The Internal Revenue Service (IRS) defines four criteria to be an "eligible individual" for making contributions to a Health Savings Account (HSA):
- The individual is covered by a qualified high deductible health insurance plan.
- The individual has no other health insurance coverage (note that certain exceptions are permitted).
- The individual is not enrolled in Medicare.
- The individual cannot be claimed as a dependent on someone else’s tax return.
The High Deductible Health Plan (HDHP) medical insurance option offered by the university is a qualified high deductible health insurance plan.
Permitted Exceptions To "Other Health Insurance Coverage"
As long as you are covered by a qualified HDHP you may also be covered for any benefit provided by "permitted insurance" as defined by IRS code. Permitted insurance includes insurance for a specified disease or illness, such as cancer, diabetes, asthma or congestive heart failure. Other permitted insurances include policies that provide coverage for accidents, disability, dental care, vision care or long-term care.
Examples of "Other Health Insurance Coverage"
First-dollar reimbursements for covered expenses from the following may make you ineligible for a HSA:
- Flexible Spending Arrangement (FSA)
- Health Reimbursement Arrangement (HRA)
- Coverage under a spouse's plan, including non-HDHP insurance, FSAs or HRAs
Effect of FSA Balance During The Grace Period
Having a FSA balance available during the grace period (January 1 to March 15, 2024) is considered "other health coverage". If by December 31, 2023, you do not claim the remaining balance in your Health FSA, IRS rules stipulate that you will not be eligible to begin contributing to your HSA until April 1, 2024, the first month after the grace period ends.
Effect of Medicare Enrollment
You are eligible to open and contribute to a HSA as long as you are not enrolled in benefits under Medicare Parts A and/or B and you satisfy all other IRS eligibility criteria.
Effect of Spouse's "Other Health Insurance Coverage"
If your spouse participates in a general purpose health FSA or HRA or you are covered by your spouse’s “other health insurance” plan, neither of you will be eligible to contribute to a HSA. You should consult with your personal tax advisor to assess the application of these rules to your personal tax situation.
Using HSA Funds When Not Enrolled in High Deductible Health Insurance
When you are no longer covered by a qualified HDHP you are not eligible to contribute to an HSA. However, any distributions you make from an existing HSA for qualified expenses continue to be tax-free and excludable from your gross income. So if you choose in a future year to enroll in a non-HDHP medical insurance option, your HSA funds will still be available to use for qualified health care expenses.
The IRS does not consider a domestic partner a spouse, regardless of any state law exceptions. Unless your domestic partner qualifies as your dependent under the federal tax laws, you cannot withdraw funds tax-free to pay for your domestic partner's qualified health care expenses. However, if you are enrolled in a family HDHP that covers your domestic partner and your domestic partner satisfies the other HSA eligibility rules, the domestic partner may be able to establish and contribute to their own HSA.
You should consult with your personal tax advisor to assess the application of these rules to your personal tax situation.