debit card.

After you enroll in an HSA, Lively sends you a branded debit card.

The catch is you can only use HSA money for qualified medical expenses. These costs generally include payment to doctors or dentists, over-the-counter [prescription](https://www.nerdwallet.com/blog/health/2014/03/24/cheap-prescriptions/) drugs, imaging such as MRIs, medical services (such as home care) and medical equipment or supplies.

With a Lively HSA, you can also reimburse yourself for any qualified medical expenses that your insurance didn’t cover and you had to pay out-of-pocket.

Lively created a [free-to-use search engine](https://livelyme.com/whats-eligible/) to find out if what you want to buy is a qualified medical expense. You can also visit [HSA Store](https://hsastore.com/?a_aid=59ee38ee1506b&a_bid=87383ed8&utm_source=Lively&utm_medium=TPA+Portal+EL+List&utm_campaign=TPA+Partner) to find and purchase thousands of eligible expenses.

Q) Can an HSA be used for glasses?

A) Yes, as long as the sunglasses have prescription lenses and were not bought over-the-counter.

Q) Can an HSA be used for dental?

A) You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments.

<h2 id="how-to-open">How to open an account</h2>

Open and FDIC-insured health savings account in minutes with Lively.

Lively brings HSA into the modern era so it’s easier for you to keep healthcare costs low today and plan for the costs of tomorrow.

__1. Why Lively HSA__
<iframe title="Why Lively HSA?" width="640" height="360" src="https://www.youtube.com/embed/6Yx8YS3wQ2o?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

__2. How to easily open an HSA__
<iframe title="Setup HSA Account Tutorial 💵 How to set up a Health Savings Account with Lively" width="640" height="360" src="https://www.youtube.com/embed/jysGYakLFQ8?feature=oembed" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

<h2 id="faq">Frequently asked questions</h2>

Q) Is an HSA also health insurance?

A) No, it isn’t. Health insurance is provided by an insurance company. An HSA is not insurance coverage. For our full answer, read our [Is HSA health insurance?](https://livelyme.com/is-hsa-health-insurance-we-know/) blog post.

Q) Is an HSA tax-deductible?

A)Yes. But you need to fill out the right forms. Read our blog post on [HSA Tax Forms](https://livelyme.com/what-hsa-tax-forms-do-you-need-to-fill-we-know/).

Q) Are HSA contributions pre-tax?

A) Your HSA contributions are pre-tax if made by payroll deduction.

Q) What happens if I use my money to pay for a non-qualified expense?

A) If you are under 65 years old, you will have to pay ordinary income taxes as well as pay a 20% penalty for the amount you’re disbursed out of your HSA account. If you are 65 or older, disabled or die, then you will just pay ordinary incomes taxes (no penalty). If you find yourself in this situation, you can attempt to put money back into your HSA funds before tax time each year.

Q) Does an HSA roll over?

A) Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

<h2>Get a free HSA</h2>

Things like your flexibility in contributing, the ability to keep your unused balance and additional tax benefits make HSAs the wisest choice. So [sign up for an HSA – it's free →](https://livelyme.com/)

HSA Guide 

Learn how to use a Health Savings Account to pay for qualified medical expenses for you and your dependents.

Health Savings Account Guide - IRS-Qualified Medical Expenses & More

2019 HSA Guidebook

<p>It’s that time of year again, when 80% of Americans spend less than an hour researching one of the most important decisions they’ll make this year: their health coverage.  Unfortunately, this often leaves many people under-insured or without the right coverage for their needs.  To prevent this from happening to you, we have a few tips that’ll help you make the right decisions for you and your family this open enrollment season.</p>

<p></p>

<h2>Tip #1- Review Your Family’s Recent Health History</h2>

<p>To make sure you’re buying the right coverage for your family’s needs, you need to know what those needs are.  During open enrollment, roughly 90% of Americans choose the health plan they had the previous year, despite any changes in health.  Sometimes this is fine.  Other times, it leaves them under-insured.</p>

<p>So take a look at what your family’s medical needs have been over the last two years.  How did your current plan support you?  Where did it fall short?  Then ask yourself if you or a family member has been recently diagnosed with a condition that will require ongoing treatment.  If so, you’ll want to take that treatment into account when choosing a plan.</p>

<h2>Tip #2- Assess Recent or Near-Future Life Changes</h2>

<p>Are you getting married?  Pregnant or wanting to get pregnant?  Are you planning to move away from your preferred doctor and want to make sure you have access to another health provider you like?  To make the right decision for your 2019 health coverage, you’ll want to anticipate how these future changes will affect your healthcare needs.</p>

<h2>Tip #3- Check Your Current Benefit Options</h2>

<p>Plan names can stay the same but the benefits included within them could change.  So even if you keep the same plan as you had last year, it could end up costing you more or less depending on what changes your employer or the plan provider made.  Possible changes to look for are:</p>

<ul>
  <li>Coverage levels</li>
  <li>Pricing</li>
  <li>Types of products offered</li>
  <li>New providers for existing products</li>
  <li>New products from existing providers</li>
</ul>

<h2>Tip #4- Check to see if Premiums and Deductibles Have Changed</h2>

<p>Sometimes companies change the amount to which they’ll contribute to their employees’ health plans.  If your company has changed its contribution levels, this will likely affect the amount you pay in premiums and deductibles.  It might also affect the attractiveness of HSAs and FSAs in order to help with those deductibles.</p>

<h2>Tip #5- Do Your Own Research</h2>

<p>Your company will likely put out official communication regarding your benefits options and reviewing its resources is a good place to start.  But it’s not a place to end.  Many companies like <a href="https://www.alegeus.com/insights/1232-choosing-a-health-insurance-plan">Alegeus</a>, which is an administrator of health benefits for organizations, provide resources to help consumers make the right choices when it comes to their benefits.  By doing your own research, you’re more likely to get a neutral third party assessment of your plan options, and you might even find better benefits in the marketplace than your company is offering.</p>

<p>If you do find better plans that you think your company should consider, try sending them to your Human Resources (HR) Department.  When HR knows what employees need, they can make better choices in terms of what benefits they offer in the future.</p>

<h2>Tip #6- Check Your Company’s Wellness Initiatives</h2>

<p>Companies have realized that a healthier workforce is a more productive workforce.  To incentivize healthy behavior, many have started programs that reward such behavior with increased benefits like more HSA money, lower premiums and other perks.  Check with your HR Department to see if you might qualify for any increased benefits.</p>

<p>Navigating the healthcare labyrinth can feel like a job in and of itself.  But if you follow our six tips, you’re more likely to make the right decisions for your family and could end up saving money over the course of the year.</p>

open-enrollment-employee-tips.png

We have six tips that’ll help you make the right decisions for you and your family this open enrollment season. 

Open Enrollment Tips for Employees

__Editor’s note__: An earlier, and shorter version of this [blog post](https://livelyme.com/individual-vs-family-hsa/) was previously published. We published this update because it’s vital you know the differences between a family HSA and individual HSA, and how to tap into your HSA funds for your family.

