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HSA Myths and Facts

by John Stebbins on Nov 26, 2019 8:33:48 AM

HSAs are the most tax-advantaged health plans available, offering tax-deductible employee contributions, tax-free earnings, and tax-exempt distributions. But they don’t always top the list when consumers shop for coverage. That’s due partly to bigger concerns about premiums and co-pays. But there are other barriers to HSA enrollment as well, namely, misconceptions about the plans. 

Here are some of the biggest HSA myths and how you can bust them for your employees to drive plan participation.

Myth: Members Must Use It or Lose It.

Fact: Unlike Flexible Spending Accounts (FSAs), consumers don’t need to spend the money in their accounts before the year’s end. Instead, the savings are rolled over from year to year and can be used any time to pay for eligible expenses. The best part? Unused funds continue to grow, making HSAs a popular retirement savings vehicle as well.

Myth: Pre-Authorization is Required for Expenses.

Fact: While there is a long list of expenses for which participants can use their HSA funds, the good news is that they don’t need to get permission in advance to withdraw money or use their debit card for purchases. The only requirement is that members keep their receipts.

Myth: When Participants Change Jobs, They Lose Their HSA.

Fact: This is another area where FSAs and HSAs differ since HSAs are portable. That means members can keep their HSA even if they change jobs or leave the workforce. Even if they are no longer enrolled in a high deductible health plan (HDHP), they can continue to withdraw funds for qualified expenses.

Myth: Eligibility Requirements Are Tough.

Fact: The primary requirement for membership is that participants must be covered under a qualified HDHP – and may not be covered under any plan that isn’t a qualified HDHP. Individuals must also not be claimed as a dependent on someone else’s tax return or enrolled in Medicare; however, even when members enroll in Medicare, they can still use the money in their HSA accounts – they just can’t make any more contributions.

Myth: HSA Funds Can Only Be Use on the Member.

Fact: Regardless of whether family members are covered under an employee’s HDHP or another policy entirely, HSA funds can still be used – tax free – for qualified medical expenses for spouses and tax dependents.

Myth: The Limits are Too Low to Make it Worth it.

Fact: With maximum contribution limits rising annually, HSAs are an effective way to help individuals mitigate healthcare costs now and in the future. For 2020, the limit is $3,550 for individuals and $7,100 for families, with the catch-up contribution limit for those 55 and over remaining at $1,000.

For more facts on HSAs, download our FAQ. To learn more about the benefits of offering an HSA to your workforce, or help communicating the benefits of an existing plan to boost participation, contact Complete Payroll Solutions at 877.253.9020.


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