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is not intended to replace the advice of an insurance professional. Visit us at
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A health savings account (HSA) is an
account funded to help you save for future
medical expenses. There are certain
advantages to putting money into these
accounts, including favorable tax treatment.
Who Can Have an HSA?
Any adult can have an HSA if you:
• Have coverage under an HSA-qualified,
high deductible health plan (HDHP)
• Have no other health coverage (certain
types of insurance, such as specific injury
or accident, disability, dental care, vision
care or long-term care, 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 contributions are limited annually. If you
make a contribution, you can deduct the
contributions (even if you do not itemize
deductions) when completing your federal
income tax return. Alternatively, some
employers will allow you to make your HSA
contributions as tax-free salary reductions.
Contributions to the account must stop once
you are enrolled in Medicare. However, you
can still use your HSA funds to pay for
medical expenses tax-free.
You must have coverage under an HSA-
qualified high deducble health plan to open
and contribute to an HSA. Generally, this plan will not cover first-dollar medical
expenses, and must have a deductible of at least (for 2016 and 2017):
Single coverage: $1,300
Family coverage: $2,600
In addition, annual out-of-pocket expenses under the plan (including deductibles,
copays and coinsurance) cannot exceed (2016/2017 limits):
Single coverage: $6,550
Family coverage: $13,100
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. Preventive care can include routine prenatal and well-child care, child
and adult immunizations, annual physicals, mammograms and more.
You can make a contribution to your HSA each year that you are eligible. You can
contribute no more than (2016 and 2017 limits):
Single coverage: $3,350 for 2016 and $3,400 for 2017
Family coverage: $6,750
Individuals ages 55 and older can also make additional “catch-up” contributions of up
to $1,000 annually.
Determining Your Contribution
Your eligibility to contribute to an HSA is determined by the effective date of your
HDHP coverage. Individuals who are eligible to contribute to an HSA in the last month
of the taxable year are allowed to contribute an amount equal to the annual HSA
contribution amount provided they remained covered by the HSA for at least the 12-
month period following that year. Contributions can be made as late as April 15 of the
Using Your HSA
You can use money in your HSA to pay for any qualified medical expense permitted
under federal tax law. This includes most medical care and services, dental and
A health savings account (HSA) is an account funded
to help you save for future medical expenses.
Health Savings Accounts
Generally, you cannot use your HSA to pay
for medical insurance premiums, except
specific instances, 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
• For HSA holders who are age 65 or older,
any deductible health insurance (for
example, retiree medical coverage) other
than a Medicare supplemental policy.
You can use your HSA to pay for medical
expenses for yourself, your spouse or your
dependent children, even if your dependents
are not covered by your HDHP. Any amounts
used for purposes other than to pay for
qualified medical expenses are taxable as
income and subject to an additional 20
percent penalty. Examples include:
• Medical procedures and expenses not
considered qualified under federal tax law
• Over-the-counter drugs and medications
obtained without a prescription (except
• Health insurance premiums, unless
specifically described above
• Medicare supplement insurance
• Expenses not health-related.
After you turn 65, the 20 percent additional
tax penalty no longer applies. If you become
disabled and/or enroll in Medicare, the
account can be used for other purposes
without paying the additional penalty.
Advantages of HSAs
Security – Your HSA can provide a buffer for
unexpected medical bills.
Affordability – In most cases, you can lower your health insurance premiums by
switching to health insurance coverage with a higher deductible.
Flexibility – You can use your HSA to pay for current medical expenses, including
expenses that your insurance may not cover, or save your funds for future needs,
• Health insurance or medical expenses if unemployed
• Medical expenses after retirement (before Medicare)
• Out-of-pocket expenses when covered by Medicare
• Long-term care expenses and insurance
Savings – You can save the money in your HSA for future medical expenses and
grow your account through investment earnings.
Control – You make the decisions regarding:
- How much money you will put in the account
- Whether to save the account for future expenses or pay current medical
- Which medical expenses to pay from the account
- Which financial institution will hold the account
- Whether to invest any of the money in the account
- Which investments to make
Portability – Accounts are completely portable, meaning you can keep your HSA even
• Change jobs
• Change your medical coverage
• Become unemployed
• Move to another state
• Change your marital status
Ownership – Funds remain in the account from year to year, just like an IRA. There
are no “use it or lose it” rules for HSAs.
Tax Savings – An HSA provides you triple tax savings:
1. Tax deductions when you contribute to your account
2. Tax-free earnings through investment
3. Tax-free withdrawals for qualified medical expenses
Health Savings Accounts
What Happens to My HSA When I Die?
• If you are married, your spouse becomes
the owner of the account and can use it
as if it were his or her 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).
Opening Your HSA
Banks, credit unions, insurance companies
and other financial institutions are permitted
to be trustees or custodians of these
accounts. Other financial institutions that
handle IRAs or Archer MSAs are also
automatically qualified to establish HSAs.
To learn more about health savings accounts
or how to get started, contact HR today.