Main Top Menu

Frequently Asked Questions About Health Savings Accounts

Who can get a Health Savings Account?
A Health Saving Account (HSA) is an account that allows individuals to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax free basis.
BACK

Who can get a Health Savings Account?
Anyone under the age of 65 who buys a qualified high-deductible policy can open an HSA. You can't be covered by another health insurance policy that isn't a qualified high-deductible plan (either as an individual or as a dependent), although you can still have other disability, dental, vision and long-term care insurance policies.
BACK

Can any high-deductible health insurance policy qualify for an HSA?
Any high-deductible health insurance policy can qualify, as long as it meets the IRS requirements. In 2017, the deductible must be at least $1,300 for individuals or $2,600 for families and the annual out-of-pocket expenses cannot exceed $6,550 for an individual or $13,100 for a family, including the deductible and co-payments (but not premiums). Individuals can buy high-deductible policies on their own or through their employers.
BACK

How much can I contribute annually to an HSA?
In 2017, you can contribute up to $3,400 to an HSA if you have self-only coverage or up to $6,750 for family coverage. If you're an eligible individual that is 55 years or older at the end of your tax year you can contribute an extra $1,000.
BACK

Would I fund an HSA with pre- or post - tax dollars?
If your employer offers a high-deductible health insurance policy, you may be able to make pretax contributions, like you would with a flexible spending account. If you open the HSA on your own, your contributions will be deductible when you file your taxes, even if you don't itemize.

You can now deduct your contributions up to the $3,400 / $6,750 limit; plus an extra $1,000 if 55 or older-regardless of the size of the deductible.
Unlike many other tax breaks, there aren't any income limits. Anyone under age 65 who buys a qualified high-deductible policy can open and HSA.

BACK

What's the difference between the new HSAs and the flexible spending accounts? It seems they are for the same purpose.
The tax benefits of both plans are very similar, but there are several differences. The biggest and most important difference is that your HSA balances can roll over from year to year and continue to grow tax-deferred.

Money in your flex plan must be spent by the end of the plan year or you lose it. That may sound like a big negative, but flex plans can save you a lot of money even if you don't spend every dollar. Also, you can open a flexible spending account only if the plan is offered by your employer, and you don't need to have a high-deductible health insurance policy.

Legislation passed by Congress in 2006 will let you make a one-time transfer of funds tax free from a flexible spending account to an HSA. Changes to the law also will allow individuals to make a one-time tax-free direct transfer of funds from an IRA to an HSA (up to the HSA annual contribution limit).

BACK

If my Employer offers both, can I fund my flexible spending plan too?
No. You cannot have an HSA if you use the flexible spending account to pay healthcare costs or if you have other medical coverage (say, through a spouses policy). However, if your flex plan restricts reimbursements to wellness care (such as annual physicals) and vision and dental care, you can have an HSA too.
BACK

If I set up an HSA through my employer, what happens if I switch jobs?
You can keep the money in an HSA account even after you leave that job, similar to a 401(k). But you will have to pay a 10% penalty, plus income taxes, if you use any of the money for nonmedical expenses before age 65.
BACK

What happens if I want to withdraw the money for nonmedical expenses after age 65?
You won't be hit with the 10% penalty if you use the money for nonmedical expenses after age 65, but you would still have to pay income taxes on the money withdrawn. Keep in mind that you can continue to withdraw money from the account tax-free for qualified medical expenses after age 65.
BACK

Can a couple who is planning to retire early open an HSA account?
Yes. Anyone under age 65 can contribute to an HSA if they have a high-deductible health insurance policy, and you can contribute an extra $1,000 in 2017 if you're 55 or older.

You can't make new HSA contributions after age 65, but you can still use the money in your account tax-free for medical expenses at any age. You'll owe income taxes on the money, but no penalty, if you withdraw the money for nonmedical expenses after age 65.

BACK

Do contributions to an HSA in any way affect one's ability to contribute to an individual retirement account?
No. Your HSA contribution won't affect your IRA limits - $5,000 per year or $6,000 for those over 50. It's just another tax-deferred way to save for retirement.
BACK

What expenses are eligible for payment by an HSA?
The following are some of the medical related expenses that CAN be paid from an HSA account:

Abortion

Drug Addiction

Medical Services

Acupuncture

Drugs

Medicines

Alcoholism

Eyeglasses

Nursing Home

Ambulance

Eye Surgery

Nursing Services

Artificial Limb

Fertility Enhancement

Operations

Artificial Teeth

Guide dog or other animal

Optometrist

Bandages

Health Institute

Osteopath

Breast Reconstruction Surgery

Health Maintenance Organization

Oxygen

Birth Control Pills

Hearing Aids

Psychiatric Care

Braille Books and Magazines

Home Care

Psychologist

Capital  Expenses

Home Improvements

Special Education

Car

Hospital Services

Sterilization

Chiropractor

Insurance Premiums

Stop Smoking Programs

Christian Science Practitioner

Laboratory Fees

Therapy

COBRA Continuation Health

Lead-based paint removal

Transportation

Coverage

Legal Fees

Tuition

Contact Lenses

Lifetime care advance payments

Vasectomy

Crutches

Lodging

Weight Loss Program

Dental Treatment

Long Term Care

Wheelchair

Diagnostic Devices

Meals

X-Ray

Disabled Dependent Care Expenses

Medical Conferences

Medical Information Plan

BACK

What expenses are not eligible for payment from an HSA account?
The following are some of the expenses that CAN NOT be paid from and HSA account:

Baby Sitting

Funeral Expenses

Nonprescription Drugs

Childcare

Future Medical Care

Nutritional Supplements

Controlled Substances

Health Club Dues

Personal Use Items

Cosmetic Surgery

Health Savings Account

Teeth Whitening

Dancing Lessons

Household Helper

Veterinary Fees

Diaper Service

Illegal Operations

Weight Loss Program(cosmetic)

Flexible Spending Account

Maternity Clothes

Medications from other Countries

BACK