Time to Put Your 2024 Health Savings Account Ducks in a Row
by William G. (Bill) Stuart | Originally posted on LinkedIn by Health Savings Academy
The clock is ticking on 2023. Take a few minutes now to make last-minute 2023 Health Savings Account plans and set a course for a successful 2024.
Whether your medical plan renews in January, July, or any other month, Health Savings Account contributions are tracked on the calendar year. It's important to know when you can no longer contribute for 2023 (spoiler alert: April 15, 2024, for most owners) and how much flexibility you have in setting and changing your 2024 funding levels.
Even though you're not locked into a binding Health Savings Account election, you can maximize your financial opportunity and minimize last-minute angst by spending a little time - perhaps the equivalent of a Yellowstone or Bosch Legacy rerun - to take the proverbial pencil to paper and determine how you want your Health Savings Account to look at the end of 2024. With a road map in place, you'll find it easy to navigate the route and realize quickly whether you've gone off course.
Below are some important pieces of the plan.
Confirm Your Beneficiary
Just as the switch in and out of Daylight Savings Time is an opportunity to replace the batteries in your smoke detectors, the beginning of a new calendar year is a good time to review your beneficiary designation. If you're married and want to name someone other than your spouse, your administrator may require your spouse to sign a form acknowledging this arrangement.
Remember, if you name your spouse as beneficiary, your account balance passes to your spouse as Health Savings Account assets. If your spouse has established her own account, she can receive your balance whether or not she's eligible to fund a Health Savings Account. If she doesn't own one, she can set up her own Health Savings Account without being HSA-eligible herself, then receive the funds. Either way, she enjoys the same tax benefits as she would if she'd funded the account herself. She can make tax-free distributions for qualified expenses, enjoy tax-free appreciation, and even make her own contributions if she's HSA-eligible.
If you name anyone else as your beneficiary, your balances aren't lost. But the account will be liquidated and funds distributed. The distribution will be included in your beneficiary's taxable income in the year that it's received. Your beneficiary will face no restrictions or loss of tax benefits no matter how the funds are spent.
Some of the saddest stories in employee benefits are tales about employees who don't update their beneficiary designations and pass away, leaving their life insurance to a now-former spouse rather than a new spouse and children. In most cases, Health Savings Account balances are less than life-insurance payouts, but you still wouldn't want someone else to receive your hard-earned balances because you failed to name your intended recipient.
Review Your 2023 Contributions
The good news is that you're not locked into an annual contribution or schedule of equal periodic contributions during the year. You can change your Health Savings Account contributions - up or down, start or stop - prospectively at any time, whether you make pre-tax payroll deductions or deposit funds from a personal financial account. You don't have to experience a qualifying event to change your contribution strategy.