---

Familiar with the tax-saving benefits of a health savings account (HSA), and wondering how you can extend those benefits to your family? While an HSA is owned by one person, there is a way to tap into those HSA funds for the rest of your family. Discover how, and the differences between a family HSA and individual HSA.

## Your HSA is Dependent on Your Health Care Coverage

To contribute to an HSA, you must enroll in an eligible [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp) (HDHP). 

__For 2020, the [HSA eligibility requirements](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account) are as follows:__

- The annual minimum deductible for individual health care coverage must be $1,400. And $2,800 for family health care coverage. 
- The health plan’s out-of-pocket maximum cannot exceed $6,900 for individual coverage. And $13,800 for family coverage. 

__These eligibility requirements change in 2021:__

- The annual minimum deductible for individual health care coverage must be $1,400. And $2,800 for family health care coverage (No change from 2020).
- The health plan’s out-of-pocket maximum cannot exceed $7,000 for individual coverage. And $14,000 for family coverage ($100 and $200 increase from 2020).

## What is a Family HSA?

![what-is-family-hsa](//images.ctfassets.net/6j8y907dne6i/2AyTsX5zWqJw75Sf8dPxjn/27b942e17c0757642c853d85db8abfe4/what-is-family-hsa.jpg)

While often referred to as a “Family HSA” account, there is actually no such thing. 

Each HSA is owned by one person. But family coverage under a qualifying HDHP allows you to use your HSA to pay for qualifying medical expenses for yourself and your family. The type of health plan (individual or family) you’re enrolled in decides how much you can contribute to your HSA account in one calendar year. 

If you are enrolled in an individual qualifying high-deductible health plan, you will only be able to contribute the individual maximum contribution amount set annually by the IRS. If you and your family are covered by the same qualifying health plan, then your contribution limit is increased to the annual contribution limit set for families. One rule: To contribute the maximum family contribution limit, none of the family members can be claimed on another person’s [tax return](https://www.irs.gov/irb/2004-02_IRB). 

## Annual HSA Contribution Limits

![hsa annual contribution limit](//images.ctfassets.net/6j8y907dne6i/3mripn4V4Q51N7FfM26AEf/283c4bf5ded5d8aefbf448ea77e7b317/hsa_annual_contribution_limit.jpg)

In 2020, you are allowed to contribute the following amounts to an HSA:

- $3,550 for individual health plans
- $7,100 for family health plans

These contribution limits change slightly in 2021:

- $3,600 for individual health plans
- $7,200 for family health plans

If enrolled in an HSA-eligible HDHP, and at least 55 years old—or will be 55 any time in the calendar year—you can make an extra $1,000 contribution. This is a [“Catch-Up” Contribution](https://livelyme.com/what-is-an-hsa-catch-up-contribution). 

The catch-up contributions for 2020 and 2021 are the same: $1,000 on top of your maximum contribution limit.

## Real-Life Examples
### Individual Health Plan with HSA

During open enrollment, James chooses an HDHP because he wants to take advantage of his employer’s contributions to an HSA. James is not currently married and doesn’t have any dependents, so his health plan will cover only him.

As an individual, James can contribute $3,550 dollars into his HSA account in 2020 without a penalty.

### Family Health Plan with HSA
Fast forward a few years, and James is now married with two children. James is at a different company, but still has his HSA and an HDHP that covers him and his family.

James is now eligible to contribute the family limit to his HSA. We won’t know exactly what that amount will be in the future. But if James had his family covered by his health plan in 2020, he would be able to contribute $7,100 within one calendar year.

## Can I Have a Joint HSA With My Spouse?
![no-joint-hsa-with-spouse](//images.ctfassets.net/6j8y907dne6i/4JyBNCLJUiCy6ietwyTrGn/588c28e6b0352282f87b6d0c6643cfe9/no-joint-hsa-with-spouse.jpg)

*Short answer:* No. An HSA is owned by one person. 

Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately. But, the amount you and your spouse contribute, combined, cannot exceed the contribution limit for a family plan. 

### Real-Life Examples:

#### Family HSA Contribution Limit with Two Accounts

Jack and Diane are married and covered under Jack’s high-deductible health plan. Diane wants to take advantage of her employer’s HSA contributions, so she decides to open up an HSA of her own. 

In 2020, Jack and Diane’s total contributions cannot exceed $7,100. That means that whatever Jack contributes to his HSA and whatever Diane contributes to her HSA added together needs to be $7,100 or less. 

Jack and Diane can use these funds to pay for the [qualified medical expenses](https://livelyme.com/whats-eligible/) of those covered under their health plan, including each other.

#### Family HSA Contribution Limit with One Account

The other option is to have the entire amount of the HSA in one account holder’s name. In this case, Jack opts not to contribute anything into his HSA for the year, and Diane and her employer will be able to contribute the entire amount into her account.

## The Benefits of an HSA

![hsa-retirement-benefits](//images.ctfassets.net/6j8y907dne6i/1okT5ICuYiKx6c18Oof9dK/0e331b4135f6588ed8df49e0f2a24bdd/hsa-retirement-benefits.jpg)

There are four primary [benefits of having an HSA](https://livelyme.com/what-are-the-benefits-of-an-health-savings-account).

1. __Three levels of tax savings__. Pre-tax or tax-deductible contributions. Tax-free interest, and investment earnings. And tax-free withdrawals when used for qualifying medical expenses.
2. __Portability__. HSAs aren’t tied to your employer. If you decide to move to a different company or retire, your HSA stays yours. The funds added to your account stay there until you choose to withdraw or roll it over; like a 401(k).
3. __ A safety net in the event of a health-related emergency__. An HSA helps you save for the unknown. It can be used for unexpected health care expenses or health insurance if you’re between jobs. An HSA covers all qualified medical expenses, even after a change of plans or providers.
4. __ Flexibility in retirement__. When you turn 65, your HSA can be used for non-health-related expenses without penalties; like a 401(k), or IRA.

An HSA is a great safety net in the event of a health-related emergency. And with options to invest, choosing to open an HSA is one of the best financial choices you can make for you and your family. 
















family hsa and individual hsa contributions are dependent on health care coverage

family-hsa-vs-individual-hsa

Learn the differences between a Family HSA vs Individual HSA. And how to extend HSA benefits to your entire family. 

Family HSA vs Individual: What’s the Difference?

Dividing your assets, such as 401(k)s and Health Savings Accounts (HSAs) is a central piece of negotiating a divorce settlement. If you receive health insurance through your spouse’s employer, you want to carefully consider whether it makes sense to stay on your partner’s health insurance after you divorce.

## Tips for navigating health insurance when divorcing

### You can pay for health insurance through an ex’s health insurance.

If your health insurance was through your partner’s workplace plan, you may be able to stay on the plan for up to 36 months. The federal COBRA legislation requires any firm or organization with at least 20 employees to offer health insurance to the divorced partner. If your soon-to-be-ex works for a smaller employer, you may be eligible for extended COBRA coverage through a state-run plan.

But there’s a big expensive catch to COBRA health insurance coverage: Once you are divorced, the employer no longer will subsidize the premium cost for the non-employee. 

You will be required to pay the full cost. According to the Kaiser Family Foundation, the average monthly premium for single coverage through a group plan was nearly $7,200 in 2019.  And the employer is also allowed to tack on an additional 2% annual fee to cover administrative charges.

