Pub. 8 2018 Issue 3

17 ISSUE 3. 2018 Here are a few services that can be paid with HSA savings. • Payments for in-patient hospital care • Payments for residential nursing home care for medical reasons (If the main reason for this type of care is not medical, then only the medical expenses are qualified) • In-home nursing services connected with patient care In-Home Care Let’s face it, most people prefer to hire help at home rather than go into a medical institution. So, a frequent question is, “Can HSA savings be used for in-home care?” As described in IRS Publication 502, Medical and Dental Expenses, the IRS does allow this for long-term care services that meet these two requirements. 1. Required by a chronically ill individual 2. Prescribed by a licensed healthcare practitioner as part of a care plan Home care expenses may not be fully qualified—only the portion of the expense paid for direct medical care is al- lowed. For example, if home support personnel spend 20 percent of their time cleaning the residence, then that 20 percent is not qualified. If using the HSA savings for in- home care, individuals should document all expenses paid from the HSA, including documentation showing that the individual meets the IRS’ chronically ill definition. Definition of Chronically Ill According to the IRS, an individual is “chronically ill” if within the previous 12 months, a licensed healthcare practitioner has certified that the individual meets one of the following descriptions. 1. The individual is unable to perform at least two ac- tivities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. 2. The individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Family Assistance with Home Care So let’s take this one step further. Most people would prefer to have a family member or close friend assist them with in-home care if that option is available. Fol- lowing definitions as outlined in IRS Publication 502, a family member may provide services if the services are similar to what a nurse provides (e.g., providing medi- cation, change of dressings, bathing, and grooming). If meeting this requirement, HSA savings could be used for these expenses. While there is no prohibition against a relative providing these services, I strongly recommend that the HSA owner document and maintain itemized receipts for payment in the event the IRS later questions it. Share the Concept As you can see, there is flexibility in use of HSA savings beyond the common medical expenses that most people are aware of. Whether you are a bank, credit union, or financial advisor, you can now outline yet another HSA savings benefit and another reason HSAs can be a key financial planning tool for a more secure retirement. I can tell you that by the time I finished this conversation with the initial couple, others were listening in. It is a message that people are looking for. w