Health Savings Account (HSA)


Frequently Asked Questions

  1. What is a Health Savings Account (HSA)?
  2. What is a High Deductible Health Plan (HDHP)?
  3. What is the deductible for a HDHP?
  4. How much can I contribute to my HSA each year?
  5. Can my employer contribute to my HSA?
  6. Do my contributions to my HSA provide any Federal tax benefits?
  7. If my employer contributes to my HSA, does that also provide me with a federal tax benefit?
  8. Can the funds be invested?
  9. How much does a HSA cost?
  10. Who is eligible for a Health Savings Account?
  11. I don't have health insurance; can I get a Health Savings Account?
  12. I am on Medicare; can I have a Health Savings Account?
  13. Does my income affect whether I can have a Health Savings Account?
  14. Does tax filing status (joint vs. separate) affect my contribution?
  15. Can I start a Health Savings Account for my child?
  16. Can I use my HSA to pay for medical care for a family member?
  17. How do I know what is included as "qualified medical expenses"?
  18. Who decides whether the money I am spending from my HSA is for "qualified medical expenses"?
  19. What happens if I use the money in my HSA for NON-qualified medical expenses)?
  20. Can I roll over an IRA, 401K or other retirement plan into a HSA?
  21. Can I roll over funds in my Archer MSA into my HSA?
  22. Can I roll over the money in my HSA into an IRA?
  23. What happens to the money in my HSA when I die?
1. What is a Health Savings Account (HSA)?
A Health Savings Account is an account that allows a participant to build up tax-free savings (Federal Tax) which can be used for current and future qualified medical expenses.
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2. What is a High Deductible Health Plan (HDHP)?
A High Deductible Health Plan is an inexpensive health insurance plan that generally doesn't pay for the first several thousand dollars of health care expenses (i.e. "your deductible") but will generally cover you after that.
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3. What is the deductible for an HDHP?
Federal Law defines deductible to be at least:
In addition annual out-of-pocket expenses under the plan cannot exceed:
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4. How much can I contribute to my HSA each year?
For Tax Year 2008: If you are 55 or older, you can make "catch up" contributions. The catch up amount for Tax Year 2008 is $900.
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5. Can my employer contribute to my HSA?
Yes. Contributions can be made by you, your employer or both. All contributions are aggregated to determine whether you have contributed the maximum allowed.
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6. Do my contributions to my HSA provide any Federal tax benefits?
Yes. Your personal contributions offer you an "above-the-line" deduction. An "above-the-line" deduction allows you to reduce your taxable income by the amount you contribute to your HSA.
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7. If my employer contributes to my HSA, does that also provide me with a federal tax benefit?
If your employer makes a contribution, it is not taxable to the employee. Employer contribution is excluded from the employee's income and wages.
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8. Can the funds be invested?
Yes, you can invest the funds in your HSA. The same type of investments permitted for IRAs are allowed for HSA's, including stocks, bonds, mutual funds, and CD's.
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9. How much does a HSA cost?
A Health Savings Account is not something you purchase; it's a savings account into which you can deposit money on a tax-preferred basis (Federal Tax).
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10. Who is eligible for a Health Savings Account?
To be eligible for a Health Savings Account, an individual must be covered under a High Deductible Health Plan, not covered by any other health plan, not enrolled in Medicare and not claimed as a dependent on someone else's tax return.
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11. I don't have health insurance; can I get a Health Savings Account?
You cannot establish and contribute to a Health Savings Account unless you have coverage under a High Deductible Health Plan.
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12. I am on Medicare; can I have a Health Savings Account?
You are not eligible for a Health Savings Account after you enroll in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contribution to a HSA after you enroll in Medicare.
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13. Does my income affect whether I can have a Health Savings Account?
There are no income limits that affect HSA eligibility.
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14. Does tax filing status (joint vs. separate) affect my contribution?
Tax filing does not affect your contribution.
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15. Can I start a Health Savings Account for my child?
No, you cannot establish a separate account for your dependents.
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16. Can I use my HSA to pay for medical care for a family member?
Yes, you may withdraw funds to pay for qualified medical expenses for yourself, your spouse, or a dependent without tax penalty.
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17. How do I know what is included as "qualified medical expenses"?
Unfortunately, we cannot provide a definitive list of "qualified medical expenses". A partial list is provided in IRS Publication 502, which is available at www.irs.gov.
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18. Who decides whether the money I am spending from my HSA is for "qualified medical expenses"?
You are responsible for that decision and therefore should familiarize yourself with what is considered as qualified medical expenses.
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19. What happens if I use the money in my HSA for NON-qualified medical expenses)?
If the money is used for non-qualified expenditures, you will be taxed and subject to a 10% tax penalty.
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20. Can I roll over an IRA, 401K or other retirement plan into a HSA?
You cannot directly roll funds in an IRA, 401K or other retirement plan into an HSA.
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21. Can I roll over funds in my Archer MSA into my HSA?
Yes, if you do so within 60 days of withdrawing the funds from the Archer MSA.
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22. Can I roll over the money in my HSA into an IRA?
You cannot roll funds in an IRA.
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23. What happens to the money in my HSA when I die?
What happens depends on how the HSA is designed. If your spouse is designated as the beneficiary, your spouse becomes the owner of the HSA when you die and the account remains tax-free. If your beneficiary is a not your spouse, the value of the HSA at death is income to that person or entity and be subject to any applicable taxes.
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