### Check out your employer’s health insurance. 

If you were on your partner’s plan because it was more robust or cost-effective than the plan offered by your employer, time to circle back to your workplace plan. It may now be more cost-effective than staying on your ex’s plan through COBRA. 

Getting divorced is considered a [qualifying life event](https://livelyme.com/life-events-that-can-change-your-healthcare-costs), so you’ll be able to enroll for health insurance outside of open enrollment. 

### Compare COBRA coverage to an ACA-marketplace plan.

Before you finalize your divorce, spend some time pricing out purchasing your own health insurance through the ACA marketplace. Depending on your income you may be eligible for subsidies. You can start your search at the [healthcare.gov](https://www.healthcare.gov/) website.

### Include the cost of paying for health insurance in your divorce negotiations. 

It’s likely that whatever health insurance solution you land on, the premium is going to be a sizable line-item cost in your monthly budget. You should factor that into negotiations for assets. And keep in mind that if there is a family HSA account that has a sizable balance, that is a valuable asset to also bring into your discussions. 

### Consider a legal separation as a temporary step. 

If you are legally separated, but not divorced, you may be able to stay on a spouse’s plan, but it varies by employer and insurer.

### Sort out who pays for insurance coverage of the kids.

This is obviously a key part of your divorce negotiation. If you opt for joint custody and you both assume responsibility for health insurance, the spouse whose birthday falls earlier in the calendar year will have the “primary” insurance for the children. If there isn’t joint custody, the custodial parent typically assumes responsibility for health insurance for children. If the custodial parent remarries, and doesn’t have health insurance, the responsibility can fall to the custodial parent’s new spouse. If that isn’t an option the non-custodial parent will be required to step in and provide health insurance coverage.

Given the complexity of divorce, including health insurance coverage. consulting with a lawyer experienced in divorce law is a smart move to ensure that everyone in the family is covered. 



stay-on-insurance-divorce

Divorce is a complicated process - and it doesn't help that your health insurance gets tied up into the process as well. We detail some information that you will need to know regarding your healthcare if you are getting divorced from your partner.

How Long Can I Stay on My Partner's Insurance After a Divorce? 

<p>Helping employees understand the benefits of an HSA (like any new HSA user), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.</p>
<p></p>
<p>Our employee HSA education guide will help you get HSA strategies&nbsp;in place from day 1 so employees can take advantage of the&nbsp;<a href="https://livelyme.com/what-are-the-benefits-of-an-health-savings-account/">triple-tax benefits</a>&nbsp;immediately.</p>
<h2>HSA Employee Education Tips</h2>
<p>Opening, establishing and contributing to an HSA should be easy.&nbsp;It shouldn&#8217;t be rocket science, that&#8217;s at least what we think at Lively! Here is what every employee needs to know to get started with their new HSA:</p>
<ol>
<li>Confirm&nbsp;<a href="https://livelyme.com/hsa-eligibility-details/">HSA-Eligibility</a></li>
<li>Understand&nbsp;<a href="https://livelyme.com/2018-hsa-contributions/">Contributions&nbsp;Limits</a></li>
<li><a href="https://livelyme.com/add-1-hsa-day-1/">Open and Establish their HSA</a></li>
<li>How to&nbsp;<a href="https://livelyme.com/hsa-rollovers-transfers/">Rollover or&nbsp;Transfer</a>&nbsp;an Existing HSA</li>
<li><a href="https://livelyme.com/set-forget-hsa/">Automating HSA Contributions</a></li>
<li>Use an HSA&nbsp;<a href="https://livelyme.com/hsa-debit-card/">Debit Card</a>&nbsp;for Eligible&nbsp;Purchases</li>
<li>Review&nbsp;<a href="https://livelyme.com/can-i-invest-my-hsa-money/">HSA Investment</a>&nbsp;Options</li>
</ol>
<p>No employer health or financial situation is the same. Once employees have opened&nbsp;an HSA, customizing&nbsp;HSA strategies can help each and every eligible employee take advantage of their HSA benefits. This will better ensure success (and renewal). Let&#8217;s look at two likely employee HSA scenarios:</p>
<ul>
<li><b>HSA Saver</b>&nbsp;&#8211; HSA savers are more focused on the long-term savings value of an HSA. They can invest their funds or simply take advantage of FDIC-Insured interest bearing&nbsp;HSA accounts. Thereby taking advantage of compound interest and save HSA funds for future health costs.</li>
<li><b>HSA Spender</b>&nbsp;&#8211; These employees are using pre-tax HSA funds to pay for expected and unexpected health costs. They can use their dedicated HSA funds to reduce their out-of-pocket health expense liability.</li>
</ul>
<p>Many HSA account holders are a mix of both. Helping employees save for health costs today and plan for anticipated health costs well into retirement will only increase HSA adoption.</p>
<h4>Employee Engagement and Support</h4>
<p>Things come up. Employees get stuck. We get it. We have&nbsp;been through it ourselves. Making sure on-demand support options are available for employees is crucial in this process. It saves everyone time. Employee HSA education is an ongoing process. So we created an on-demand resource center to help &#8211; from an&nbsp;<a href="http://support.livelyme.com/">HSA FAQs</a>&nbsp;to&nbsp;<a href="https://livelyme.com/calculator/">HSA saving calculators</a>. We backed it all up with a dedicated&nbsp;customer&nbsp;service team to answer employee&nbsp;questions via&nbsp;<a href="mailto:support@livelyme.com">email,</a>&nbsp;<a href="tel:1-888-576-4837">phone</a>&nbsp;or chat (via our website).</p>
<h4>Don&#8217;t&nbsp;Forget! Talk About Retirement &amp; Health Costs</h4>
<p>Many employees are stuck on a year-to-year&nbsp;ferris&nbsp;wheel when it comes to health insurance and cost planning. Employees are forced into rising yearly health insurance premiums and out-of-pocket costs. Not planning for health costs in retirement &#8211; which are&nbsp;<a href="https://www.cnbc.com/2017/11/24/health-care-costs-in-retirement-can-top-275000.html">expected to exceed&nbsp;$275,000 per couple</a>&nbsp;&#8211; can be a financial mistake. Employees can use their HSA to plan and save for retirement. In fact, an HSA might be the&nbsp;<a href="https://livelyme.com/stealth-ira/">new stealth IRA</a>.</p>
<p>Opening an HSA is easy (at least at Lively). Helping employees understand the value of an HSA should be too. Use this employee HSA guide&nbsp;to fast-track benefits education to save employees time.</p>

Employee-HSA-Guide.jpg

Helping employees understand the benefits of an HSA (like any new HSA users), takes time and resources. In order to make the HSA education and engagement process easier for employers and employees, we have outlined our best practices.

Employee HSA Guide

Lively Blog

__Editor’s note:__ An earlier, and shorter version of this [blog post](https://livelyme.com/what-is-an-hsa/) was previously published. We published this update to provide a more comprehensive response to “What is an HSA?” This new blog outlines the rules and uses of account ownership, and more.

