Health Savings Accounts for Americans Abroad

Americans abroad can often continue to hold an existing Health Savings Account, but contribution eligibility and account use should be reviewed carefully.

An HSA review should usually consider:

• whether you are still HSA-eligible
• whether you are covered by a qualifying high deductible health plan
• whether you have other disqualifying coverage
• whether you are enrolled in Medicare
• whether you can still contribute
• whether employer contributions are being made
• whether contributions have already been made for the year
• whether distributions are for qualified medical expenses
• whether overseas medical costs are eligible
• whether receipts and records are being retained
• whether Form 8889 is required
• whether the account is invested
• whether the provider accepts a foreign address
• whether the account has trading restrictions
• whether beneficiaries are up to date
• whether the HSA may be used later in retirement
• whether you may return to the United States

IRS Publication 969 says an HSA is a tax-exempt trust or custodial account set up with a qualified HSA trustee to pay or reimburse certain medical expenses.

IRS Form 8889 is used to report HSA contributions and distributions.

The financial planning point is that an HSA should not be ignored simply because you have moved abroad.

It may still be valuable, but contributions, withdrawals and long-term use need to be checked.

An HSA is often thought of as a short-term medical expense account.

For some people, it can also be part of long-term retirement planning.

That is because an HSA may be used to pay or reimburse qualified medical expenses, and healthcare costs are often a major retirement planning variable.

For Americans abroad, this needs careful planning.

You may need to think about:

• whether to use the HSA now or preserve it for later
• whether current overseas medical expenses qualify
• whether to reimburse yourself now or keep records for later
• whether the account should be held in cash or invested
• whether investment options remain available with a foreign address
• whether Medicare enrolment changes contribution eligibility
• whether future healthcare will be in the US or abroad
• whether the HSA currency matches future healthcare costs
• whether a spouse or dependant can benefit
• how the HSA works after death

The HSA can be particularly useful where the owner expects future US healthcare costs.

It may be less useful where the owner will remain abroad permanently and has a different healthcare funding plan.

The right answer depends on eligibility, tax status, healthcare plans, investment access, cash flow and future residence.

The key point is that an HSA should be integrated into the retirement plan, not left as a forgotten account from an old employer.

This page is for general information only and does not constitute personalised financial, tax, legal, healthcare, medical, insurance, HSA, Medicare, pension, investment, retirement, estate planning or currency advice.

HSAs, contribution eligibility, high deductible health plan rules, qualified medical expenses, HSA withdrawals, HSA investments, Form 8889, Form 1099-SA, Medicare, private medical insurance, overseas healthcare expenses, tax reporting, beneficiaries, estate planning, currency and future residence depend on personal circumstances and may change.

HSA and US tax advice should be taken from a suitably qualified US tax adviser or CPA. Healthcare and insurance advice should be taken from a qualified medical, Medicare or insurance specialist where relevant.

Medical advice should be taken from a qualified healthcare professional.

Financial planning should be coordinated with tax, legal, insurance, healthcare, pension, investment and estate planning advice where appropriate.

Investing involves risk. HSA investments, retirement accounts and investment values can fall as well as rise, and you may get back less than you invest.

Currency movements can affect the value of HSA assets, medical expenses, reimbursements, withdrawals and future spending.