Health Savings Account - Q&A

Health Savings Account - Q&A

Answers to your Questions

A Health Savings Account (HSA) from Salin Bank enables individuals to plan, pay, and save for qualified healthcare expenses, while providing tax savings for businesses plus an additional incentive to attract and retain a talented workforce.

What Is a Health Savings Account?

A Health Savings Account is a special tax-advantaged savings account that can be used to pay for current or future medical expenses. When combined with a high-deductible health plan (HDHP), HSAs offer savings and tax advantages that a traditional health plan can't duplicate.

When and Why Were HSAs Created?

HSAs are often described as “medical IRAs.” Like an IRA, an HSA shares tax-shelter benefits. HSAs were created by the U.S. Treasury in 2003 as a way to help individuals who were covered by high-deductible health plans receive tax-preferred treatment on money saved for out-of-pocket medical expenses such as doctor visits, dental care, vision, and prescriptions.

Who Is Eligible to Open an HSA?

An HSA can be opened at any financial institution that offers them. Individuals can open an HSA on their own or through their employer, if that employer offers one. The main requirement for opening an HSA is having a high-deductible health plan that meets guidelines established by the Internal Revenue Service for the annual deductible and out-of-pocket maximum contributions.

Who Funds the HSA?

The taxpayer and/or employer. If the employer contributes to the employee’s HSA, the contribution must be the same for all employees.

Is There Is a Contribution Limit That HSA Holders Can Deposit Into HSAs?

In 2017, the annual contribution limit is $3,450 for an individual and $6,900 for a family (Account holders over the age of 55 can contribute an extra $1,000 annually).  Minimum annual deductibles are $1,350 for self-only coverage or $2,700 for family coverage.  Annual out-of-pocket expenses (deductibles, copayments and other amounts, but not premiums) cannot exceed $6,650 for self-only coverage and $13,300 for family coverage.

How Many People Qualify for HSAs?

Spurred in part by recent changes in health-care laws, HSAs have grown considerably in popularity among employers and employees. According to America’s Health Insurance Plans (AHIP), a national trade association representing the health insurance industry, nearly 17.4 million Americans were covered by HSA-eligible insurance plans in 2014. That is an increase of nearly 12 percent since 2013.

What Are the Benefits of HSAs for Employees?

  • Ability to withdraw funds tax-free at any time provided the money is used to pay for qualified health expenses.
  • Once in your account, money grows tax-free and is yours to keep. Unlike a Flexible Spending Account (FSA), unused funds in an HSA roll over year to year. There's no "use it or lose it" penalty.
  • You decide on how much money to set aside for your health-care costs. Because you own your HSA and you control it, the idea is that you will become a better-educated healthcare consumer.
  • Receive tax-free earnings on investments.

What Are the Benefits of HSAs for Employers?

  • Reduces payroll taxes, 7.65% FICA taxes
  • Saves on administration costs
  • Provides an additional incentive to attract and retain top talent and enhances overall employee benefits package

What Types of Medical Expenses Are Covered by an HSA?

HSA funds can only be used to pay for "qualified" health care expenses. Note: You will pay 100% of the cost of your health care out of your pocket until you meet your deductible. However, many preventive health care services are exceptions; you may only pay a copay for those.

Can I Use My HSA to Pay for Voluntary Cosmetic Surgery?

An HSA can be used for cosmetic surgery only if the procedure is prescribed by a physician as “medically necessary.”

Can My Employer Contribute to My HSA?

Yes, your employer can contribute to your HSA. However the total of your employer's contribution plus your contribution must remain within the contribution limits.

Can I Withdraw Money From My HSA for Non-Medical Expenses?

Yes. Keep in mind if do you withdraw funds for non-medical expenses before the age of 65, you must pay taxes on that money plus a 20 percent penalty. If you take money out after you turn 65, you don't have a penalty, but you must still pay taxes on the money.

What If I Leave My Place of Employment?

An HSA is portable. In other words, if you are terminated from your current place of employment, leave on your own accord, or retire, you can bring the HSA with you.

Can I Roll Money From an IRA Into an HSA?

You are allowed to make a one-time rollover from your IRA into your HSA. However, you cannot roll money into your IRA from your HSA. In addition, the rollover will count against your annual contribution amounts.

Can I Use Funds From My HSA to Pay Medical Expenses for Family Members?

Yes. Even if your spouse or children are covered by another medical plan, you can use your HSA funds to pay for their medical expenses.

What About Filing Taxes on My HSA?

You will need to file IRS Form 8889 each year to inform the IRS about your HSA contributions and withdrawals for the current tax year. The forms can be found online.