Health Savings Account (HSA)
What is an HSA?
A savings account set up by either you or your company where you can either direct pre - tax payroll deductions or deposit money to be used by you to pay for current or future medical expenses for you and/or your dependents. Once money goes into the account, it's yours to spend on eligible healthcare costs. The HSA is held in your name, just like a personal checking or savings account.
Why would I want an HSA?
Because you fund the HSA with pre - tax funds, you are using tax - free funds for healthcare expenses you would normally pay for out - of - pocket using after - tax dollars. HSA contributions do NOT count toward your taxable income for federal taxes.
What Rules Must I Follow?
■ You must be covered under a Q ualified High Deductible Health Plan (QHDHP) in order to establish an HSA.
■ You cannot establish an HSA if your spouse has a medical flexible spending account (FSA) through their employer.
■ You cannot set up an HSA if you have insurance coverage under another plan, for example your spouse ’ s employer, unless that secondary coverage is also a qualified high deductible health plan.
■ You cannot be enrolled in Medicare or Tricare.
■ You cannot be claimed as a dependent under someone else ’ s tax return.
What is the Difference Between a Qualified High Deductible Health Plan and a Traditional PPO Plan?
In a QHDHP, all services received, with the exception of preventive office visits, are applied to the deductible and coinsurance first. This would include office visits that are not preventive, emergency room visits, and prescription drugs. You will, however, still have the opportunity to benefit from the discounts associated with using a network physician or facility. If you or your family have high prescription drug costs, you may want to consider the Base plan over the QHDP to help cover those expenses.
What Else Do I Need to Know?
■ The IRS sets HSA contribution limits yearly, which are listed under “ Total Annual Maximum Contribution ” in the table below. You cannot put more than this amount in the account in a calendar year; you can put less.
■ HSA contributions from your paycheck are tax - free, grow tax - free, and are paid out as tax - free as long as you utilize the fu nds for approved services (medical, dental, vision and OTC medically-necessary items).
202 4 Total Annual Maximum Contribution
$ 4,150 $ 8,300
Employee
Employee + Family
■ Unspent contributions roll over from year to year and can be taken with you if you leave your current job.
■ If you use the HSA for non - qualified expenses, that money becomes taxable and subject to a 20% excise tax penalty (like in an IRA account). ■ Once you turn 65, become disabled and/or qualify for Medicare, you can use the account for other than eligible medical purposes without paying the 20% penalty, but you will pay income taxes. ■ The savings account can be established with your employer, so you can take advantage of payroll deductions on a pre - tax basis. ■ The $1,500 employer contribution is not front - loaded and will be evenly allocated over each pay period throughout the benefit year and will be prorated based on calendar date of hire for a new enrollment or qualifying life event plan change.
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