---

It’s a fact. The cost to be - and stay - healthy rises each year. And even the comprehensive  (expensive) health insurance plans are covering less for the cost of care. So what’s a person to do? Open an HSA.

A Health Savings Account (HSA) allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. You, your employer, and even friends and family can contribute money to your HSA. The contributions are tax-deductible and never expire. So you can save them for a rainy day, retirement, or to help pay for an expensive procedure you have coming up.

## How Do I Qualify for an HSA?

To qualify for opening and contributing to an HSA, you must meet these criteria:

1. You must enroll in a [High-Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp) (HDHP). In 2020, the IRS defined HDHPs as any plan with a deductible of at least $1,400 for an individual and $2,800 for a family. The total annual out-of-pocket expenses can’t exceed $6,900 for an individual or $13,800 for a family.  
2. You can’t have any other supplemental health insurance coverage. Meaning, you can’t be covered under your spouse’s health insurance plan too.
3. You must not be eligible for or enrolled in Medicare.
4. You must be under the age of 65.
5. You can’t contribute to a [Health Flexible Spending Account](https://livelyme.com/what-is-a-healthcare-fsa) (HFSA). But you can contribute to a [Dependent Care](https://livelyme.com/dependent-care-fsa-dcfsa-work) (DCFSA) or [Limited-Purpose FSA](https://livelyme.com/what-is-a-limited-purpose-fsa) (LPFSA) and contribute to a health savings account in the same year.

## How Does a Health Savings Account Work?

![how-does-health-savings-account-work](//images.ctfassets.net/6j8y907dne6i/3zynuAFE9SoOfJRy8MT7lO/d0078bf16189f8141aeeaa5b7ae1da54/how-does-health-savings-account-work.jpg)

### Step 1: Elect a high-deductible health plan during open enrollment.

### Step 2: Open a health savings account and decide how much you want to contribute. 

To enroll in an employer-sponsored health savings account, you'll likely open your HSA during open enrollment. Let your employer know how much you want to contribute for the year (up to the IRS contribution limit). And your employer will begin making payroll deductions each month.

Your employer may choose to contribute to your HSA. But they’re not required to. If they do, those contributions will count toward your annual limit. But will remain tax-free to you.

Maybe your employer doesn’t offer a health savings account. Or it’s outside of open enrollment and you want to get started on saving for your health care costs today. You can open an HSA with a financial institution in the private market.

With this route, you will make arrangements to fund your HSA with the account administrator. And your contributions will be deducted from your gross taxable income when you pay taxes for that year.

### Step 3: Use your funds for qualified medical expenses.

To use your funds, your account administrator may provide a debit card so you can pay for your health care costs at the point of sale. Or you will pay for costs upfront and submit documentation for [reimbursement](https://livelyme.com/hsa-reimbursement-rules). Your withdrawals are tax-free as long as you use the money to pay for qualified medical expenses. If you use your money for something else, the money you withdrew will be subject to income tax plus a 20% penalty.

![mobile-wallet-hsa-expenses](//images.ctfassets.net/6j8y907dne6i/xFSNWNpRjvuAnTymT4F18/108a46d5452cfb9b855a03c76bab9755/mobile-wallet-hsa-expenses.jpg)

__Additional health savings account details:__

- You own your account so you can take it with you from employer-to-employer (or employer to unemployed). 
- Even if you choose a health insurance plan that isn’t an HDHP, you can still use past contributions for out-of-pocket, qualified medical expenses. But you won’t be able to contribute to your account.
- Employer contributions are tax-free.
- If you’re under the age of 65, you must use your contributions for qualified medical expenses.
- Once you reach 65, you can no longer contribute to your account. But you can use your savings to pay for whatever you’d like.  
- An HSA offers triple tax savings: pre-tax or tax-deductible contributions, tax-free interest and investment earnings, and tax-free distributions when used for qualified medical expenses.

## How Much Can I Contribute to My HSA?

[Contribution limits](https://livelyme.com/hsa-guide#maximizing-your-savings) are set annually by the Internal Revenue Service. 

For __2020__, those limits are:

- $3,550 for someone with an individual health plan.
- $7,100 for a family health plan.
- An additional $1,000 “catch-up” if one or both members of the family are aged 55 or older.

For __2021__, those limits are: 

- $3,600 for someone with an individual health plan.
- $7,200 for a family health plan.
- An additional $1,000 “catch-up” if one or both members of the family are aged 55 or older.

## What Can I Use a Health Savings Account For?

![hsa-eligible-expenses](//images.ctfassets.net/6j8y907dne6i/42Oe00AuAcE2fs9KFkcmHS/b30013424117eb2a8c42b7c42b094e5c/hsa-eligible-expenses.jpg)

HSA-eligible expenses include (but are not limited to):

- Deductibles
- Copays
- Coinsurance
- Out-of-pocket costs related to diagnostic services like x-rays and blood tests
- Prescriptions
- Quality of life enhancers like air purifiers (with a letter of medical need)
- Medical supplies like band-aids and crutches
- Alternative medicine treatments like acupuncture

This list is not exhaustive. For a comprehensive list of IRS-qualified medical expenses check [“What’s Eligible."](https://livelyme.com/whats-eligible)

## What Happens to My HSA if I Switch Employers?

You get to keep your account and every dollar you’ve saved. Although you may not be able to continue contributing to that same account. 

If your new employer uses a different health savings account administrator, you will have two options. Roll the HSA from your previous employer into the new account or maintain two different HSAs. One account from your previous employer - from which you can withdraw but not contribute. And one from your current employer into which you can start contributing.

For more details about your specific situation, contact your HR department.

## Where Can I Sign-Up for an HSA?

![sign-up-lively-hsa](//images.ctfassets.net/6j8y907dne6i/4sUTWDriKFMgGBrIHxeyH9/a36ee79d497005f21445666727ab98e6/sign-up-lively-hsa.jpg)

You can sign up for an HSA in two places. Through your employer, if it offers this benefit. Or through a financial institution in the private market.

Here, at Lively, we offer a private-market HSA that allows you to put your contributions into mutual funds or other investments. That way you can access an even greater benefit: growing your money with the market.

As you can see, there are many ways an HSA can help you save money for health care expenses and retirement. A health savings account can also offer security should you lose your health insurance coverage for a period of time. For more information about HSAs, check out our [HSA Guide](https://livelyme.com/hsa-guide).







what-is-hsa

Learn more about HSAs including the qualifications for opening and contributing to a health savings account, how much you can contribute annually, how to use your account for qualified medical expenses, and more.

What is an HSA? Qualifications, Contributions, Uses, and More

*__Editor’s note:__ This post was originally published on June 29, 2017 and updated on September 3, 2020.*

In a world of text, chat and email it can feel like everything is (or has) an acronym. Health insurance plans are no exception. You may have come across the acronym HDHP and are wondering "What is a High Deductible Health Plan (HDHP)?" Continue reading to learn how choosing an HDHP could benefit you. Provided it gives you the coverage you need.

To start, an HDHP is a health insurance plan defined by lower premiums and a higher deductible. But don't let "higher deductible" scare you off. Here are two reasons why an HDHP could make sense for you:

1. All preventative care is covered before the deductible, and
2. HDHPs are an affordable way to get the coverage you need without paying more for extras you may not need.

