Health Savings Account (HSA)
A Health Savings Account (HSA) is a funding program that allows you to put money aside for eligible medical care expenses tax-free. Unlike the healthcare reimbursement account, an HSA allows you to “roll-over” unused dollars into the next year. There is no “use it or lose it” provision. Furthermore, your funds can be invested and grow much like the funds in a retirement account. Earnings are tax-free.
Who is eligible?
- Must be enrolled in the HDHP medical plan
- Must not be enrolled in any part of Medicare
- Must not be covered by other medical insurance
- Must not have received VA medical benefits at any time in the past three (3) months
- Spouse is not contributing to/participating in a general-purpose FSA through his/her employer
Eligible employees may contribute up to the limits established by the federal government. Limits for 2016 are a maximum of $3,350 for employees with Employee-Only coverage, and $6,750 for employees with Employee+Spouse, Employee+Child(ren), and Employee+Family coverage. Catch-up contributions are available for employees over 55 ($1,000 in 2016).
If contributions are made through payroll deductions, they will be made pre-tax. Participants will receive IRS forms 5498 and 1099 to aid in tax preparation. The participant is responsible for documenting that all withdrawals have been used for qualified medical expenses and they will be liable for state and federal taxes if the expenses were not qualified medical expenses.
The money in your account is yours as soon as it is deposited into your account. You can change health care coverage or change jobs in the future and still keep the money in your account.