HSA
Brochure
Advantages of HSAs
Your high deductible insurance and HSA
protect you against high or unexpected medical bills.
Affordability
– You should
be able to lower your
insurance premiums by switching to health
coverage with a higher deductible.
– You can use the funds in your account
to
pay for current medical expenses, including expenses
insurance may not cover, or save the money in
account for future needs, such as: insurance or medical expenses if unemployed,
expenses after retirement (before Medicare),
pocket expenses when covered by Medicare,
and term care expenses and insurance.
You can save the money in your account for
medical expenses and grow your account through
earnings.
You make all the decisions about:
how much money to put into the account,
whether to save the account for future expenses or
medical expenses,
which medical expenses to pay from the account,
which company will hold the account, where
to invest any of the money in the account, and which investments to make.
Portability
– Accounts are completely portable,
you can keep your HSA even if you: change
jobs
change your medical coverage, become
unemployed, move to
another state, or change
your marital status.
Ownership
– Funds remain in the account from year to year
like an IRA. There are no “use it or lose it”
HSAs.
Savings
– An HSA provides you triple tax savings:
deductions when you contribute to your account;
earnings through investment; and,
withdrawals for qualified medical expenses.
What Happens to My HSA When I Die?
If you are married, your spouse becomes the owner of
the account and can use it as if it were their own HSA.
If you are not married, the account will no longer be
treated as an HSA upon your death. The account will
pass to your beneficiary or become part of your estate (and be subject
to any applicable taxes).
Opening Your Health Savings Account
Banks, credit unions, insurance companies and other
financial institutions are permitted to be trustees or
custodians of these accounts. Other financial
institutions that handle IRAs or Archer MSAs are also
automatically qualified to establish HSAs. If you cannot locate a local
institution willing to establish your account, check links under “Resources”
on the Treasury
website.
Need More Information about HSAs?
Treasury’s web site has additional information about
Health Savings Accounts , including answers to
frequently asked questions, related IRS forms and
publications, technical guidance, and links to other
helpful web sites. Treasury’s HSA website can be
found through www.treas.gov (click
on “Health Savings Accounts”) or directly at the following address:
http://www.treas.gov/offices/public-affairs/hsa/.
Health Savings Accounts
A Health Savings Account (HSA) is an account that you can put money into
to save for future medical expenses. There are certain advantages to putting
money into these accounts, including favorable tax
treatment. HSAs were signed into law by President
Bush on December 8, 2003. Who Can Have an HSA
Any adult can contribute to an HSA if they:
·
Have coverage
under an HSA-qualified “high
deductible health plan” (HDHP)
· Have no other first-dollar medical coverage (other
types of insurance like specific injury insurance or
accident, disability, dental care, vision care, or longterm
care insurance are permitted).
· Are not enrolled in Medicare.
· Cannot be claimed as a dependent on someone else’s
tax return.
Contributions to your HSA can be made by you, your
employer, or both. However, the total contributions are
limited annually. If you make a contribution, you can
deduct the contributions (even if you do not itemize
deductions) when completing your federal income tax
return.
Contributions to the account must stop once you are
enrolled in Medicare. However, you can keep the
money in your account and use it pay for medical
expenses tax-free.
High Deductible Health Plans (HDHPs)
You must have coverage under an HSA-qualified “high
deductible health plan” (HDHP) to open and contribute
to an HSA. Generally, this is health insurance that does
not cover first dollar medical expenses. Federal law
requires that the health insurance deductible be at least:
$1,100* -- Self-only coverage
$2,200* -- Family coverage
In addition, annual out-of-pocket expenses under the
plan (including deductibles, co-pays, and co-insurance)
cannot exceed:
$5,500* -- Self-only coverage
$11,500* -- Family coverage
In general, the deductible must apply to all medical
expenses (including prescriptions) covered by the plan.
However, plans can pay for “preventive care” services
on a first-dollar basis (with or without a co-pay). "
Preventive care" can include routine pre-natal and
well-child care, child and adult immunizations, annual
physicals , mammograms, pap smears, etc.
Finding HDHP Coverage
Any company that sells health insurance coverage in
your state may offer HDHP policies. Although
Treasury cannot recommend any specific names of
companies selling these policies, you should be able to
find a qualified policy by contacting your current
insurance company, an agent or broker licensed to sell
health insurance in your state, your state insurance
department, or check Internet links under “Resources”
on the Treasury website.
HSA Contributions
You can make a contribution to your HSA each year
that you are eligible. Individuals age 55 and older can also make additional
“catch-up” contributions. You can contribute up to the
amount of your HDHP deductible but no more than:
$2,900* -- Self-only coverage
$5,800* -- Family coverage
*These amounts are adjusted annually for inflation.
Determining Your Contribution
Your eligibility to contribute to an HSA is determined
by the effective date of your HDHP coverage. If you do
not have HDHP coverage for the entire year, you will
not be able to make the maximum contribution. All
contributions (including catch-up contributions) must
be pro-rated. Your annual contribution depends on the
number of months of HDHP coverage you have during
the year (count only the months where you have HDHP
coverage on the first day of the month).
Contributions can be made as late as April 15 of the
following year.
Using Your HSA
You can use the money in the account to pay for any
“qualified medical expense” permitted under federal tax
law. This includes most medical care and services, and
dental and vision care, and also includes over-thecounter
drugs such as aspirin.
You can generally not use the money to pay for medical
insurance premiums, except under specific
circumstances, including:
·
Any health plan coverage while receiving federal or
state unemployment benefits.
·
COBRA continuation coverage after leaving
employment with a company that offers health
insurance coverage.
·
Qualified long-term care insurance.
·
Medicare premiums and out-of-pocket expenses,
including deductibles, co-pays, and coinsurance for: Part A (hospital and
inpatient services),
Part B (physician and outpatient services),
Part C (Medicare HMO and PPO plans),
Part D (prescription drugs).
You can use the money in the account to pay for
medical expenses of yourself, your spouse, or your
dependent children. You can pay for expenses of your
spouse and dependent children even if they are not
covered by your HDHP.
Any amounts used for purposes other than to pay for
“qualified medical expenses” are taxable as income and
subject to an additional 10% tax penalty. Examples
include:
·
Medical expenses that are not considered “qualified
medical expenses” under federal tax law (e.g., cosmetic
surgery).
·
Other types of health insurance unless specifically
described above.
·
Medicare supplement insurance premiums.
·
Expenses that are not medical or health-related.
After you turn age 65, or if you become disabled, the
10% additional tax penalty no longer applies.
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