Participant Learning Center
There’s a lot of information out here, we’re available if you want to talk some more in person. Select a plan type below to review frequently asked questions and answers.
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An HSA is a savings account in your name that offers a different way to pay for health care expenses on a tax-advantaged basis. HSAs enable you to pay for current eligible medical expenses and save for future ones on a tax-free basis. In order to be eligible to contribute to an HSA, the HSA owner 1) must be covered by an HSA-eligible HDHP and 2) the HSA owner cannot have other first dollar medical coverage.
You must be enrolled in an HSA-eligible high deductible health plan (HDHP) if you want to legally open and contribute to an HSA. An HDHP is a health insurance plan that generally doesn’t pay for first dollar health care expenses, other than preventive services. Your HSA is available to help you pay for qualified medical expenses, as defined by the IRS, with pre-tax dollars.
In order to qualify to open and contribute to an HSA, your HDHP must have a minimum deductible and maximum out-of-pocket limits as set annually by the IRS.
To be eligible for an HSA, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance” and will not jeopardize your eligibility to contribute to an HSA.
You are only allowed to have 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 do not pay significant medical benefits.
No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy and you do not have any other first-dollar medical coverage, you can be eligible to contribute to an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible to contribute to an HSA even if the health plan is in your spouse’s name.
You are not eligible to contribute to an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it and use it to pay for eligible expenses on a tax-free basis. However, you cannot continue to make contributions to an HSA after you enroll in Medicare.
If you have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last three months, you are not eligible to contribute to an HSA. Beginning January 1, 2016, you will be eligible to contribute to an HSA if you received VA health benefits for a service-related disability or for preventive care.
At this time, it is our understanding TRICARE does not offer an HDHP option, so you are not eligible to contribute to an HSA.
You can have both types of accounts, but only under certain circumstances. General Purpose Flexible Spending Arrangements (FSAs) will typically make you ineligible for an HSA. General purpose FSAs reimburse medical, vision and dental expenses for you, your spouse and your dependents. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the IRS deductible is met) FSA, then you can still be eligible for an HSA.
You can have both types of accounts, but only under certain circumstances. Health Reimbursement Arrangements (HRAs) that reimburse your medical expenses from first dollar will typically make you ineligible for an HSA. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the IRS deductible is met) HRA, then you can still be eligible for an HSA. If your employer contributes to an HRA that can only be used when you retire, you may still be eligible for an HSA.
You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met.
Yes, if you have coverage under an HSA-eligible HDHP. You do not have to have earned income from employment. In other words, the money can be from your own personal savings, income from dividends, unemployment or welfare benefits, etc.
I’m a single parent with HDHP coverage but have a child that can be claimed as a dependent for tax purposes and this dependent also has non-HDHP coverage. Am I still eligible for an HSA?
Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP.
Effective January 1, 2007, regardless of your deductible, you may contribute, per calendar year, up to the IRS annually indexed maximum regardless of your coverage type (single vs. family). If you are age 55 or older, you can also make additional “catch-up” contributions.
The “full contribution rule” allows a full-year’s worth of HSA contributions for someone who is HSA-eligible for only a portion of the year. Under the full-contribution rules, an individual who becomes covered under a high deductible health plan (HDHP) in a month other than January and who is HSA-eligible on December 1 of that year, is treated as having been an eligible individual during every month of that year, and will be allowed to make contribution for those months during the year before the individual actually enrolled in an HDHP.
- Individuals who enroll in the HDHP by December 1 can make a full-year contribution to the HSA that year.
- Individuals must be covered by a qualified HDHP and remain an eligible individual for 12 months after the end of the calendar year in which they enrolled in an HDHP.
- Individuals not covered by an HDHP for 12 months after the end of the calendar year in which they enrolled in an HDHP are subject to income tax and a 10% excise tax on HSA contributions for months not covered by an HDHP.
No, you can contribute in a lump sum or in any amounts or frequency you wish. However, your health savings account trustee/custodian (bank, credit union) can impose minimum deposit and balance requirements.
Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated and count toward the maximum amount you are permitted to contribute during the calendar year. If your employer contributes some of the money, you can make up the difference.
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. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.
If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).
If your employer offers a “salary reduction” plan (also known as a “Section 125 plan” or “cafeteria plan”), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the “above-the-line” deduction on your personal income taxes.
Can I claim both the “above-the-line” deduction for an HSA and the itemized deduction for medical expenses?
You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.
I’m over 55 and would like to make catch-up contributions to my HSA, like I’ve done with my IRA. Is that possible?
Yes, individuals 55 and older who are covered by an HDHP can make additional catch-up contributions of $1,000 into an HSA in their own name each year until they enroll in Medicare. The additional “catch-up” contributions to HSA allowed are as follows:
2009 and after – $1,000
- Individuals who enroll in the HDHP by December 1 can make a full-year catch-up contribution to the HSA that year.
