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Health Savings Account

Who Can Have an HSA?

    Any adult can contribute to an HSA if they:
  • Have coverage under 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 long-term 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 contribution is limited annually.  Contributions are tax deductible even if deductions are not itemized when completing your federal income tax return.

Contributions to the account must stop once you are enrolled in Medicare.  However, you may keep the money in your account and use it to pay for medical expenses tax-free.

    High Deductible Health Plans (HDHPs)

    You must have coverage under a 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:
    • $1,250—Self –only coverage
    • $2,500—Family coverage

    In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

    • $6,250—Self only coverage
    • $12,500—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 spears, etc.

Finding HDHP Coverage

Any company that sells health insurance coverage in your state may offer HDHP policies. Although we 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 or your state insurance department.

HSA Contributions

You can make a contribution to your HSA each year that you are eligible. For 2013 you can contribute up to $3,250 if you have self-only coverage and $6,450 if you have family coverage.

Individuals older than 55 can also make additional “catch-up” contributions. The maximum annual catch-up contribution for 2011 and after is $1,000.

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.

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 your dependent children even if they are not covered by your HDHP.

You can generally not use the money 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 co-insurance for:
    • Part A (hospital and inpatient services)
    • Part B (physician and outpatient services)
    • Part C (Medicare HMO and PPO Plans)
    • Part D (prescription drugs)

Any amounts used for purposes other than to pay “qualified medical expenses” are taxable as income and subject to an additional 20% tax penalty. Examples include:

  • Medical expenses that are not considered “qualified medical expenses” under federal tax law (e.g. cosmetic surgery)
  • The purchase of other types of health insurance unless specifically described on the last page.
  • Medicare supplement insurance premiums.
  • Expenses that are not medical or health related.

Exceptions to the Additional 20% Tax Penalty
The additional 20% tax does not apply to distributions made after the account beneficiary

  • Dies
  • Becomes disabled, or
  • Turns age 65

    Advantages of HSAs

    You should be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible.

    Your high deductible insurance and HSA protect you against high or unexpected medical bills.

    You make all the decisions about:

    • How much money to put into the account
    • Whether to save the account for future expenses or pay current medical expenses
    • Which medical expenses to pay from the account.

    Since you control the account, you determine whether to pay for current medical expenses or to save for future needs including:

    • Health insurance or medical expenses if unemployed or after retirement (before Medicare)
    • Out-of-Pocket expenses when covered by Medicare
    • Long-term care expenses and insurance

    Your account will grow through your deposits and interest earned.

    Accounts are completely portable, meaning you can keep your HSA even if you:

    • Change jobs
    • Change your medical coverage
    • Become unemployed
    • Move to another state
    • Change your marital status

    Funds remain in the account from year to year, just like an IRA. There is no “use it or lose it” rule for HSAs.

    Tax Savings
    An HSA provides you triple tax savings:

    • Tax deductions when you contribute to your account
    • 2. Tax-free earnings through investment; and
    • 3. Tax-free withdrawals for qualified medical expenses.

What Happens to My HSA When I Die?

If your spouse is the beneficiary they can use the account 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).

Need More Information About HSAs?

The U.S. Treasury’s website 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 websites. The U.S. Treasury HSA website can be found through

Click here to request a brochure.

The term “noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It also includes Interest on Lawyers Trust Accounts (“IOLTAs”). It does not include other accounts, such as traditional checking or demand deposit accounts that may earn interest, NOW accounts and money-market deposit accounts.
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