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Within the subset of high deductible plans, some are HSA compatible and some are not. Just because it is high deductible does not mean it is HSA compliant.

Yes, but you said Our exchange does have HSA compliant plans, but that’s not the same as a high deductible plan. - implying that HSA compliant plans were not HDHPs. Not all plans with high deductibles are HSA compliant. But all HSA compliant plans have high deductibles.

AJ
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My company is offering a HDHP/HSA option for medical insurance this year. The HSA is forever. But I don't know if I can fund it enough to matter. I'm limited to something like $3600 next year. And, of course, I plan to retire in the first quarter. So employer contribution won't be much. Not a factor.

If you aren't covered by a HDHP the entire year, your contribution is pro-rated based on the number of months you are covered.

I'll be signing up on the exchanges once I retire.

Exchanges offer HDHP coverage, too.

(Can I do it before I retire, so no gap between coverages?)

Probably not. You generally can't sign up for new coverage until your 'qualifying event' occurs.

Opinions?

Unless you know that you are going to be signing up for an HDHP on the exchange, or using COBRA from your employer, it doesn't appear to me that either an HSA or an FSA will be useful for you in 2022. That said - I will point out that it might be useful to sign up for an HDHP in order to have access to an HSA. When used for qualified medical expenses, including Medicare premiums, HSAs are even more tax advantaged than Roth accounts, since the contribution is tax-free, in addition to the withdrawals being tax-free.

AJ
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So I can only contribute to an HSA while employed? Once I'm retired, no more? (Otherwise the prorate comment doesn't make sense to me.)
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So I can only contribute to an HSA while employed? Once I'm retired, no more? (Otherwise the prorate comment doesn't make sense to me.)

No, you can only contribute to an HSA for months that you are covered by a HDHP. You said you were going to use the exchange for health insurance after you retired, rather than taking COBRA. That means you are changing health insurance, and it's not clear whether you were going to elect HDHP coverage. If that plan is an HDHP plan, you're fine to make the full contribution. If it's not an HDHP plan, then you can only make a pro-rated contribution for the months that you had HDHP coverage through your employer.

AJ
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Thanks, AJ. Makes sense.

I'm not sure if our exchange has an HDHP plan. Last time I looked they had added BCBS (it wasn't there previously), so that's good. All our doctors are in-network for BCBS, so that's what I was going to do. I didn't drill down further to see HDHP or not.

So I should plan on COBRA for a month or two until I get an exchange plan active. We can do that. HDHP would be cheaper, too (it's the cheapest our company offers), making the COBRA a little less painful.

1poorguy
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So I should plan on COBRA for a month or two until I get an exchange plan active. We can do that. HDHP would be cheaper, too (it's the cheapest our company offers), making the COBRA a little less painful.

When you said at the top of the thread that you thought you could only contribute $3600 or so to an HSA, it appeared to me that you were choosing single coverage. (I will point out that the 2022 HSA limit for singles is $3650.) If you are choosing family coverage (since you said "We"), the HSA contribution limit is $7300. I would also point out that there is a catch-up contribution amount of $1000 for each person who is covered by the HDHP and is 55 or older. So if you and 1poorspouse are both at least 55, that's a total of $8300 that could be contributed between 2 HSAs. Each of you would have to have your own HSA for the $1000 catch-up contribution. The remaining $7300 can be divided between your 2 HSAs, or put completely in one or the other.

I would also point out that re-starting deductibles part way through the year can be rather expensive. So if you're going to do COBRA for even a little while, you may want to consider taking it all year and then changing to the exchange in 2023. Of course, it depends on how much your COBRA costs compared to what the exchange plans will cost. But be sure that you calculate the costs, you are looking at the premiums and any deductibles/co-pays for both options. Around here, the exchange plans aren't that much cheaper than our COBRA, and the deductibles/co-pays on the exchange are significantly more, so COBRA ends up better a better deal.

AJ
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Ugh - I meant $9300 for both: $7300 for the regular contribution, plus 2 $1000 catch-ups.

AJ
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Yes, it's $3650 plus a $1000 "catch-up" because I'm over 55. I say "we", but my wife has her own insurance (cheaper getting it individually now that daughter has her own insurance from her job). 1poorlady may do HDHP as well (with $1000 catch-up).

I'll double-check the COBRA. With us only working one quarter, our income may be low enough to qualify for subsidies. I would have to consider that in the equation also. Unless I have to use my 2021 earnings, in which case there would be no subsidies. But if I can estimate 2022 income, I'll probably qualify.

I plan to give about 1 month's notice for retirement. Not sure how helpful HR will be about COBRA and such, but once I announce I can ask them.

Thanks for the additional tips. It's much more complicated than it should be.

1poorguy
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With us only working one quarter, our income may be low enough to qualify for subsidies.

