It is common for people to have more than one health savings account (HSA.) Changing jobs can lead to someone having multiple HSAs. Having more than one HSA offers some potential advantages, such as the opportunity to take advantage of employer matches with one HSA while enjoying expanded investment options with another HSA. However, fees can add up, and contributions for all HSA accounts are combined when tabulating annual contribution limits.
If you need help managing your HSAs or figuring out how they fit into your broader financial plans, consider working with a financial advisor.
HSAs offer attractive tax benefit for people saving to cover future healthcare costs. Contributions to the accounts are deducted from current income for income tax purposes, earnings grow tax-free and withdrawals to pay qualified medical-related expenses also evade taxation.
To open an HSA, someone needs to be covered by a high-deductible health plan (HDHP). The IRS has a detailed definition of what it takes to be considered an HDHP, but the main feature is a high deductible. For 2022, an HDHP has to have a deductible of at least $1,400 for individuals or $2,800 for families.
There are also limits to the annual contributions that can be made to an HSA. For 2022, an individual usually can contribute no more than $3,650 and a family is capped at $7,300. Contributions from employers also count against this cap. After HSA owners reach age 55, they can contribute another $1,000 over the cap.
Multiple HSA Considerations
Having multiple HSAs presents few problems. It’s common for people to acquire more than one HSA as a result of job changes. When an HSA owner takes a new job, his or her HSA remains his and doesn’t stay behind at the old employer. If the new employer’s insurance has an HDHP option, the employee can and often does open a new HSA.
However, that’s not the only way to acquire multiple HSAs. Anyone covered by a qualifying HDHP can open more than one HSA. Many banks and other financial institutions offer HSAs. Even if an employer doesn’t have an HSA as part of the employee health plan, membership in an HDHP allows workers to open more than one HSA at a financial institution that does offer them.
Employees may be motivated to have to more than one HSA if, for instance, the employer matches contributions but the employer’s HSA plan has only limited investment options. An HSA plan from another financial institution won’t provide for matching, but may have more flexible investment choices that appeal to the employee.
The contribution limits apply to the total contributions to multiple HSAs. That is, if an employee under age 55 with individual coverage and two HSAs contributes $2,000 to one HSA in 2022, the employee would only be able to contribute $1,650 to the other HSA before reaching the limit of $3,650.
Multiple HSAs can mean somewhat more complicated recordkeeping. In addition to maintaining documentation for any expenses that are compensated by HSA withdrawals, an owner of two HSAs needs to track and avoid double-dipping by reimbursing themselves from each account for the same expense.
Fees provide a reason to consider avoiding multiple HSAs. HSAs may charge monthly or annual fees for each account, so that having two accounts means paying twice the fees.
Taxes are also a consideration. An employee whose employer offers an HSA can make pre-tax contributions using payroll deductions. This technique may allow the contributions to avoid being assessed income taxes as well as FICA payroll taxes. If the employee also has another HSA with a third-party financial institution, the employee can contribute to that account as well but will have to use after-tax dollars to do it. The contributions can be deducted to reduce taxable income for filing purposes, but the employee won’t be able to escape paying the payroll taxes.
Having multiple HSAs presents few problems and can add desirable flexibility including options to take advantage of employer contributions with one HSA and more investment options with another. However, the annual contribution limits still apply and are calculated based on combined contributions to all HSAs. Employees may also have to pay more fees and lose out on some tax advantages by having more than one HSA.
Tips on Healthcare
- A financial advisor can suggest ways to use HSAs to help fund future health costs. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to combine multiple HSAs into one to reduce paperwork and save on fees and taxes, you can do it by filling out an HSA transfer form supplied by the HSA provider. It’s also possible to combine HSAs using a rollover, but this method has more restrictions and reporting requirements.
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