HSA portrayal status if one cancel HDHP insurance?
After signing up for a High Deductable Health Plan (HDHP) for 2008, I opened a HSA account and funded it near a pretax dollars from an IRA. What are the implcations and what do I need to do with my HSA information, if I cancel the HDHP insurance coverage this year? Can I still use it for health expenses?
Answers: If you dissolve the HDHP before you have have it a full year you will be required to withdraw some of the funds you deposited. You will have to wages taxes and a 10% penalty since the fuds came from an IRA. If you enjoy a family plan the most you deposit for each month you have the HDHP is $470.83, if you have a single plan $237.50.
Some agents are confused on this. Even though you are allowed to deposit the entire annual amount up front if you cancel the plan surrounded by the first year you will have to take out the excess contributions.
If you nullify your HDHP plan after the first full 12 months you can keep the HSA and still spend the money tax free as long as it is on qualified expenses. You can even spend the HSA money on your current plan co-pays, etc.
If you are not happy with your current HDHP you can other switch to a new provider.