HEALTH SAVINGS ACCOUNTS
FREQUENTLY ASKED QUESTIONS
WHAT IS A HEALTH SAVINGS ACCOUNT (HSA)?
An HSA is a savings account for you to contribute money tax-advantaged. An HSA works with an HSA-eligible health plan to help you save money for your current and future expenses.
WHY SHOULD I PARTICIPATE IN AN HSA?
An HSA can save you money, since your contributions are taken before taxes and pay out tax-free for qualified expenses. The money will also stay with you from year to year without expiring, even if you change jobs. You can even invest your money to get extra savings in addition to the tax benefit.
WHO CAN OPEN AN HSA?
To be eligible to open or contribute to an HSA, you must:
be covered by an HSA-eligible health plan
not be enrolled in Medicare
not be covered by any other disqualifying health coverage
not qualify as another person's tax dependent
If you and your spouse are both covered under the same HSA-eligible plan, you can both open HSAs, but your dependent children can't open their own HSAs.
HOW DO I KNOW IF MY HEALTH PLAN IS HSA-ELIGIBLE?
Your insurance company keeps track of IRS requirements for an HSA-eligible health plan, and they will tell you if your plan meets the standards. HMOs or PPOs may be HSA eligible.
HOW DO I MAKE CONTRIBUTIONS?
You can make contributions directly from your paycheck if your employer and insurance plan allow it. You can also make a direct deposit from your bank account using your online portal. You can change your election as needed throughout the year.
WHO CAN MAKE CONTRIBUTIONS?
You can contribute to your account, your employer can, or any other person or group. The total amount contributed by everyone can’t be more than your annual limit for the year. Any contributions are tax-advantaged for you, no matter who contributed.
HOW MUCH CAN I CONTRIBUTE TO AN HSA EACH YEAR?
The IRS sets annual limits on the amount you can contribute to an HSA in a year. The limit is based on the level of health plan coverage you have, not your family status. People aged 55 or older who are eligible can make an extra $1,000 contribution.
If you are only eligible for part of the year, you are only eligible for part of the contribution. To find out what your limit is, take the annual amount, divide by 12, and multiply by the number of months that you are eligible.
You can still choose to make a full contribution, even if you aren’t eligible for the entire year, using the Last Month Rule. If you do this, you will need to maintain eligibility for a 12-month testing period or pay taxes on the excess contributions.
CAN I HAVE AN HSA AND AN FSA OR HRA?
Not usually. Having a regular Health Flexible Spending Account (Health FSA) or Health Reimbursement Arrangement (HRA) counts as disqualifying coverage for an HSA.
You can have a Health FSA or HRA if it is a Limited Purpose account that only covers allowable benefits like vision and dental care and will not affect your HSA eligibility. You may also have a post-deductible FSA or HRA that only reimburses costs paid after meeting your deductible for the year.
If you have an HSA and then switch to a plan with an FSA or HRA, you will keep any money in your HSA. You just won't be able to make additional contributions.
HOW DO I SPEND MY HSA DOLLARS ON QUALIFIED EXPENSES?
You’ll receive a debit card that is already set up to work for qualified expenses. It’ll automatically track your purchases and save the information so you don’t have to submit receipts.
If you don’t have your card or want to reimburse an expense separately, you can request reimbursement by check or direct deposit through your online portal.
WHAT IS A QUALIFIED MEDICAL EXPENSE?
A qualified medical expense generally is anything that your insurance would cover or something that is needed primarily for medical reasons. IRS Publication 502, updated and published every year, provides a more complete list of examples.