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    Thread: 401K to HSA Conversion & Pregnancy (Kerfuffle)

    1. Member Inkarnata's Avatar
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      09-05-2012 07:27 PM #1
      Ok, here's the situation. I recently changed jobs, I had approx $7200 in my 401k with previous employer. Old employer had your standard run of the mill health insurance plan, which I participated in and between my insurance and my wife's insurace, my 1st daughters birth was completely paid for.

      We now have babies 2 and 3 on the way, and my new employer only offers a HDHP with HSA which I have just become eligible for. My intent is to roll the family max contribution of my 401k into an HSA, and the remainder..well right now its up in the air. Our OB's office bills us ahead of time for all of the appointments and the birth. From what I understand, with the HSA, I cannot pay any medical expenses incurred before the HSA was opened...now obviously the birth would be after the HSA was opened...

      Options:
      1. I take the remainder of my 401k as a cash disbursement and take the 10% + taxable income hit and pay part of the bills.

      2. I roll the leftover into an IRA, pay the bills via HSA, report it as an unqualified expense and take 10% (only?) hit

      3. I pay the bills from the HSA, and everything turns out better than expected because the procedure was completed after the start of the HSA.

      Cliffs: I have money and want to pay bills without getting butt raped with taxes...how to do.
      Reppin the GAP[/B]
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    2. Senior Member ChrisMD's Avatar
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      09-09-2012 10:52 AM #2
      Quote Originally Posted by Inkarnata View Post
      my new employer only offers a HDHP with HSA which I have just become eligible for.
      Have you opened an HSA yet? If you haven't, get your butt to a bank tomorrow morning and do so. It doesn't matter when you fund it (although the bank may require you to put in like $20 or something when you open the account). Just get it open. Don't even worry too much about where you open it; you can always transfer it later.

      Our OB's office bills us ahead of time for all of the appointments and the birth.
      They bill you in advance for services not yet rendered? How far in advance? Have you already been billed for them?

      From what I understand, with the HSA, I cannot pay any medical expenses incurred before the HSA was opened
      That is correct.

      Options:
      I need to understand this pre-billing before I can fully address the options but #2 would be both taxed and penalized just like #1. Taxes paid on the unqualified amount plus the 10% penalty. Unless you're over the age of 65 (then you pay taxes but no penalty) but I'm going to assume that you are not.
      Chris
      "All hail Dr. Chris, doctor of money medicine!" --Tornado2dr
      "annuity = financial abortion." --jnm2.0t

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