2020 Plan Year Information
What are the main advantages of an HSA?
There are several advantages to having an HSA:
- Triple Tax savings:
- Pre-tax contributions lower your taxable income.
- Tax-free growth, even on investments.
- Tax-free distribution means you don’t pay taxes when you use HSA dollars to pay for eligible health care expenses.
- You can contribute: When you contribute to an HSA, you lower your taxable income.
- Investment opportunities: As soon as your account balance reaches $500, you can invest some or all of your HSA money above that $500 in a variety of investment funds.
- No “use it or lose it” rule: You don’t have to use all of your HSA money by the end of the year; it carries over from year to year, even in retirement.
- Higher before-tax savings opportunities: With an HSA in 2021, you can contribute up $3,600 per year for individual coverage or $7,200 per year for family coverage and, if you’re age 55+, you can contribute an additional $1,000 to your HSA.
- You can take it with you: You can use it if you switch medical plans in the future and after you leave the Firm. The money in your account follows you wherever you go.
- Your contributions are flexible: You can change or stop your HSA contributions at any point during the year.
If I enroll in Medical Plan Option C, do I have to contribute to an HSA?
No, you are not required to make HSA contributions, but the tax benefits and potential investment opportunities are good reasons to consider doing so.
The HSA can help you budget for the higher deductibles and out-of-pocket maximums of Option C and it is a tax-effective way to save for future qualified health care expenses. Additionally, since the per-paycheck premiums for Option C are significantly lower than the other medical plan Options, you may want to consider contributing the difference in your premiums to the HSA.
If I contribute to the HSA, will the entire amount of my annual contribution be available to me immediately?
No. If you choose to make paycheck contributions to the HSA account, your annual election will be divided by the number of paychecks in the year. The amount will be deposited into your account each pay period, and only the amount that’s been deposited to date is available. You may not “borrow” against contributions not yet deposited in your account.
For this reason, if you expect to have significant health care costs immediately, you’ll want to be sure you budget adequately to pay for them out-of-pocket. You can be reimbursed from your HSA as your contributions are added to your account.
Does it matter when I open my HSA?
Yes. You may only submit eligible expenses for reimbursement from the point in time when your HSA was opened. For example, if you open your HSA on February 7, 2021, any medical expenses incurred prior to that date are not eligible for reimbursement.
Is there a time limit to submit expenses for reimbursement?
No. You may submit eligible expenses at any time, including years later or even in retirement. What’s important is that your HSA is open at the time the service was incurred.
Do I have to invest my HSA?
No, investing the funds in your HSA is optional.
The investment feature is flexible and allows you to invest a portion of your account balance. You must have a minimum cash balance of $500 in your HSA before you can begin investing your money. The HSA investment feature is designed to promote savings for future health care expenses. Reimbursements from your HSA for current health care expenses can only be taken from amounts that are not invested.
If I want to invest my HSA money, when can I start?
You can begin investing your HSA assets as soon as your cash balance is $500. (Some investment funds may require a minimum investment. If your account balance does not meet that minimum, you may not be able to invest in a particular fund immediately.)
What happens to my investments if my cash balance falls below $500?
If your balance falls below $500, you will not be able to purchase further investments until you replenish the cash account. The current investments you hold would remain invested in the account.
How does the HSA work when I need to pay a health care expense?
There are three simple ways to access your HSA balance to pay for eligible health care expenses:
- When you enroll in an HSA, you will receive a Your Spending Account (YSA) smart debit card to pay for eligible expenses. As long as there are funds available in your account, you can use the card to pay for expenses directly.
- Pay bills online: Request a payment to your provider, at no charge, through your HSA on the Benefit Center. No claim forms will be necessary, and your funds will be drawn directly from your account. View your account balance and recent payments online, too.
- Pay for an expense out of your own pocket and be reimbursed by your HSA. Request reimbursement by logging on to your HSA account on the Benefit Center. Or call a Benefits Advocate at 877-MSHR-411 (877-674-7411). You can make requests daily. Reimbursements can be deposited electronically into any account you specify, or you can choose to receive a paper check in the mail.
Can I take a distribution from my HSA for non-health care-related expenses?
If you use HSA money for non-qualified expenses and are under age 65, you’ll be taxed on that money at your income tax rate and assessed an additional penalty. Once you reach age 65, you’ll be taxed on HSA money used for non-qualified expenses, but you won’t pay the additional penalty.
