Frequently Asked Questions

Health Savings Accounts (HSAs)

General Questions

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) pairs a high-deductible health plan with a tax-free savings account. Designed to reduce healthcare insurance costs for employers and employees, HSAs enable individuals to pay for qualified day-to-day medical expenses on a tax-favored basis. Contributions are tax-deductible and eligible distributions are tax-free. Funds not spent can carry forward to future years and be used penalty-free after age 65 for any purpose.

What is a high-deductible health plan (HDHP)?

High-deductible health plans are insurance policies that have a higher than average deductible (the amount paid for health expenses each year before an insurance plan covers costs). They also have annual limits on how much has to be paid out-of-pocket in the form of co-payments or co-insurance fees.

In 2017, to qualify for a Health Savings Account (HSA), your high-deductible health plan minimum deductible must be at least:

  • $1,300 (self-only coverage)
  • $2,600 (family coverage)

The annual out-of-pocket (including deductibles and co-pays) for 2017 cannot exceed:

  • $6,550 (self-only coverage)
  • $13,100 (family coverage)

High-deductible health plans can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (co-pays and co-insurance) for non-network services.

What are the requirements to be eligible for a Health Savings Account (HSA)?

An eligible individual is one who on the first day of a given month

  • is covered under a high-deductible health plan (HDHP),
  • is generally not covered by any health plan that is not an HDHP,
  • is not enrolled in Medicare, and 
  • is not eligible to be claimed as a dependent on another person’s tax return.

For any month that an individual meets the criteria for an eligible individual, they may make and/or receive on their behalf a Health Savings Account (HSA) contribution.

What are my responsibilities as a Health Savings Account (HSA) holder?

Health Savings Account (HSA) holders must report all contributions and distributions on their individual income tax returns. Non-qualified uses of HSA assets are subject to taxation and 20% penalty unless the HSA beneficiary is age 65 or older, dies or is disabled. The HSA holder is responsible for any distribution of non-medical expenses.

How can Health Savings Account (HSA) funds be used?

Use HSA funds to pay for any qualified medical expense as defined by IRC section 213(d). This includes most medical care and services, including dental and vision. More information, including a list of qualified expenses, is provided in IRS Publication 502 (irs.gov).

How much can be contributed to a Health Savings Account (HSA) each year?

2017 Annual Maximum Contribution limits are listed below. Contributions can be made as late as the tax deadline date of the following year and can be made up to these limits regardless of high-deductible health plan (HDHP) deductible limits.

  • $3,400 (self-only coverage)
  • $6,750 (family coverage)

Catch-up contributions are allowed if you attained age 55 before the close of a taxable year. Catch-up contributions are shown below.

  Taxable Year  Maximum Catch-up
  2017    $1,000

 

Note: Limits are adjusted annually for inflation.

Routing #: 325183220

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