Contribution & Distribution Rules Flashcards

What is the maximum annual contribution limit for an individual HSA in 2024?

Answer: $4,150

The IRS sets annual contribution limits for HSAs. For 2024, the limit for an individual is $4,150.

Who can make contributions to an individual's HSA?

Answer: Both the account holder and the employer

Contributions to an HSA can be made by the account holder, their employer, or any other individual on their behalf.

When can HSA funds be withdrawn without penalty?

Answer: Anytime, if used for qualified medical expenses

HSA funds can be withdrawn tax-free for qualified medical expenses at any time, but using them for non-qualified expenses before age 65 incurs a penalty.

What is the penalty for using HSA funds for non-qualified expenses before age 65?

Answer: 20% penalty and income tax

If HSA funds are used for non-qualified expenses before age 65, they are subject to income tax and an additional 20% penalty.

What happens to HSA funds if the account holder dies?

Answer: A spouse can inherit the HSA tax-free, but a non-spouse must pay taxes on it.

If an HSA is inherited by a spouse, it remains an HSA. If inherited by a non-spouse, it becomes taxable income to the beneficiary.

Can an individual contribute to an HSA after enrolling in Medicare?

Answer: No, HSA contributions must stop upon Medicare enrollment.

Once an individual enrolls in Medicare, they are no longer eligible to contribute to an HSA, though they can still use existing funds for medical expenses.