HDHPs are also the only health insurance option that can be paired with a Health Savings Account (HSA). An HSA can help pay for the high-deductible or to save money for future medical costs.

<iframe src="https://player.vimeo.com/video/377355900" width="640" height="360" frameborder="0" allow="autoplay; fullscreen" allowfullscreen></iframe>

## What is Considered an HSA-eligible HDHP?

Annually, the IRS redefines what it considers an HDHP (adjusting for inflation). In 2020, their parameters were a [health plan](https://livelyme.com/hsa-guide) with a deductible of at least $1,400 for an individual and $2,800 for a family. As well as out-of-pocket expenses that didn’t exceed $6,900 for an individual and $13,800 for a family.

In 2021, the minimum deductibles will be the same. But the maximum out-of-pocket limits will rise to $7,000 for an individual and $14,000 for a family.

There's one other qualifying characteristic of HDHPs. The individual pays for the cost of healthcare, up to the deductible, before insurance pays for services. The one caveat here is preventative care. All preventative care is covered before the deductible.

## How Does a High Deductible Health Plan Work?

![preventative-care-included-hdhp](//images.ctfassets.net/6j8y907dne6i/5j1glZm5E5y47Fi5eW2T2K/1ebc0d46beb92be8021d514656948957/preventative-care-included-hdhp.jpg)

HDHPs charge participants lower monthly premiums. This is in exchange for requiring higher deductibles and out-of-pocket maximums.

Choosing an HDHP could make sense if you don't need many health care items or services. Or if you only visit the doctor for preventative care. This is because you'll be spending less on your monthly [health insurance plan](https://livelyme.com/compare-health-insurance-plans) premium. An HDHP could also make sense if you need more care. Here's why.

Because HDHPs have a higher deductible, the IRS allows you to deposit pre-tax money into a savings account called an HSA. Also known as a [Health Savings Account](https://livelyme.com/what-is-hsa). HSAs are tax-advantaged accounts because contributions are pre-tax.

The distributions and any gains those contributions make can also be tax-free. That's as long as the contributions are used to pay down your deductible or to pay for other qualified medical expenses. Depending on your tax bracket, this could help you save up to 30% on medical expenses.

Where an HDHP could get you into trouble is if you suffer a catastrophic event that requires an expensive procedure or treatment. And you can’t afford the out-of-pocket maximum. Or if you have or develop a chronic condition that needs management.

__Decide which plan is right for you with our [Health Plan Comparison Calculator](https://livelyme.com/compare-health-insurance-plans).__

To choose an HDHP, you would make the election during the open enrollment period for either your place of employment or in the private market. The other time is after a [Qualifying Life Event](https://livelyme.com/when-should-i-consider-changing-my-health-plan). If you’ve experienced a life event like the loss of health insurance, marriage, the birth of a child, or death of a dependent, you can sign up for an HDHP at any time during the year with a special enrollment period.

## What Are the Benefits of a High Deductible Health Plan (HDHP)?

![high-deductible-health-plans-lower-premium](//images.ctfassets.net/6j8y907dne6i/45YNFcVTSqOIH1GiPuzUVQ/150ddbbe5981bcf60c7150e50f13f6d1/high-deductible-health-plans-lower-premium.jpg)

Whether you’re considering an HDHP or have been using one for years, there’s no question that higher deductibles are a tough pill to swallow. The good news is, this type of health plan does offer some unique flexibility and opportunities that other health insurance plans lack.

1. __Flexibility__ – HMO health insurance plans require referrals from a primary care physician. This can be extremely frustrating for individuals who need to have some kind of care outside of a general practitioner. While HDHPs still have in and out of network designations, the list of in-network providers is extensive. And you can see a dermatologist, cardiologist, or other specialists even if you haven’t yet designated a primary care physician.
2. __Lower cost__ – The problem with large, overarching health plans is they try to cover everyone. This might sound good on paper, but not in practice. This often leads to people with low health care needs paying more to cover people with high health care needs. HDHPs reward limited use of the medical system by charging participants low monthly premiums. While also covering preventative care before the deductible is met.
3. __Health savings for the long term__ – HDHPs are the only health insurance plan that you can pair with an HSA. You own the contributions both you and your employer make to your HSA. And they never expire. The funds can be saved or invested in stocks and mutual funds, making these accounts function as a medical safety net. This is beneficial if you lose your employment or your employer changes your health insurance options. Or if your health insurance company decides to discontinue the plan you’re on, or you experience a catastrophic event. Any of which could leave you scrambling to cover unexpected medical expenses. And in the event you don’t spend your contributions before the age of 65, you can use that money, tax-free, for any expenses. Just like another retirement account. 

## How Do I Know If an HDHP Is Right for Me?

![is-hdhp-right-for-me](//images.ctfassets.net/6j8y907dne6i/1lGHA7VDq1QmkbEHtrozbq/8ce9096c3149cd21eca124e9fb2a5cf3/is-hdhp-right-for-me.jpg)

*The right health insurance plan for you lies at the nexus of affordability and appropriate coverage.* You must be able to afford the monthly premium but also the annual out-of-pocket maximum in case you experience a catastrophic event.

The plan must also provide adequate coverage for your current medical needs. As well as those in the foreseeable future (e.g. having a baby, knee surgery, etc.). Inadequate coverage could cause your out-of-pocket expenses to get out of hand quickly.

So take a look at the specifics for the HDHP you’re being offered. Can you afford that monthly premium? If yes, then take a look at what procedures, treatments, and prescriptions are covered and at what levels. When taking coverage levels into account, can you afford the copays, co-insurance, and other out-of-pocket costs?

Do you have the ability to contribute even a small amount to an HSA? Something to remember about HSAs is the money is contributed pre-tax. That means you could end up saving up to 30% on medical expenses depending on your income taxes bracket.

If, after answering these questions, an HDHP looks like it makes financial sense, then it could be the right plan for you. If you have questions about your specific situation, you should always reach out to your HR department.

HDHPs are often thought of as an affordable health insurance option, especially for the healthy or if you know you’ll exceed your out-of-pocket maximum. Combine an HDHP's monthly affordability with the option to pair the plan with an HSA, and you have an attractive setup. Not only for those who have limited medical care needs but those who can afford to contribute a little extra each month toward future costs and savings. 

discover "what is a high deductible health plan?"

what-is-a-high-deductible-health-plan

Wondering “What is a High Deductible Health Plan?” Discover how they work, the benefits, and if an HDHP is right for you.

What is a High Deductible Health Plan (HDHP)?

__Editor’s note:__ *This post was originally published on March 17, 2018 and updated on September 2, 2020.*

You’ve heard about HSAs and FSAs. And you think they are a good way to save money for and on medical expenses. And your employer offers both as part of its benefits plan. 

You’re in luck. You get to choose the option best suited to your needs. And yes, you do have to choose. Because you can’t contribute to an HSA and a Healthcare FSA at the same time. Let’s discover which account type will win in HSA vs FSA.

So how do you choose? To make the best decision for you and your family, consider the details of each account. And compare those to the realities of your family’s medical and financial needs.

