HSA Withdrawals
How do I pay for qualified expenses?
We recommend that when paying for medical services or products, you treat claims just as you probably do now. Have doctors and service providers submit claims to your insurance company or claims administrator, to ensure that your claims are counted toward your deductible under the HDHP covering you. You will also gain the benefit of any price negotiation and reduction as a part of applicable Preferred Provider Organization (PPO) networks or other arrangements that reduce your actual costs for medical services.
After the claim is processed and you receive an adjusted bill, you have the choice of writing a check on your HSA to pay the bill, or you can stop by your doctor's office and swipe your debit card for payment. You can also call your doctor's office and provide your debit card number for payment. It's just that easy.
Some individuals may want to pay their qualified medical expenses out of their own pocket and reimburse themselves from the HSA at the end of the year in one lump sum. Or you may decide not to reimburse yourself in the current year and let the HSA continue to grow and accumulate for future use.
What are nonqualified withdrawals?
You can make withdrawals for purposes other than qualified medical expenses, but you should be aware that nonqualified withdrawals are taxed as regular income, and individuals under age 65 pay a 10% penalty on the amount of the non-qualified withdrawal.
Once you reach age 65, you can withdraw money from your HSA for any purpose and simply pay income taxes on the amount of the withdrawal. No additional penalties apply after age 65.
As far as family members are concerned, you can make qualified withdrawals for yourself or any of your dependents, even if those dependents are not covered as a dependent under your HDHP. When using funds from your HSA to pay for qualified medical expenses, federal income tax does not apply to those withdrawals and payments regardless of your age.
An important note about keeping records of your qualified withdrawals: by law, you are responsible for substantiating that any withdrawals from your HSA are for qualified medical expenses. You should keep records such as receipts and Explanation of Benefits statements as proof should you ever be audited.
How do I withdraw from my HSA at the pharmacy or doctor's office?
You may withdraw funds from your Health Savings Account by writing a check on your account, or using your debit card at the pharmacy or doctor's office. You may make 6 free withdrawals per monthly statement cycle; withdrawals in excess of 6 incur a $10 excess transaction fee.
