What you can do with a Fidelity HSA

A Fidelity Health Savings Account works like a regular bank account, except the money inside it can only be spent on medical costs. You can use it to pay for doctor visits, prescriptions, dental work, vision care, and many other health expenses right now. You can also leave the money untouched and let it grow — Fidelity lets you invest your HSA balance in mutual funds and other investments, which means your account can earn money over time.

The account itself is separate from your checking or savings account. Fidelity holds the money, keeps track of what you spend, and sends you statements. You access the money through a debit card, a check, or a transfer to your bank account, depending on which method you choose when you set up the account.

Key Takeaways

  • Fidelity HSAs come with a debit card that you can use at pharmacies and medical providers, or you can request a check or bank transfer to pay for health expenses.
  • You can invest your HSA balance in mutual funds through Fidelity, which means the money can grow beyond what you deposit.
  • Keep receipts for all medical expenses you pay from your HSA, because you may need to show proof that the money went to may have access to medical costs.
  • If you spend HSA money on something that is not a may have access to medical expense, you will owe income tax on that amount plus a 20 percent penalty.
  • After age 65, you can withdraw money for any reason without the penalty, though non-medical withdrawals are still taxed as income.

Getting your Fidelity HSA set up and funded

When you open a Fidelity HSA, you will receive a debit card in the mail within one to two weeks. Before that card arrives, you can log into your Fidelity account online or through their mobile app to see your account balance and make transfers. Fidelity will also send you a welcome packet with your account number and instructions.

The money in your HSA comes from your paycheck if your employer offers payroll deduction, or you can deposit money yourself. If you are self-employed or your employer does not offer HSA payroll deduction, you can make a direct deposit or transfer funds from your bank account. The annual deposit limit changes each year — check Fidelity's website or your plan documents for the current year's maximum.

Once money is in the account, you can leave it sitting there earning a small amount of interest, or you can move it into investments. Fidelity offers a range of mutual funds and other investment options within the HSA. If you choose to invest, understand that the value can go up or down, and you should only invest money you will not need to spend on medical costs in the next year or two.

Using your debit card for medical expenses

The easiest way to spend from your Fidelity HSA is with the debit card. You can use it at pharmacies, doctor's offices, hospitals, and other medical providers that accept cards. When you swipe or insert the card, the money comes straight from your HSA balance. The transaction shows up in your Fidelity account within a day or two.

Some medical providers may not recognize the card as an HSA card and might decline it. If that happens, you can pay with your regular debit card or cash, then request a reimbursement from Fidelity. Save your receipt — you will need it to prove the expense was medical-related.

The debit card works only at places that accept card payments. If you need to pay a doctor or dentist who only takes checks or cash, use your regular payment method and then request a reimbursement from your HSA through the Fidelity website or app.

Requesting reimbursement and withdrawals

If you paid for a medical expense with your own money or with a different card, you can ask Fidelity to reimburse you from your HSA. Log into your Fidelity account, find the reimbursement request option, and enter the amount and the date of the expense. Fidelity will transfer the money to your bank account, usually within three to five business days.

You can also request a check from Fidelity if you prefer not to use the debit card or electronic transfer. Call Fidelity's HSA customer service line, provide the amount you need, and they will mail a check to your address on file. This takes longer — typically seven to ten business days — so plan ahead if you have a large medical bill due.

Some people use their HSA as a long-term savings account and do not withdraw money every year. That is allowed. The money rolls over from year to year, and you can spend it whenever you need it, even years later. There is no "use it or lose it" rule with HSAs.

Keeping records and proving your expenses

Fidelity keeps a record of every transaction you make with your HSA debit card, but you are responsible for keeping your own receipts and records. The IRS can ask you to prove that the money you withdrew was spent on may have access to medical expenses. If you cannot show proof, you may have to pay income tax and a 20 percent penalty on that amount.