To start, let's look at what these accounts have in common.

Health Savings Accounts (HSA) and Healthcare Flexible Spending Accounts (FSA) are pre-tax accounts. And are both used to pay for qualified, out-of-pocket medical expenses. These include, but aren’t limited to, copays, deductibles, coinsurance, and prescriptions. Because contributions are pre-tax, you can save up to 30% on those out-of-pocket expenses. Depending on your tax bracket.

How are HSAs and FSAs different? Account functionality and account holder requirements are different for the two account types. Let’s learn a little more about each account type.

## What is a Health Savings Account?

![how-to-choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/1JfvzE56bAaAExlGqDmfjd/eafd5bc19e833ef342e4349e4eb6f630/how-to-choose-between-hsa-fsa.jpg)

A [Health Savings Account](https://livelyme.com/what-is-hsa) is a kind of savings account that allows you to save for health care costs. And reduce your taxable income. In other words, HSAs are individually owned, tax-advantaged medical savings accounts. You can open one as an individual or as part of a family plan. As long as you and your family are enrolled in an HSA-eligible [High Deductible Health Plan](https://livelyme.com/what-is-a-high-deductible-health-plan-hdhp/) (HDHP).

### What’s Considered an HSA-eligible Health Plan?

For 2021, the IRS considers HSA-eligible HDHPs to be [health plans](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account) with a minimum deductible of $1,400 for individuals. And $2,800 for families. And a maximum out-of-pocket amount of $7,000 for individuals and $14,000 for families.

The IRS adjusts its allowed annual HSA contribution limits annually for inflation. Those limits for 2021 are $3,600 for individuals and $7,200 for families. If you have a [mid-year change](https://livelyme.com/hsa-contribution-limits-mid-year-changes) – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit becomes prorated.

### How Does an HSA Work?

When you open your HSA, you choose how much you’d like to contribute annually. Then, your employer will deduct the appropriate amount from each paycheck. Your employer may choose to also contribute to your account. But they’re not required to.

If they do contribute, those contributions will count toward your [maximum annual limit](https://livelyme.com/hsa-guide#maximizing-your-savings). Choose your individual contribution amount carefully. And keep in mind that contributions are cumulative. Otherwise, you could end up going over the annual contribution limit.

If you’re under the age of 65, you must use your contributions to pay for qualified medical expenses. These include, but are not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://hsastore.com/SearchProducts.aspx?q=band+aid&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://hsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://hsastore.com/SearchProducts.aspx?q=braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

Want to see the full list of HSA-eligible expenses? Visit [What’s Eligible?](https://livelyme.com/whats-eligible/)

### How Age Affects HSA Use & Taxes

![age-affects-hsa-taxes](//images.ctfassets.net/6j8y907dne6i/1mxiaR9se6IhBYokKGgsdd/86de5569ecab00a84ae82f763e30789e/age-affects-hsa-taxes.jpg)

If you’re under the age of 65 and use your contributions for qualified medical expenses, those funds are not subject to federal income tax. But, your state tax liability for contributions depends on your state.

If you choose to use the money for something other than qualified medical expenses, you will incur a 20% tax penalty. And have to pay income taxes on the misused money. After age 65, you can use your health savings on anything you want provided income tax is paid on the amount of the non-qualified disbursement.

## What is a Flexible Spending Account (FSA)?

A [Healthcare FSA](https://livelyme.com/what-is-a-healthcare-fsa), aka Healthcare Flexible Spending Account, is a spending account your employer makes available to pay for medical expenses with pre-tax dollars.

### How Does a Healthcare FSA Work?

If you decide you would like to open an FSA, the good news is that you don’t have to purchase a specific health plan. In fact, you don’t have to purchase any health plan.

But you must elect to participate during your employer’s open enrollment period. Or within 30 days of starting employment if you begin your job mid-year. Then, you select the amount you would like to contribute to your account at that time. Your employer will then deduct the appropriate amount from each paycheck.

Your employer can choose to contribute to your FSA but is not required to do so. And their contributions don’t count toward your annual max. Unfortunately, you can’t change this election at any point outside of open enrollment. Unless you’ve experienced a [qualifying life event](https://www.healthcare.gov/glossary/qualifying-life-event/) like the birth of a child, death of a dependent, marriage, or divorce. 

![qualifying-life-event-fsa-contribution-amount](//images.ctfassets.net/6j8y907dne6i/td25GiIFP70vewqfrlrSD/751854829eee489fc8a0c81fddb11efb/qualifying-life-event-fsa-contribution-amount.jpg)

You also lose any unused money at the end of the year. Unless your employer offers either the option to rollover $500 to next year’s account or a 2.5 month grace period during which you can use leftover funds. So choose your contribution amount carefully.

Like with HSAs, the IRS imposes an annual limit on FSA contributions that adjusts annually for inflation. For 2020, that limit was: $2,750 (2021 limits have not yet been released). Unlike HSAs, FSAs are only opened on an individual basis, so there are no “family plan” increases for annual contribution limits. But if both you and your spouse are offered the opportunity to take part in an FSA at work, you can do so and each can contribute up to the maximum allowed amount.

FSA funds can be used to pay for out-of-pocket medical, vision, and dental expenses not covered by your health insurance plan. Including, but not limited to:

- Copays
- Coinsurance
- Deductibles
- Acupuncture
- Mental health treatment
- Prescriptions
- Medical supplies like [bandages](https://fsastore.com/SearchProducts.aspx?q=bandages&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [crutches](https://fsastore.com/SearchProducts.aspx?q=crutches&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), [joint braces](https://fsastore.com/SearchProducts.aspx?q=joint%20braces&utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner), and more
- Hearing aids
- Dental health
- Vision tests

For a full list of medical expenses that you can use your FSA (or HSA funds) on, check out [Publication 502](https://www.irs.gov/forms-pubs/about-publication-502) from the IRS. You can also visit the [FSA Store](https://fsastore.com/?utm_source=Lively&utm_medium=TPA+Public+Proprietary+EL&utm_campaign=TPA+Partner).

## Choosing Between an HSA and Healthcare FSA

![choose-between-hsa-fsa](//images.ctfassets.net/6j8y907dne6i/EqKcpDQS9JGMip8psYcVj/994cea7acae40c6fc14eecff7688fdfc/choose-between-hsa-fsa.jpg)

### Eligibilty Requirements

- __FSA:__ Only employers can establish an FSA plan for employees to contribute. Employees can open an FSA regardless of if they have a HDHP or not. Self-employed individuals cannot open an account.
- __HSA:__ Employees are eligible only if they have an [HSA-eligible HDHP](https://livelyme.com/hsa-guide#qualifying-for-an-hsa-account). Individuals are not dependent upon their employer to offer an HSA. And an HSA can be opened from the private market. Self-employed individuals can open an account.

### Contribution Sources & Changes

- __FSA:__ The contribution amount is chosen during open enrollment or at the time of a qualifying life event. And the contribution amount can not be changed outside of these two time periods.
- __HSA:__ You can change your contribution amount at any time, no major life event required. This gives you the flexibility to increase or decrease your contribution at any time. *__Multiple contribution sources:__* You can grow your HSA in multiple ways. Not only can you add money to your HSA, but your employer, relatives, or anyone who would like to contribute can help your HSA grow.

