What an HSA Does
A Health Savings Account generally kicks in to cover unexpected qualified medical expenses, so you don’t have to deal with them. But the benefits reach beyond your immediate pocket.
Pre-tax dollars fund HSAs from your check. In other words, the money you earn and apply toward your HSA is not taxed. When you withdraw the funds, they remain untaxed as long as you use them to pay for a qualified medical expense.
Additionally, those funds can be invested into the markets and grow. The earnings on the growth are tax-deferred or exempt. If you cash them out, you’ll pay taxes on the earnings later, but if you use them for medical expenses, they remain tax-exempt.
HSAs aren’t employer-only, although you can open one if your employer provides the option. Contributions through an employer are pre-tax and aren’t included in payroll taxes. You can also begin an account with your bank, a credit union, or an insurance company.
This is great for US citizens who remain at one job for long periods or transfer their HSA to another employment. But are they worth it for H-1B visa holders?
Requirements for Health Savings Accounts
HSAs do have serious financial advantages, and it’s legal for an H-1B visa holder to open one. However, there are a few requirements you must meet first, whether you’re a foreign national or a US citizen.
Before you can open an HSA, you must prove that you have a high-deductible health insurance plan. Your deductible is the amount you have to pay out of your own pocket before the insurance starts covering your expenses. You can’t have another health insurance policy (with the exception of separate coverages such as vision, life, disability, etc.), and you can’t be covered under Medicare. If someone else claims you on their tax return (which isn’t typical for an H-1B visa holder), you can’t have an HSA, either.
If none of these factors apply to you, let’s move on and determine whether an HSA account would benefit your time in the US.
The Pros of an HSA for H-1B Holders
It doesn’t matter why you’re in the country or whether you’re an H-1B holder or US national. Everyone can get sick or injured, and having an HSA as a backup plan is a smart idea.
Provided you’re legally employed in the country and meet the program’s requirements, you can open an HSA on your own or through your employer. You’ll need a social security number and a valid address in the US, which you receive with your H-1B documentation.
However, if you still use your home country’s health coverage, you can’t have an HSA because of the rule of not having a secondary insurance plan.
If you don’t spend it, the money you invest into your HSA is retrievable when you return to your home country. Or, you can leave the HSA and use it to pay qualified medical expenses when you get back home. You’ll have to file a special form (1040NR), but you still won’t be taxed on that money. Note that if you use the debit card option to pay these medical bills, you’ll be responsible for the conversion fees to move from dollars to your country’s currency.
Should you decide to withdraw the funds from your HSA, you’ll pay taxes on them and the interest you earned. But since you would have paid taxes on that money anyway, that’s not the concern. The only drawback is that there’s a 20% penalty because you didn’t use the funds for a qualified medical expense.
This penalty does not apply to those 65 or older or anyone with a disability. So, you can hang in and wait until you’re 65 to withdraw your HSA funds and let them be an addition to your retirement plan.
Switching Jobs With an HSA
H-1B visas have a portability element to them, giving you the opportunity to transfer to another employer with USCIS approval. But the HSA isn’t as easy to move unless it’s under your information and not tied to your employer.
Should you change jobs, you can keep your HSA funds as long as you continue to meet the requirements for the account. If your new employer’s HSA terms are more favorable than your previous one, you can roll the funds into their plan. Otherwise, you may keep your old HSA account with your other employer and continue to use the money to pay for qualified medical expenses.
What’s Next?
The journey to obtaining your H-1B visa and understanding everything you’re entitled to under it is exciting — and, let’s face it, confusing. You’re heading to a new and strange country where they do things differently than you’re used to, and you want to do it all right.
That’s why Visa2US is here. Our legal experts know immigration law inside and out, and we use that knowledge to make your trip easier.
No matter where you are in your H-1B petition process, we can offer advice and direction to ensure you get the benefits you’re entitled to as a visa holder, like an HSA. Contact us 24/7, online or over the phone, and get started on the path to becoming a foreign worker in the US.
