Managing Your HSA
Accessing Your HSA Funds
Fidelity has three methods by which you can access your HSA funds to pay for qualified medical expenses:
- Fidelity BillPay for Health Savings Accounts – You can make online payments to health care providers, companies, and individuals. You can set up an automatic schedule for your payments and keep track of all bill payments for qualified medical expenses.
- Fidelity HSA debit card – Use at the point of service.
- Fidelity HSA checkbook – Use when you need it.
You must keep all receipts and records of medical expenses paid with your Fidelity HSA funds to document sufficiently that distributions have been made exclusively for qualified medical expenses.
You should keep these items for your own records; do not submit them to Fidelity. Distributions from your HSA will also be reported by Fidelity to you and the IRS each tax year on IRS Form 1099-SA. If your tax return is audited by the IRS, you might be asked to provide receipts for qualified medical expenses paid for before receiving distributions from your Fidelity HSA.
Using your HSA for nonqualified medical expenses
Distributions from your Fidelity HSA that are used to pay for or reimburse nonqualified medical expenses must be included in your gross income for tax purposes and are subject to an additional 20% penalty. The 20% penalty does not apply to distributions made if you become disabled, once you reach age 65, or after your death.
Using your HSA for a dependent child
You may use your HSA to pay for qualified medical expenses incurred by your dependent child as long as your child is considered a dependent for federal tax purposes. Otherwise, you will pay a penalty plus taxes. According to IRS guidelines, a dependent child for tax purposes includes one of the following:
- A dependent you can claim on your tax return
- A dependent that you could have claimed on your tax return except that they had gross income of $4,300 or more in 2020 (as adjusted)
HSAs are not subject to the use-it-or-lose-it rule; therefore, funds remain in your account from year to year. Any unused funds may be used to pay for future qualified medical expenses.
Transfer of assets
You may transfer funds from another HSA custodian through a transfer of assets transaction as long as the account type is the same. Fidelity will coordinate the transfer from the other institution after you complete and return the completed Transfer of Assets form. The transfer will not be considered a taxable event and will not be reported to the IRS. Additionally, Fidelity does not charge fees on this transaction. You should always consult the fee schedule of your other HSA to understand any fees or changes that may apply. Please note that eligible transfers are not included when calculating your maximum annual contribution amount.