How Not To Pull Your Family Apart

At the end of the previous meeting, the group decided to review this funding mechanism which is steadily gaining in popularity. Jodi starts the discussion. “Did you know you can use an HSA account as a long-term care funding mechanism?”

Everyone shakes their head.

Doug doesn’t want to upstage Jodi, so he waits to pitch in. “Don’t feel bad. Dad and I also thought you couldn’t use an HSA account to pay long-term care premiums, and we actually have HSAs!”

Nicole, looking hopeful, mentions, “I know Erik has a flexible savings account at work? Is that the same?”

“No, sorry dear, it isn’t,” Jodi says, “but I am glad you asked. It’s easy to mix the two up since both FSAs and HSAs are pretax accounts you can use to pay for health-care related expenses.”

Having piqued everyone’s interest, Jodi throws out a second question. “How would anyone who is not contributing to an FSA account open an HSA account?”

“You better just tell us, Mom,” says Nicole.

“Actually, there are two ways to open an HSA account,” Jodi explains. “Since the HSA belongs to the individual and not the employer, as long as you are covered by a high deductible health plan, you may open and contribute to an HSA. The other way is how Dad and I did it. Since we have a qualifying high deduction health plan through work, we were also able to open an HSA through our employer.”

Nicole continues her inquiry. “What if my employer doesn’t offer an HSA account? Where can I open one on my own?”

Jodi answers, “First, remember that you cannot contribute to both an HSA and FSA. From what I read, Nicole, you may want to check first with your human resources department since my employer, like others, contributes money to my HSA. I suspect my employer may pick up the fees as well. I found this helpful chart to explain the triple tax advantages of HSAs.