### Rollover Rules

- __FSA:__ Employers choose whether an employee can keep their unused funds or not. There are three options: *__Forfeit__*: Employee forfeits money, and employers get to keep it. *__Grace period__*: Employee has a 2.5 month grace period after the plan year ends to use on expenses. Any remaining money after the grace period is employer’s. *__Carryover__*: Employees can add up to $500 of unused funds to next year’s plan (in addition to contribution limit). Employers decide the carryover limit, and any funds over the limit are the employer’s.
- __HSA:__ Funds do not expire from year-to-year. Rollover money is in addition to the contribution limits. Money in your HSA can be carried with you and is available even if you change health insurance plans, get a new job, or retire. And funds left in your account grow tax-free through interest or any investment gains.

### Account Ownership

- __FSA__: An FSA is owned by the employer. Unused funds belong to employers, not the employee.
- __HSA__: Funds stay with you. One of the best perks of an HSA is that the money you save always stays with you because you own the account. If money is left in your HSA at the end of the year, it stays put. No scrambling around trying to find ways to spend the money before the timer runs out.

### Access to Money

![accessing-hsa-fsa-contributions](//images.ctfassets.net/6j8y907dne6i/4lJ6EN6128M5SHmAuh8hzk/60301225072d2cec1be8a6e2fda926ca/accessing-hsa-fsa-contributions.jpg)

- __FSA:__ Money available from day one. Every penny you contribute to your FSA is available at the beginning of the benefit year. Or shortly after the first contribution is made. Say you add $2,000 to your FSA for the year, you’ll likely contribute about $80 per paycheck. Yet, the entire $2,000 is available to use at any time even though you only make small contributions during the year. Another perk? If you leave a position before the year is over, the money spent from your FSA doesn’t have to be paid back.
- __HSA:__ As the employee contributes to their plan. An employee only has access to what has actually been deposited into their HSA account.

### HSA: A Savings Asset

- *__After the age of 65, your HSA functions like any other retirement account.__* And you can use your HSA money on anything you wish. How does it differ from other retirement accounts? You don’t pay income taxes on money used for medical expenses. You do, however pay income taxes on money used for anything else.
- *__HSAs are assets you can pass on to your kin:__* If your spouse inherits the HSA, it retains its status as a retirement-like account. With the same rules and allowances as it had when you were the account holder. If you pass it on to someone other than your spouse, it stops being an HSA, and inheritance laws apply.

## Is an HSA or FSA Better for You?

![is-hsa-fsa-better](//images.ctfassets.net/6j8y907dne6i/7dkm3u9Ez0B7z6r7ZndKdK/d746299a286d54387aae669880b9cbb2/is-hsa-fsa-better.jpg)

Deciding between an HSA and FSA depends on your medical and financial needs. The principal requirement for an HSA is enrollment in an HDHP. And while preventative care is covered before the deductible under HDHPs, most other care is not. That means you will have to pay for your medical expenses for you and your family out-of-pocket until you reach your deductible.

An HSA-eligible HDHP makes the most sense in two cases. First, if you or one of your family members has a condition that needs managing by either a specialist or with speciality prescriptions or treatments. In this case, you’ll likely exceed the deductible and be able to use HSA funds to save up 30% on out-of-pocket medical costs.

Secondly, if you rarely use the medical system except for routine preventative care (that includes vaccines and well visits for children) and really want the ability to use your pre-tax account as an investment vehicle to save for retirement. Then, an HSA/HDHP arrangement may be the best choice for you.

To make the best decision for you and your family, start by assessing your past medical needs and those you can project. Then take a look at your finances. Choose the account and health insurance plan arrangement that sits at the nexus of best health coverage and account flexibility.

hsa-vs-fsa

An HSA and FSA provide up to 30% savings on out-of-pocket healthcare expenses. But you can’t contribute to both at the same time. Let’s explore each account type to help you decide which wins in HSA vs FSA.

HSA vs FSA: How to Choose Between an HSA and Healthcare FSA

pexels-photo-259363.jpeg

Paying for out-of-pocket medical expenses with an HSA and paying lower premiums with higher deductible heath care is better than a PPO plan.

HDHP HSA vs PPO Plans: Which is better for healthcare?

HDHP HSA vs PPO: Is HSA or PPO Better?

Editor’s note: An earlier, and shorter version of this [blog post](https://livelyme.com/what-does-it-mean-to-reimburse-myself-with-my-hsa) was previously published. We published this update to help you learn about HSA reimbursement rules and choose the best timing for your reimbursements. Plus, learn how delaying reimbursement can build wealth and security in retirement.

---

When you have a medical expense there are two ways of paying. You can either 1) swipe your [Lively Visa debit card](https://www.benefitnews.com/news/lively-visa-partner-on-debit-processing-hsa) at the time of purchase, or 2) reimburse yourself later. 

What does it mean to “reimburse” yourself with your Health Savings Account (HSA)? It means paying out-of-pocket for an HSA-qualified medical expense and then using money from your HSA to pay yourself back. This can be done even if you don’t have money in the account the day the expense incurred, and at any time in the future. Whether you reimburse yourself now⁠—or later⁠—has some interesting benefits.

## Paid for a Medical Expense Out-of-Pocket? What’s Next?

As long as the qualifying medical expense was made after the establishment of your HSA, you can use your HSA to pay yourself back for your out-of-pocket expense. And while it isn’t required that you submit receipts to be reimbursed from your HSA, we recommend it in case of an IRS audit. 

### Know What Qualifies as an HSA-Eligible Medical Expense

There are thousands of HSA qualified medical expenses. Expenses are likely pretty obvious if you’re at the doctor’s, having an eye exam, or at a dentist appointment. But what about over-the-counter products like sunscreen, prenatal vitamins, or contact lens cleaning solution? 

Use “[What’s Eligible](https://livelyme.com/whats-eligible/)” to find qualifying medical expenses without the requirement of a doctor’s note, with a prescription, or with a doctor’s letter. Better yet; let Lively’s Expense Scout do the searching for you.

### Expense Scout

Don’t spend your time scanning receipts trying to find your HSA-eligible medical expenses. 

Instead, use Lively’s [Expense Scout](https://livelyme.com/expense-scout/) to scan and alert you of potential HSA-eligible expenses from linked external accounts. Like your personal debit card or credit cards. Expense Scout prompts you to a list of expenses for review. Then you have the option to reject or submit them⁠—with receipt—for reimbursement, now or later.

## Document All Medical Expenses

![document-all-expenses](//images.ctfassets.net/6j8y907dne6i/4FopIwi9mrF1zEqiMZQpxi/aadc96e2bbe2ec9a3e7426a5a4f48b6d/document-all-expenses.jpg)

To justify spending money on a qualified medical expense, you should keep or track your expense receipts. Receipts should be kept for as long as your tax return is open and subject to an audit; usually three years. Or as long as your HSA is open. Whichever is longer.

Some HSA companies (like Lively) offer digital receipt filing so you can document your receipts without having to save piles of receipts. This is helpful if you plan on paying for out-of-pocket expenses and reimbursing yourself “20 years” from now. But, more on that hack in a bit. 