Is there a limit on how much I can accumulate in my HSA over time?
There is no limit on the amount you can accumulate in your HSA over time. However, there is a limit on how much you can contribute to the account each year.
If my spouse also has an HSA, is there a limit to what we can contribute together?
If you and your spouse both have an HSA, both of you are treated as having Family coverage, even in a situation where you are not covered by your spouse’s medical plan or vice versa.
If your spouse has Family medical coverage and you have Individual coverage, both of you are treated as having Family coverage, even if the Family plan doesn’t cover you both. In either case, you can both make and receive HSA contributions as long as your total contributions don’t exceed the annual Family coverage contribution limit of $7,200 in 2021. The contribution limit is divided equally between you and your spouse, unless you agree on a different division.
For example, Bill (a Morgan Stanley employee) and Diana, both under age 55, are married with two children. Bill has Family coverage with Option C for himself and their children. Diana has Individual coverage for herself. Each establishes an HSA in 2021. Unless they agree to a different allocation, Bill can contribute $3,600 to his HSA and Diana can contribute $3,600 contribution to hers (each contributing half of the $7,200 limit). If both Bill and Diana were age 55 or older, each would be able to contribute an additional $1,000.
What if I already have an HSA from a previous employer?
If you have an HSA from a previous employer, you can roll over your account to the Morgan Stanley HSA if you enroll in Option C. You can also keep your accounts separate – it’s up to you.
What happens to my HSA if I decide to switch from Option C to a different option in the future?
If you decide to switch from Option C to a different option, the money in your HSA is yours to keep. If your new plan is a non HSA-qualified plan, or if you go to another employer that doesn’t offer a qualified HSA plan, you can still use your HSA to pay for out-of-pocket qualified health care expenses at any time, including after you retire. However, you won’t be able to continue making contributions to your HSA.
What happens to my HSA if I leave Morgan Stanley?
If you decide to leave Morgan Stanley, the money in your HSA is yours to keep. If your new employer offers a medical plan with an HSA, you should be able to roll over the amount from your Morgan Stanley HSA into your new plan. You should confirm with your new employer.
If your new employer doesn’t offer a qualified plan, you can still use your HSA to pay for out-of-pocket qualified health care expenses at any time. However, you won’t be able to continue making contributions to your Morgan Stanley HSA.
Can I have an HSA and a Health Care FSA at the same time?
No. If you have an HSA, you cannot contribute to an FSA. However, you can contribute to a Limited Purpose Health Care FSA.
What is a Limited Purpose Flexible Spending Account (FSA)?
A Limited Purpose FSA allows you to put aside before-tax money to pay for eligible dental and vision expenses if you are enrolled in Option C under the Medical Plan. Use your Limited Purpose FSA to pay deductibles, copays and coinsurance related to dental and vision expenses only. Other eligible health care expenses include eyeglasses, laser eye surgery and orthodontia. For a complete list, see IRS Publication 502. The Limited Purpose FSA is administered by Your Spending Account (YSA).
For 2021: Contribute up to the IRS maximum of $2,750.
To pay for eligible Limited Purpose FSA expenses, use the Smart YSA debit card to pay at the time of service or purchase, like you would use a debit or credit card. With the YSA debit card, you don’t have to fill out forms or wait for reimbursements. Eligible expenses will automatically be debited from the correct account—either the HSA or the Limited Purpose FSA—depending on which account the purchase is eligible for.
- For 2020: Eligible Limited Purpose FSA expenses must be incurred by December 31, 2020, and submitted for reimbursement by April 30, 2021.
- For 2021: Eligible Limited Purpose FSA expenses must be incurred by December 31, 2021, and submitted for reimbursement by April 30, 2022.
Use it or lose it: By law, any amount in your Limited Purpose FSA that is not timely claimed by you must be forfeited. Estimate your projected dental and vision expenses and potential tax-savings with the FSA Calculator on the Benefit Center website.
If I have a Health Care FSA in 2021 and I open an HSA for 2022, will I still have a grace period in early 2021 to spend any leftover FSA balances?
No, you must incur all 2021 Health Care FSA expenses by midnight on December 31, 2021, or your funds will be forfeited. The $550 Health Care FSA carry over feature is only available to use toward eligible health care expenses in 2022 if you enroll in a Health Care FSA and do not enroll in Medical Plan Option C.
Why should I enroll in a Health Care FSA?
