Free HSA Contribution & Distribution Rules Questions and Answers — Questions and Answers
Question 1: What is the maximum annual contribution limit for an individual HSA in 2024?
- $3,500
- $4,150 (Correct answer)
- $5,000
- $6,500
Correct answer: $4,150
The IRS sets annual contribution limits for HSAs. For 2024, the limit for an individual is $4,150.
Question 2: Who can make contributions to an individual's HSA?
- Only the account holder
- Only the employer
- Both the account holder and the employer (Correct answer)
- Only family members
Correct 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.
Question 3: When can HSA funds be withdrawn without penalty?
- Only after age 65
- Anytime, if used for qualified medical expenses (Correct answer)
- Only after retirement
- Only during employment
Correct 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HSA funds can be withdrawn tax-free for qualified medical expenses at any time, but using them for non-qualified expenses before age 65 incurs a penalty.
Question 4: What is the penalty for using HSA funds for non-qualified expenses before age 65?
- 10% penalty and income tax
- 20% penalty and income tax (Correct answer)
- No penalty, just income tax
- 50% penalty
Correct 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.
Question 5: What happens to HSA funds if the account holder dies?
- The funds are forfeited.
- The HSA remains tax-free for any beneficiary.
- A spouse can inherit the HSA tax-free, but a non-spouse must pay taxes on it. (Correct answer)
- The funds must be used immediately for medical expenses.
Correct 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.
Question 6: Can an individual contribute to an HSA after enrolling in Medicare?
- Yes, as long as they are employed.
- No, HSA contributions must stop upon Medicare enrollment. (Correct answer)
- Only if they delay Medicare Part B enrollment.
- Yes, but only up to age 70.
Correct 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.
Free HSA Contribution & Distribution Rules Questions and Answers
What is the maximum annual contribution limit for an individual HSA in 2024?