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Health Savings Account FAQ |
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- What is an HSA?
A health savings account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses. Tax-deductible
Contributions to the HSA are 100% deductible (up to the legal limit) just like an IRA.
Tax-free Withdrawals to pay qualified medical expenses are never taxed. Tax-deferred
Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free. HSA money is yours to keep
Unlike a Flexible Spending Account, unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred.
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- What are the HSA limits for 2008-2009
2008 offers individuals and families additional opportunities to save for current and future health care with a health savings account:
HSA holders can choose to save up to $2,900 for an individual and $5,800 for a family (HSA holders 55 and older get to save an extra $900 which means $3,800 for an individual and $6,700 for a family) - and these contributions are 100% tax deductible from gross income. Minimum annual deductibles are $1,100 for self-only coverage or $2,200 for family coverage. Annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) cannot exceed $5,600 for self-only coverage and $11,200 for family coverage.
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- Why does an HSA require a high deductible health plan?
High deductible policies often costs less than low deductible and copay plans.
Typically you can save as much as half of a traditional plan premium.
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- How Does an HSA work?
An HSA works in conjunction with high deductible health insurance which has a lower premium the saving can be placed into the HSA for future medical expenses. The money earns interest and is tax deductible.
Your HSA money can be used to help pay the health insurance deductible and qualified medical expenses not covered by the health insurance, including dental and vision.
If you meet the deductible with covered expenses, the health insurance pays remaining covered expenses in accordance with the terms and conditions of your particular plan
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- Who qualifes for an HSA?
The individual must:
1) Choose a high deductible health insurance plan
2) Not be covered under other health insurance
3) Not yet be enrolled in Medicare; and
4) Not be another person's dependent currently
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- Do HSAs work with Physician and Provider Networks?
Yes. There are networks included as a part of the health insurance plan, and they provide discounts on health care. The discounts apply to all care, even prior to meeting the health insurance deductible. So, your HSAs savings goes further.
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- Can I use my HSA to cover dependents
Typically, yes. Qualified medical expenses include unreimbursed medical expenses of the account holder, his or her spouse, or dependents.
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- Can I withdraw funds from my HSA for non medical expenses?
Yes, the funds are yours but will be subject to normal income tax and a 10% penalty like any non qualifed withdrawal.
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- What are the tax benefits?
There are three major tax advantages to your HSA.
1) Cash contributions to an HSA are 100% deductible from your federal gross income.
2) Interest earnings accumulate tax-deferred.
3) Withdrawals from an HSA for "qualified medical expenses" are free from federal income tax.
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- When can I start to use the funds in my HSA account?
You are 100 percent vested as soon as the funds are deposited and you have total control over the funds
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- What about "catch up" contributions for those 55 and older?
Individuals aged 55 and over may contribute an additional $800 above the maximum for tax year 2007 or $900 above the maximum for tax year 2008
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- Is it true that individuals 65 or older can take out funds from their HSAs for any reason without a penalty?
If an individual is age 65 or older, regardless of whether the individual has been enrolled in Medicare, there is no penalty to withdraw funds from the HSA. As always, normal income taxes will apply if the distribution is not used for unreimbursed medical expenses (expenses not covered by the medical plan).
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