For 2021 and 2022, the 400% of FPL cap was lifted. You will pay a maximum of 8.5% of your income. Although I'm not sure how that works when you only have ACA for part of the year. I imagine that it's pro-rated based on the number of months you have ACA, but I haven't actually looked into that. If your state has some type of 'navigator' to help with selecting plans, you might want to engage them.

But if I can estimate 2022 income, I'll probably qualify.

Yes, you are supposed to provide an estimate of what you expect your income to be for the year you are being covered. Subsidies get trued-up on your tax return for that year.

AJ
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“I'm not sure if our exchange has an HDHP plan. Last time I looked they had added BCBS (it wasn't there previously), so that's good. All our doctors are in-network for BCBS, so that's what I was going to do. I didn't drill down further to see HDHP or not.”

Our exchange does have HSA compliant plans, but that’s not the same as a high deductible plan. Our bronze non-HSA plan has higher deductibles than the HSA compliant plans but costs substantially less. Less overall coverage.

We’ve gone with the cheaper plans because we usually are right on the edge, or over the edge, of getting subsidies. Not an issue now for this year and next. We might go HSA compliant for next year.
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Our exchange does have HSA compliant plans, but that’s not the same as a high deductible plan. Our bronze non-HSA plan has higher deductibles than the HSA compliant plans but costs substantially less. Less overall coverage.

Actually, HSA compliant plans are, by definition, HDHPs (High Deductible Health Plans). You must have an HDHP to make contributions toward an HSA. Per IRS Pub 969:
High deductible health plan (HDHP). An HDHP has:
• A higher annual deductible than typical health plans, and
• A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but don’t include premiums.


For 2022, the minimum deductible for an HSA compliant HDHP is $1,400/$2,800 (single/family) and the maximum out of pocket is $7,050/$14,100

It may be that a non-HSA compliant has out of pocket costs that are higher out-of-pocket maximums, or some other quirk that doesn't meet with being an HSA compliant HDHP.

AJ
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Actually, HSA compliant plans are, by definition, HDHPs (High Deductible Health Plans). You must have an HDHP to make contributions toward an HSA.

Within the subset of high deductible plans, some are HSA compatible and some are not. Just because it is high deductible does not mean it is HSA compliant.

It may be that a non-HSA compliant has out of pocket costs that are higher out-of-pocket maximums, or some other quirk that doesn't meet with being an HSA compliant HDHP.

Our Bronze plan has higher deductibles than the HSA compliant plan from the same insurer. And as a result it has lower premiums.
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Within the subset of high deductible plans, some are HSA compatible and some are not. Just because it is high deductible does not mean it is HSA compliant.

Yes, but you said Our exchange does have HSA compliant plans, but that’s not the same as a high deductible plan. - implying that HSA compliant plans were not HDHPs. Not all plans with high deductibles are HSA compliant. But all HSA compliant plans have high deductibles.

AJ
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One other wrinkle is meds. We both have at least one med, and they each are rather expensive ($1000+). If I do HDHP, there will be some discount (not sure how much), and then we have to pay the rest up until we meet deductible. I guess the benefit is that we'll meet deductible faster.

Walgreens only says "your insurance saved you $xxxx", and shows the copay we currently pay as our responsibility. No indication of the discount/adjustment we would receive in an HDHP. Hmmmm...

1poorguy
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Walgreens only says "your insurance saved you $xxxx", and shows the copay we currently pay as our responsibility. No indication of the discount/adjustment we would receive in an HDHP. Hmmmm...

</snip>


Compare the Walgreens price to the Goodrx price. I've seen stuff from Walgreens at 10 times the Goodrx price. I only go to Walgreens when they have bacon on sale to attract customers. <LOL>

intercst
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> A normal FSA won't help a lot since I'll be retiring within a quarter, and I can't take it with me.

I disagree. If you have any planned medical expenses you can squeeze into the time before you retire, the FSA can be fantastic. You can't take it with you, but you can use up to the FSA maximum before you leave.

Let's say you plan to have an eye exam and get several pairs of glasses. Your insurance has a $15 copay for the exam, and after their lenses/frames benefit you will pay $25 for the first pair of glasses (normal walking/driving-around glasses). You will also pay $175 for a pair of reading glasses, $175 for a pair of glasses specific to working on computers, and $175 for a pair of sun glasses. You also believe you'll be spending $100 on approved prescriptions and other medicines. That's a $665 total.

Sign up for the FSA, with a $665 annual total. They'll take $12.79 from each week. Retire after 13 weeks (end of Q1). You've paid $166.27, and received $665 benefit from the FSA.

You've spent everything you signed up for before retiring, so there's no loss to you. Just like you couldn't have taken it with you, the company and/or FSA institution also will not come after you for the difference. They eat the difference, making up for it from those who don't use all of their FSA by end of year.

You've made a $498.73 "profit" just for signing up for the FSA.

That's what I did this year, effectively getting $1700 of dental work free of charge.

Bob Menschel
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