By participating in a Health Care FSA, you can save from 25 to 40% on the cost of your eligible health care expenses.
What are eligible Health Care FSA expenses?
You can use a Health Care FSA for medical, prescription drug, dental and vision care costs not covered by those plans, including deductibles, copays and coinsurance as well as other health care expenses such as bandages, braces, laser eye surgery and more. Review a list of eligible expenses.
Who can I cover with my Health Care FSA?
You can use your Health Care FSA for health care costs for any of your covered dependents, including yourself, your spouse and children.
How much can I contribute to a Health Care FSA?
You may contribute up to the IRS maximum, which is $2,750 for 2021.
What happens if I don’t use all of the money in my Health Care FSA?
You may carry over up to $550 to use toward eligible health care expenses in 2021, assuming you enroll in a Health Care FSA and do not enroll in Medical Plan Option C. Any unused funds over $550 will be forfeited. Find out how much to contribute by using the FSA Calculator, which you can access at the Benefit Center (from the office, type benefits in your browser, or visit morganstanley.com/benefits).
How long do I have to submit my Health Care FSA expenses for reimbursement?
Your eligible expenses for the 2020 calendar year must have been incurred by December 31, 2020. You will need to submit these expenses for reimbursement by April 30, 2021. Your eligible expenses for the 2021 calendar year must be incurred by December 31, 2021, and submitted for reimbursement by April 30, 2022.
When can I start using my Health Care FSA?
Your total annual election is yours to use on the first day of the year.
Do I have to be enrolled in the Firm’s plans to have a Health Care FSA?
No, you can contribute to a Health Care FSA even if you’re not enrolled in the Firm’s medical, dental or vision plans.
Why should I enroll in a Dependent Day Care FSA?
By participating in a Dependent Day Care FSA, you can save from 25 to 40% on the cost of your eligible dependent day care expenses.
Who can I cover with a Dependent Day Care FSA?
You can use your Dependent Day Care FSA to pay for day care providers for dependent children under age 13 or qualifying dependents of any age who are physically or mentally incapable of self-care, such as disabled children or elderly dependent parents, as described in Internal Revenue Code section 152(c).
How much can I contribute to a Dependent Day Care FSA?
How much you may contribute depends on your marital status. For 2021, you may contribute between $100 and $5,000 annually to the Dependent Day Care FSA if you are single or married and file a joint tax return. (Lower limits may apply in certain circumstances.)
If you are married and file separate tax returns, you may contribute between $100 and $2,500 annually.
What happens if I don’t use all of the money in my Dependent Day Care FSA?
By law, any amount in your Dependent Care FSA that is not used for an expense incurred during the calendar year will be forfeited. Find out how much to contribute by using the FSA Calculator, which you can access on the Benefit Center (from the office, type benefits in your browser, or visit morganstanley.com/benefits).
How long do I have to submit my Dependent Day Care FSA expenses for reimbursement?
Your eligible expenses for the 2020 calendar year must be incurred by December 31, 2020 and submitted for reimbursement by April 30, 2021. Your eligible expenses for the 2021 calendar year must be incurred by December 31, 2021 and submitted for reimbursement by April 30, 2022.
When can I start using my Dependent Care FSA?
You may only receive reimbursement from your Dependent Day Care FSA for your contributions to date.
Can I use my Health Care FSA for dependent day care expenses?
No. Your Health Care and Dependent Day Care accounts are separate. You may only use your Health Care FSA for eligible health care expenses and your Dependent Day Care FSA for eligible dependent day care expenses.
Can I change the amount of my Health Care and Dependent Day Care FSA contributions during the year?
No. Unless you have a qualifying family status change (such as getting married or divorced, having a child, etc.), you cannot change your contribution amount during the year. You will have to wait until the next annual benefits enrollment period, typically held in the fall for the following calendar year. Special rules also apply if your qualifying family status change occurs after November 1.
How can I save on the cost of my commute to work?
If you take public transportation or drive to work, you can save up to 25% to 40% on the cost of your commute, depending on your tax bracket. Participate in the Commuter Benefits Program and you can contribute before-tax dollars to Transportation or Parking accounts or both, up to the IRS maximums.
- If you take public transportation—including the train, bus, subway, vanpool or ferry—you can contribute up to $270 per month in 2021 for eligible expenses.
- If you drive and park your car, you can contribute up to $270 per month in 2021 for eligible parking expenses.
- You can enroll in, change or stop your contributions at any time during the year.