### Records to Keep in Case of an IRS Audit 

It’s best to save a copy of your health insurance carrier’s Explanation of Benefits (EOB) in case the IRS audits you. This documents the expenses for services covered under your High-Deductible Health Plan (HDHP). You should also keep receipts for all products or services you paid for.

In case of an [IRS audit](https://www.irs.gov/forms-pubs/about-publication-969), you need to have records that prove:

- Distributions were to pay or reimburse qualified medical expenses,
- Qualified medical expenses had not been paid or reimbursed from another source, and
- The medical expenses had not been taken as an itemized deduction in any year. 

When you choose to be reimbursed for an eligible medical expense that’s called a __distribution__.

If you take a distribution your HSA provider will send you [Form 1099-SA](https://livelyme.com/what-is-irs-tax-form-1099-sa). You should be prepared to file [Form 8889](https://livelyme.com/irs-tax-form-8889) with your annual taxes. If there’s something that doesn’t match between forms 1099-SA and 8889, resolve it before filing your taxes. Keep reading to learn how HSA distributions are taxed and reported.

## When Can I Reimburse Myself for an Out-of-Pocket Expense?

![when-hsa-reimbursement](//images.ctfassets.net/6j8y907dne6i/2DcikyDJz1nLL4z6MHOCy1/36828f85b62ccab059de8b6a9336d31b/when-hsa-reimbursement.jpg)

You can reimburse yourself __anytime__. 

Today, tomorrow, or 20 years from now. The only rule is that your HSA was established at the time that the expense was incurred (date of service). And that the expense was not reimbursed in any other way. 

This is one of the reasons why knowing the exact date of the establishment of your HSA is important. You cannot be reimbursed for expenses that were incurred prior to that date.

Did you know that you can also reimburse yourself for expenses even if you are no longer eligible to contribute to an HSA? That’s because the use of your funds is not tied to HSA eligibility. Once you add money to your HSA, it’s yours. And it can be used at any time in the future.

## Want More Money in Retirement? Reimburse Yourself Later

One of the major financial benefits of an HSA is that you can choose to reimburse yourself anytime. This gives you the opportunity to save the funds in your account. It also provides the opportunity to increase interest earned or provide more time for invested funds to grow.

Many people choose to pay for medical expenses out-of-pocket and reimburse themselves later. Since there’s no reimbursement deadline, you can choose to reimburse yourself years later. Even during retirement.

This requires you to save your receipts and invoices for reimbursement. In the event that you ever get audited by the IRS, they will ask for proof. If you’re unable to provide those records, you would have to pay regular income tax plus a 20% penalty on your reimbursements.

## How HSA Distributions Are Taxed and Reported

![hsa-distribution-tax](//images.ctfassets.net/6j8y907dne6i/1Qp2iGiBLoBkr48xsxV81z/ad237aa0e2034eae881b12050d5fa8c8/hsa-distribution-tax.jpg)

If you use your HSA to buy a qualified medical expense, you will not have to pay income taxes on those funds. If you use your HSA for something other than a qualified medical expense, that distribution is taxable income. And you can be subject to a 20 percent penalty for early withdrawal. When an HSA account holder reaches the age of 65 or becomes disabled, they are no longer subjected to that 20 percent penalty.

In terms of reporting HSA tax information, the HSA trustee or custodian keeps all reports of distributions. The trustee then shares that information to the account owner through IRS Form 1099-SA. HSA account holders are responsible for reporting their own distributions to the IRS through Tax Form 8889. It’s recommended that HSA owners keep records of all their distributions, in the event, they ever become audited by the IRS.

## Reimbursement in Action

### Real-Life Example: When Your HSA is Low in Funds 

James recently got a new job and has a variety of health plans to choose from. He decides on a high-deductible health plan so that he can take advantage of his employer’s HSA contributions. Upon opening his account, he deposits a dollar to establish his account. 

A few weeks after opening his account, James gets into an accident and sprains his ankle. Since he doesn’t have those funds in his HSA yet, he pays for his treatment out-of-pocket. He saves his receipts with a digital receipt organizer, so he can reimburse himself later.

Fast forward to a year from then. James now has enough money in his HSA to pay himself back for those out-of-pocket expenses. Because he kept such diligent records, he was able to reimburse himself with his HSA.

He reports this information to the IRS using IRS Tax Form 8889. If James did not report his distribution to the IRS correctly, the money he withdrew could receive a 20% tax penalty. Since James saved his receipts, he won’t have to pay this penalty. And he receives the tax-free benefits from using his HSA for qualified medical expenses.

### Real-Life Example: Your Savings Strategy

![hsa-reimbursement-wealth-building](//images.ctfassets.net/6j8y907dne6i/6R7cjd9se6Xrgawi2jo8UB/6d65ef236dfdd131080e9af01ae762b8/hsa-reimbursement-wealth-building.jpg)

Juliet is a smart, money-savvy individual and she wants to get the most out of her HSA when she retires. She enrolls in an HDHP for several years and also maxes out her HSA every year. When she needs to pay for a health-related expense, she pays out-of-pocket. She tracks her health expenses by taking pictures of her receipts and logging them into Lively App to reimburse herself later.

Fast-forward to years from now when Juliet is in retirement. Since she hasn’t withdrawn any of the money in her HSA, she was able to earn more interest with her higher account balance. And even earned more through investing some of her funds. 

Juliet has diligently logged years’ worth of glasses, contacts, prescriptions, and other qualified health-related expenses into her account. Which, when added together totals thousands of dollars. She chooses this opportunity to finally reimburse herself for those expenses with her HSA. And uses those funds to help her travel during retirement.

## Reimbursing Yourself For Out-of-Pocket Medical Expenses with Lively

Have a couple of out-of-pocket expenses that you can use your HSA for? Here’s how you can reimburse yourself through the [Lively app](https://livelyme.com/app/):

1. Access your Lively account through our online portal, iOS, or Android App.
2. Navigate to “Transactions” in the menu or click on “+ Expense.”
3. Choose “Add Expense: For purchases made using your personal fund.”
4. Enter the amount of the medical expense, who the merchant/provider was, and the date you made the purchase or started receiving service.
5. Choose “Get Reimbursed Later” or “Process Immediately.” 
6. Add a receipt by taking a photo or uploading an image.
7. Click the “Submit” button.

This process is quick and easy, and you’ll have those funds in your account within 2-3 business days. 

We suggest taking a picture of all of the receipts you have for your healthcare expenses so you can keep them attached to your transactions within your Lively account. Having your information ready to go makes using your HSA simple.






hsa-reimbursement-rules

Learn about HSA reimbursement rules: How to efficiently track expenses in case of an IRS audit, how distributions are taxed, and how to determine whether to delay reimbursements as part of a wealth-building and retirement strategy.

Kate Dore

Personal Finance Writer • Candidate for CFP® Certification

Lively Blog

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Kate Dore

Personal Finance Writer • Candidate for CFP® Certification

Lively Blog

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Latest Posts

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2020 HSA Contribution Limits

#1 HSA Provider

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