- Individuals must be covered by a qualified HDHP and remain an eligible individual for 12 months after the end of the calendar year in which they enrolled in an HDHP.
- Individuals not covered by an HDHP for 12 months after the end of the calendar year in which they enrolled in an HDHP are subject to income tax and a 10% excise tax on HSA catch-up contributions for months not covered by an HDHP.
Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a “catch-up” contribution.
If each spouse has self-only HDHP coverage (neither spouse has family coverage), how much can we contribute?
Each spouse is eligible to contribute to an HSA in their own name, up to the single IRS HSA maximum contribution as set annually by the IRS.
If both spouses have family HDHP coverage but one spouse has other coverage, are both spouses eligible for an HSA? How much can each spouse contribute?
The following examples describe how much can be contributed under varying circumstances. Assume that neither spouse qualifies for “catch-up contributions”.
Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only coverage with a $200 deductible. Wife, who has coverage under a low-deductible plan, is not eligible and cannot contribute to an HSA. Husband may contribute up to the family IRS HSA maximum contribution.
Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only HDHP coverage with a $2,000 deductible. Both husband and wife are eligible individuals. Husband and wife are treated as having only family coverage. The combined HSA contribution by husband and wife cannot exceed the family IRS HSA maximum contribution to be divided between them by agreement.
Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has family HDHP coverage with a $3,000 deductible. Both husband and wife are eligible individuals. Husband and wife are treated as having family HDHP coverage and may contribute up to the the family IRS HSA maximum contribution to be divided between them by agreement.
Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also is enrolled in Medicare. Wife is not an eligible individual and cannot contribute to an HSA. Husband may contribute the family IRS HSA maximum contribution.
I’m a single parent with family HDHP coverage but have a child that can be claimed as a dependent for tax purposes, and this dependent also has non-HDHP coverage. Am I still eligible for an HSA?
Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP. You can contribute up to the IRS annually indexed amount for family coverage.
No. Self-employed individuals may not contribute to an HSA on a pre-tax basis. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.
Contributions for the taxable year can be made any time prior to the time prescribed by law (without extensions) for filing the eligible individual’s federal income tax return for that year, but not before the beginning of that year. For calendar year taxpayers, the deadline for contributions to an HSA is generally April 15 following the year for which the contributions are made. Although the annual contribution is determined monthly, the maximum contribution may be made on the first day of the year.
What happens when HSA contributions exceed the maximum amount that may be deducted or excluded from gross income in a taxable year?
Contributions by individuals to an HSA, or if made on behalf of an individual to an HSA, are not deductible to the extent they exceed the limits. Contributions by an employer to an HSA for an employee are included in the gross income of the employee to the extent that they exceed the limits or if they are made on behalf of an employee who is not an eligible individual. In addition, an excise tax of 6% for each taxable year is imposed on the account beneficiary for excess individual and employer contributions. However, if the excess contributions for a taxable year and the net income attributable to such excess contributions are paid to the account beneficiary before the last day prescribed by law (including extensions) for filing the account beneficiary’s federal income tax return for the taxable year, then the net income attributable to the excess contributions is included in the account beneficiary’s gross income for the taxable year in which the distribution is received but the excise tax is not imposed on the excess contribution and the distribution of the excess contributions is not taxed.
Must employers who make contributions to an employee’s HSA determine whether HSA distributions are used exclusively for qualified medical expenses?
No. The same rule that applies to trustees or custodians applies to employers. Individuals who establish HSAs make that determination and should maintain records of their medical expenses sufficient to show that the distributions have been made exclusively for qualified medical expenses and are therefore excludable from gross income.
Upon death, any balance remaining in the account beneficiary’s HSA becomes the property of the individual named in the HSA as the beneficiary of the account. If the account beneficiary’s surviving spouse is the named beneficiary of the HSA, the HSA becomes the HSA of the surviving spouse. The surviving spouse is subject to income tax only to the extent distributions from the HSA are not used for qualified medical expenses. If by reason of the death of the account beneficiary, the HSA passes to a person other than the account beneficiary’s surviving spouse, the HSA ceases to be an HSA as of the date of the account beneficiary’s death, and the person is required to include in gross income the fair market value of the HSA assets as of the date of death. For such a person (except the decedent’s estate), the includable amount is reduced by any payments from the HSA made for the decedent’s qualified medical expenses, if paid within one year after death.
Yes. The rules allow for a one-time tax-free trustee to trustee transfer of IRA funds into an HSA, provided:
- The amount contributed to the HSA is subject to the maximum annual contribution limits. Amounts transferred from the IRA plus any additional employer or employee contributions will be applied against the maximum annual contribution limit.
