Health Savings Account (HSA)

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1. What is an HSA?

   HSA stands for Health Savings Account. It was established by the US government in 2003 for individuals with a high-deductible health insurance plan (HDHP). The money deposited is tax deductible, interest accrues tax-free or tax-deferred and the money is to be used for qualified medical expenses.

2. Who is eligible for an HSA?

   You are eligible for an HSA if...

   • You are enrolled in a high deductible health insurance plan (HDHP) that is HSA compatible.
   • You are not claimed as a dependant on anyone’s tax return.
   • You are not under any other health insurance.
   • You are eligible to be covered by a family members plan.  
     • If you are eligible to be covered by a family member's plan you may not participate in a personal HSA.  
     • If you decline the coverage provided by a family member's HSA plan you remain inelligible to participate in a personal HSA.
   • You are under the age 65 or are 65 or older and have not elected Medicare Parts A or B.

3. Can spouses open an HSA account together?

   Spouses my not open and HSA account together. An HSA account is an individual account. However, each person may have an account if they are enrolled in a HDHP.

4. Can an HSA account be started for a dependent child?

   You may not start a separate account for your dependent children, but you may use the funds in your own HSA account for your dependent childrens' or spouse's expenses.

5. What are the advantages of an HSA?

   • You own it: As soon as the funds are deposited you have full privilege of what to do with the money.
   • Triple Tax benefits: Any money deposited is tax-free. The money grows tax free.  The money can be withdrawn tax-free to pay for eligible medical expenses.
   • Contributions: Anyone can contribute to your HSA: yourself, your employers, or any other person.
   • Uses: You may use the funds for family medical expenses; not just your own.

6. When can the funds in an HSA be used?

   The funds are available to withdraw immediately after the HSA account is opened and a deposit is made.

7. Is there a limit on how much can be contributed to an HSA?

   The IRS has contribution/deduction guidelines to determine how much can be contributed during the year including any contributions from an employer or any other person.

   The 2018 guidelines are:

   • Individual (self-only): $3,450.00
   • Family: $6,900.00

   The 2019 guidelines are:

   • Individual (self-only): $3,500.00
   • Family: $7,000.00

   * Individuals age 55 and older may contribute an additional $1,000 for each tax year.

8. What are the qualified expenses that can be paid for with an HSA account?

   The main HSA expense is the payment of a large deductible on one's health insurance plan. Some other expense may include, but are not limited to:

   • Doctor, lab, x-ray, and hospital expenses
   • Prescription and over-the-counter drugs
   • Mental health services
   • A percentage of long-term care insurance costs
   • Dental care (excluding cosmetic procedures)
   • Alternative medicine (chiropractic and acupuncture)
   • Physical therapy and medically related transportation and lodging
   • Eye and Hearing care, including contact lenses, eye glasses, and hearing aids

   * Please note that this is not a complete list and may change according to the IRS policy. For a definite list check Publication 502 at the IRS website, www.irs.gov

9. Can health insurance premiums be paid from an HSA?

   Health insurance premiums may not be paid from an HSA.  The only time a health insurance premium payment is allowed is if one is collecting Federal or State unemployment benefits.

10. What if the money in an HSA account is used for expenses other then medical?

    If the money in an HSA is used for non-qualified medical expenses, it will be taxed as income with a 20% penalty.

11. What happens to the money in a HSA account if a HDHP no longer exists?

    If one is no longer enrolled in a HDHP, the money in his or her HSA account is still his or hers to pay medical expenses with outside of time restraints. Any interest earned remains tax-free or tax-deferred. If one decides to re-enroll in a HDHP he or she may start contributing to his or her HSA again.

12. Can HSA contributions be deducted from one's federal income taxes?

    HSA contributions can be deducted from one's federal income taxes.  There are certain guidelines to follow, so check with a qualified tax advisor for details.

13. Who keeps track of HSA expenses?

    The HSA account owner is responsible of keeping track of his or her expenses and keeping any receipts he or she may have.

14. How does the Affordable Care Act affect HSA accounts?

    There are two changes to an HSA account due to the Affordable Care Act:

    1. There is an increase penalty from 10 to 20 percent for expenditures that are not used for qualified medical expenses (if one is over the age of 65 or disabled this will not apply).

    2. Over-the-counter medications will not qualify as a medical expense unless prescribed by a physician.