Save receipts for at least three years after you withdraw the money. You do not have to send receipts to Fidelity, but keep them in a folder or take photos of them. Include receipts for deductibles, copays, prescriptions, dental work, vision care, medical equipment, and any other health-related costs. If you are unsure whether an expense counts, check the IRS list of may have access to medical expenses or contact Fidelity's customer service.

If you use your HSA debit card and Fidelity automatically approves the transaction because it is at a medical provider, you still need to keep the receipt. Fidelity's approval does not mean the IRS will accept it — the card system is not perfect at identifying medical expenses.

Investing your HSA balance through Fidelity

One of the main reasons people choose Fidelity for their HSA is the ability to invest the balance. If you have more money in your account than you plan to spend this year, you can move some of it into mutual funds, index funds, or other investments offered by Fidelity. The money can grow, and you pay no taxes on the growth as long as you eventually spend it on medical costs.

To invest, log into your Fidelity account and look for the investment or brokerage section of your HSA. You will see a list of available funds with information about their past performance and fees. Choose the funds that match your comfort level with risk and your timeline. If you are not sure where to start, Fidelity offers target-date funds that automatically adjust as you get older.

Keep in mind that investing means the value can go down as well as up. If you need the money soon for a medical expense, do not invest it. Only invest money you are confident you will not need for at least a few years. If the market drops and you need to withdraw money for a medical bill, you will have to sell your investments at that lower price.

What happens if you spend HSA money on non-medical costs

If you withdraw money from your Fidelity HSA and spend it on something that is not a may have access to medical expense — groceries, rent, a vacation — you will owe income tax on that amount. You will also owe a 20 percent penalty on top of the income tax. For example, if you withdraw $1,000 for a non-medical expense and you are in the 22 percent tax bracket, you would owe $220 in income tax plus $200 in penalty, for a total of $420.

The only exception is after you turn 65. At that age, you can withdraw money from your HSA for any reason without the 20 percent penalty. You will still owe income tax on non-medical withdrawals, but the penalty goes away. This makes HSAs a useful retirement savings tool if you have built up a large balance.

If you make a mistake and withdraw money for a non-medical expense, you can put the money back into your HSA within a certain time frame to undo the withdrawal. Contact Fidelity right away to ask about their process for correcting mistakes.

Frequently Asked Questions

Can I use my Fidelity HSA debit card at any store?

No. The card only works at medical providers, pharmacies, and health-related merchants. If you try to use it at a grocery store or gas station, it will be declined. If you need to pay for a may have access to medical expense at a place that does not accept the card, pay with your regular payment method and request a reimbursement from Fidelity.

What if I leave my job — can I keep my Fidelity HSA?

Yes. Your HSA belongs to you, not your employer. When you leave your job, the account stays open and the money remains yours. You can keep it with Fidelity, continue to invest it, and spend it on medical expenses whenever you need to. You will just need to update your contact information with Fidelity if your address changes.

How do I know if an expense is may have access to for my HSA?

The IRS publishes a list of may have access to medical expenses on its website. Common ones include doctor visits, prescriptions, dental work, vision care, hearing aids, and medical equipment. Some expenses like cosmetic surgery do not count unless they are medically necessary. When in doubt, contact Fidelity's customer service or check the IRS list before you withdraw the money.

Can I transfer money from my Fidelity HSA to another bank?

Yes. You can request a transfer from Fidelity to another HSA held at a different bank or financial institution. This is called a trustee-to-trustee transfer. Contact Fidelity with the account details of the new HSA, and they will handle the transfer directly. The money moves without being taxed, and you do not have to count it as a withdrawal.

What fees does Fidelity charge for an HSA?

Fidelity's HSA fees vary depending on your account balance and whether you invest the money. Some accounts have no monthly fee if you maintain a minimum balance, while others charge a small monthly maintenance fee. If you invest in mutual funds, you pay the fund's expense ratio. Check your account documents or Fidelity's website for the specific fees that explore to your account.