HSA With Payroll Contributions and Reimbursable Expenses
The official HSA Guide is not clear in explaining how to handle this situation. I have read all of the Forum posts on HSAs as well. We would greatly appreciate help since we are nearing the end of our evaluation period of YNAB and will be needing to make a decision.
I make contributions to my HSA account through payroll deductions only. I have entered my paycheck gross as Inflow: To Be Budgeted, then split out the expenses for taxes, insurance, 401k and HSA. I do not use the available debit card to pay for medical expenses. Rather, I use a credit card that I get cash-back on (and pay the balance in full every month). I then periodically submit the expenses to the HSA Bank which then direct deposits the funds into my checking account.
If I categorize the expenses put on my credit card as medical, for example, and then also categorize the reimbursement to medical, the reports will look like I have no medical expenses, won't they?
I tried adding the HSA as a tracking account, then categorizing the HSA payroll deduction as a transfer to that account, but that didn't work because it requires a category. If I make the category medical, then it puts that as "Activity" and shows an overspent category.
Thank you very much.
With an on-budget HSA, the "reimbursement" is actually just a transfer. This results in only one spending transaction (categorized outflow).
You also wind up synchronizing a category (or group) with that account total, which is a signal those funds should NOT be part of the budget. The synchronization will be completely on you to maintain -- additional effort -- as YNAB won't help you.
Taking the HSA off-budget removes the need to synchronize and changes the semantics of that medical spending to be an actual reimbursement. As with all reimbursable spending, it's SUPPOSED to net to $0. (It's outside the purview of the budget.) You could add a Tracking (off-budget) account to have the current balance in front of you.
TLDR: I would take the HSA off budget. I would also use a dedicated reimbursable-medical category for such expenses, and a normal medical category for (non-reimbursable) expenses your budget must support.
Cadet Wildcat said:
I tried adding the HSA as a tracking account
The category required represents growing the fund. In my view, that's conceptually a different purpose than handling medical expenses that will be reimbursed.
Yes, it would be temporarily overspent. However, TBB is also correspondingly larger. Once you cover the overspending in HSA-Contributions, TBB will be equal to the actual deposit amount (net pay).
How did you resolve your question? I am trying to adjust my approach to resolve the same tracking account - "requires a category" problem you identify. We have moderately high regular medical expenses so we regularly use HSA funds to reimburse eligible expenses, but not all of them. I try to use the HSA on a reimbursement basis only (i.e., avoid using the HSA debit card) to maximize the $$ left in the HSA for investing. Thinking of taking the HSA on-budget to resolve this issue.
I too track gross pay because, at the end of the day, I like knowing how much of our earnings goes to those wage deduction categories and I do "plan" with those dollars - adjust my W4 to try to keep tax due and tax paid close. These deductions are like super high priority regular monthly expenses - they always get spent at the same time I get paid. For reporting purposes, it's easy to remove the Payroll Deductions category group, and I keep them at the bottom of my budget.
Thanks for asking this and thanks too to the replies.