What is a Health Savings Account?

Created in 2004 to help Americans with their health care needs, a Health Savings Account is one in which a member can accumulate funds to pay for medical expenses for themselves or any eligible covered family members.

Health Savings Account with added benefits!

Health Savings Account FAQs

• Who is eligible to open an HSA?
  • An individual or a family.
  • Not a trust or business.
  • Must be covered by a high deductible health plan (HDHP).
  • Some one who is self-employed and covered by an HDPH.
  • Members who are active in an health reimbursement (HRA) or flexible spending account (FSA) need to check with their employer to determine if the HRA or FSA has been properly coordinated with HSA rules.
   
• Who is not eligible to open an HSA?
  • Members enrolled in Medicare.
  • Members receiving veterans affairs medical benefits.
  • Members who can be claimed as a dependent on another person’s tax return.
   
• What is an HDHP?
  • Is a health insurance plan that has a high deductible/out of pocket expense that must be met before coverage starts.
  • To qualify as a HDHP the minimum deductible must be at least $1,200 for an individual and $2,400 for a family coverage.
  • There is also a maximum deductible/out of pocket expense cap of $6,050 for an individual and $12,100.00 for a family.
   
• What are the possible benefits of a Health Savings Account?
  • The earnings in the HSA are tax deferred, and may be used tax free.
  • The member decides which medical expenses to pay from the HSA.
  • Funds can be saved and used during retirement.
  • There is no use-it or lose-it provision as in the flexible spending plan.
  • The HSA is not tied to an employer.
  • The HSA increases in value with tax deferred dividends.
  • The HSA funds can be used for qualified medical expenses that are traditionally not covered by insurance.
   
• What are the regular contribution limits?
  • Regular contribution limits are affected by:
    • HDHP deductible amount.
    • Age (catch-up contributions apply).
  • Self-Only Coverage
    • $3,100.00-2012 limit
     
  • Family Coverage
    • $6,250.00-2012 limit
       
• What are the Catch-Up Contributions?
  • An additional contribution may be made by individuals at least age 55 but younger than age 65
    • For 2011 the catch up is $1000.00
    • Applies to eligible individuals with self-only coverage or family coverage
   
• What Rollover Contributions are allowed? 
  • HSA to HSA
  • Archer MSA to HSA
  • One time transfer from an IRA to HSA transfer is limited to the maximum HSA contribution for the year. Note: the amount contributed is not allowed as a deduction. (Other restriction apply)
  • Rollovers from health FSAs and HRAs into HSAs through 2011(Restriction do apply)
   
• What are some facts about HSA Distributions?
  • Distributions can be taken any time
  • The HSA owner is responsible for determining if expenses qualify.
  • Tax-free if used to pay for qualified medical expenses
  • Tax and 10% penalty apply to non-qualified distributions
   
• What is a Qualified Medical Expense?
  • An amount paid by an HSA owner, spouse, and dependents for certain types of medical care not covered by insurance or another health plan.
  • Examples are:
    • The cost of diagnosis, cure, treatment or prevention of disease. This includes prescription and non-prescription drugs.
    • Transport essential to medical care above.
     
  • Qualified long term care services
  • Premiums for COBRA following termination of employment.
  • Premiums for qualified long term care insurance.
  • Dental, vision, and other services that may not be covered under the HDHP.
  • Must be incurred after an HSA is established; earlier expenses are non-qualified.
  • For more information on qualified medical expense please visit the IRS website http://www.irs.gov/pub/irs-pdf/p502.pdf
   
• What distributions are exceptions to the 10% penalty tax?
  • Death
  • Disability
  • Attainment of age 65
    • But may be subject to federal income taxes if not used for medical expenses
   
• What are the Death Beneficiary rules?
  • Spouse:
    • HSA becomes the HSA of the spouse.
    • Distributions used to pay for qualified expenses of the deceased or surviving spouse are tax-free.
     
  • Non-Spouse:
    • HSA ceases to be an HSA on the date of death
    • Date of death fair-market value included in beneficiary’s income, reduced by distributions used to pay for qualified expenses of the decedent within one year after death
    • Income tax but no penalty tax
   
• Can I use my HSA account to keep my $50 minimum share requirement.
  • No, an HSA account cannot be used to secure the $50 minimum share requirement.
   
• Can a Health Savings Account (HSA) have a joint owner?
  •  No, the HSA is designed for individuals enrolled in High Deductible Health Plans.