According to a letter I just received from my employer - it is "not legal" to contribute after-tax dollars to an existing HSA when our new health insurance kicks in on January 1st, which makes no sense.
I can see how it would be "not preferable" for us to do it - because the new HSCA they're pushing us towards is 100% forfeited at the end of the year if we haven't used it in its entirety. (Whereas the HSA is mine even if I quit/don't use it.)
After spending an extended period of time on the phone with our benefits department, I confirmed that the call center representatives were neither lawyers (which I'm not) nor licensed health insurance producers (which I am.)
So - lawyers - is there any difference between "not legal" and "illegal?" This seems like a heavy handed attempt to get us to contribute to an account whose balance we will lose at the end of the year... rather than an actual issue of law.
I also put in a call to my CPA... but thought I'd let you hooligans take a crack at it, too. Lawyers and non-lawyers are both invited to respond. And you too, Liz. I think you're in a category unto yourself.
"Not allowed by law" means the same thing as "illegal" too. We just think of "illegal" more in a criminal sense, I think. Normally when you say "that's illegal" you are referring to a violation of a criminal or traffic code or something. But it could be a violation of any codified law, I would think.
My CPA said she wasn't sure, but encouraged me to keep contributing to my existing HSA if I wanted to, try and write it off at the end of 2012 and - worst case scenario - the IRS says I can't have a tax benefit. But, she said the word "illegal" is definitely wrong, it's not like I'll end up in savings account jail for putting money into one.
Well, that's because CPAs don't have law degrees. Like I said above, we commonly associate it with criminal infractions but technically, it just means there's a law on the books that prevents it. Not necessarily a criminal law. I think they are technically right, but it is a heavy handed way to put it. Unless there isn't actually a law, I'm not sure and I'm not looking it up.
forbidden by law or statute.
contrary to or forbidden by official rules, regulations, etc.: The referee ruled that it was an illegal forward pass.
What magical fairy land do you live in that DOESN'T forfeit your money if you don't use it?
In every job I've ever had since the army, you could put pre tax dollars into an account for medical expenses you knew you would incur during the year but, you lose anything you don't use at the end of the year.
So, if you're a diabetic, for example, you know what your insulin costs will be and plan accordingly. You use pre tax dollars to pay for your medical expenses.
If there isn't anything wrong with you, it makes no sense to contribute to a plan like that.
What happens to any money you have already put into the HSA when you switch companies?
Is it like a 401k, 403b, or IRA? Can you roll it over to a new plan without penalties?