- The individual must be covered by an HDHP and remain an eligible individual for 12 months after the transfer. If not, the funds transferred will be treated as taxable income and subject to a 10% excise tax.
How does the health FSA grace period affect my eligibility to own/contribute to a health savings account (HSA)?
In general, if you, or your spouse want to be eligible to own/contribute to an HSA, you must have a zero balance in a general purpose health FSA by the end of your FSA plan year in order to be HSA-eligible on the first day of your new plan year.
How could the health FSA $500 carryover affect eligibility to contribute to a health savings account (HSA)?
In general, if you, or your spouse want to be eligible to contribute to an HSA, you must: 1) have a zero balance in your general purpose health FSA at plan year end, 2) elect to convert your general purpose health FSA to a limited purpose health FSA for the next plan year (for dental and vision expenses, if offered by your employer) or 3) elect to forfeit your carryover funds. You must choose your “election” prior to the end of your plan year. Call FlexBank to discuss in detail how the carryover may affect you.
HSA funds can pay for any “qualified medical expense”, even if the expense is not covered by your health plan. For example, most health insurance does not cover the cost of prescription eyeglasses, but you can use your HSA dollars to pay for those. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.
Unfortunately, we cannot provide a definitive list of “qualified medical expenses”. A partial list is provided in IRS Pub 502 (available at www.irs.gov). To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental illness. The determination often hangs on the word “primarily.” Contact FlexBank as you have questions about eligible expenses.
You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.
If the money is used for purchases other than for qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to an additional penalty.
Generally, yes. However, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.
Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent. This is one of the great advantages of HSAs.
Health care reform did not change the rules governing HSAs when it comes to paying for a child’s medical expenses. This means you can only use your HSA to pay for your child’s medical expenses if your child qualifies as your tax dependent (other than the income limitation).
There are two ways a child can be your tax dependent. The first way is if your child is considered a Qualifying Child and the second way is if your child is considered a Qualifying Relative. The following lists the requirements for each category.
I. Qualifying Child
a) The child lives with you for more than half the year;
b) The child is under age 19 or is a full time student under age 24
c) The child does not provide more than half of his or her own support; and
d) The child does not file a joint tax return with his or her spouse.
II. Qualifying Relative
a) You must provide at least 50% of the child’s support
You can use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer. HSA holders age 65 or over (whether or not they are entitled to Medicare) may use HSA funds for any deductible health insurance (e.g., retiree medical coverage) other than a Medicare supplemental policy. The insured must also be age 65 or over if different than the HSA owner.
An HSA can pay or reimburse the cost of qualified long-term care insurance premiums. However, the amount considered a qualified medical expense depends on your age. Click here for annually indexed LTC premium limitations.
For Example: Kelly, age 41, pays premiums totaling $1,400 in 2021 for a qualified long-term care insurance contract. The limit in calendar year 2021 for deductions for persons who are more than age 40, but not more than 50 = $850. Kelly’s HSA can reimburse up to $850 on a tax-free basis for the long-term care premiums. The remaining $550 ($1,400 minus $850), if reimbursed from the HSA, is not for qualified medical expenses and is includible in gross income and may be subject to an additional 20% tax.
I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?
Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.
Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.
Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.
You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare (age 65 or older), you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.
Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and an additional penalty on the amount withdrawn.
No. You cannot reimburse qualified medical expenses incurred before your high deductible health plan is effective AND your health savings account is established (opened & funded). We recommend you establish your account as soon as possible. According to IRS ruling, state trust law determines when an HSA is established. Most state trust laws require that for a trust to exist, it must be funded to be established.
If the effective date of your HDHP is mid-month, you may use your HSA for eligible expenses with dates of service on or after the first of the following month.
If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit.
If your physician does not ask for payment at the time of service, the physician should submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an “Explanation of Benefits” from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician will then send you a bill for payment.
HSAs act just like a regular checking account in that you can only spend what has been deposited to date. Just like your personal checking account, checks can bounce and debit cards will reject if there isn’t enough money in your account.
You should always watch your health savings account balance via on-line access and/or your statements from the HSA custodian.
If you need to pay for an expense before there is enough money in your HSA, you can pay for the eligible expense out of your pocket, save your receipt and pay yourself back later from your HSA.
The HSA owner is responsible for using the account within the rules. As you are purchasing medical goods and services, you should save your itemized receipts showing date of service, patient name, services rendered and how much insurance paid, if any.
If you are ever personally audited, you will be asked to present receipts for eligible expenses matching the amount you have withdrawn from your HSA. Your HSA custodian is not determining if your purchases are for qualified medical expenses nor are the transactions on your monthly statement enough to prove the purchases are permitted. Save your receipts.
Distributions from your HSA should only be used for qualifying medical, vision, hearing or dental expenses.