Health Savings Account FAQ
What is a Health Savings Account?
A Health Savings Account (HSA) is designed to help eligible individuals with a High Deductible Health Plan (HDHP) save for qualified medical expenses on a tax-advantage basis. An HDHP is a health insurance plan that generally offers lower premiums in exchange for a higher deductible. Individuals can save by contributing money saved on premiums to their HSA and then using that money to pay for medical expenses.
Who is eligible for a Health Savings Account?
Eligible individuals are those who:
- Are covered by an HDHP and are not covered by other health insurance that is not an HDHP
- Are not enrolled in Medicare
- Cannot be claimed as a dependent on someone else’s tax return accounts
How do I know if my health insurance plan is a qualified HDHP?
Various factors specified by the Department of Treasury, such as deductible amount and annual out-of-pocket expenses, help to determine whether an insurance plan is a qualified HDHP. To find out if your insurance plan is a qualified HDHP, contact your insurance company, agent or broker.
Can I get an HSA even if I have other insurance that pays medical bills?
You’re only allowed to have auto, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they don’t pay significant medical benefits.
How much can I contribute to my HSA each year?
In general, you can contribute up to the amount of the maximum limit set by the Department of Treasury. Other factors that may affect your contribution limit include the number of months in which you were covered by an HDHP during a given year, whether your HDHP is “self only” or “family” coverage, and your eligibility for catch-up contributions. You can contribute to your HSA in a lump sum or in any amount and frequency you wish until you meet your maximum annual limit.
I’m over the age of 55; can I make “catch-up” contributions?
Yes, individuals age 55 and older who are covered by an HDHP can make “catch-up” contributions each year in amounts set by the Department of Treasury until they enroll in Medicare.
Who can contribute to my HSA?
Contributions to your HSA can be made by anybody, including you, your employer, family members, or from a combination of sources. All contributions are aggregated to determine whether you’ve contributed the maximum allowed.
Will my bank notify me if I’ve exceeded my allowable contribution amount?
No, it’s your responsibility to keep track of the amounts deposited and spent from your account, just like a normal savings or checking account.
Can I use the money in my HSA to pay for medical care for a family member?
Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty.
Does an HSA pay for the same things as regular insurance?
HSA funds can be used to pay for a “qualified medical expense,” even if the expense is not covered by your HDHP. For example, most health insurance does not cover the cost of over-the-counter medicines, but HSAs can.
How do I know what is included as a “qualified medical expense”?
According to the Department of Treasury, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. Visit the Department of Treasury online for more details.
What happens if I use HSA funds for non-qualified expenses?
If HSA funds are used for expenses other than qualified medical expenses, the amount withdrawn will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% penalty.
Does the HDHP policy have to be in my name to open an HSA?
No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse’s name.
I don’t have a job, can I have an HSA?
Yes, if you have coverage under an HDHP. You do not have to have earned income from employment-in other words, the money can be from your personal savings, income from dividends, unemployment or welfare benefits, etc.
Does my income affect whether I can have an HSA?
There are no income limits that affect HSA eligibility. However, if you do not file a federal income tax return, you may not receive all the tax benefits HSAs offer.
Do my HSA contributions have to be made in equal amounts each month?
No. Contributions can be in differing amounts if wanted.
I turned 55 this year. Can I make the full “catch-up” contributions?
If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must pro-rate your “catch-up” contribution for the number of full months you were eligible.
Where can I turn for more HSA information?
Contact the Department of Treasury