What is a Health Savings Account?

What is an Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged bank account that can be used to pay for medical, dental, vision and other qualified medical expenses.

Who is Eligible?

Anyone enrolled in a high deductible health plan, provided they are;

  • Not covered under another health plan
  • Not covered under Tricare
  • Not another person’s tax dependent
  • Not enrolled in Medicare (if over 65)
  • Not enrolled in Medicaid

What is a High Deductible Health Plan (HDHP)?

A High Deductible Health Plan is a health insurance plan that has been qualified as an HSA compatible or eligible plan.  HDHP’s typically share a few common characteristics such as;

  • High Deductibles
  • No or very few Co-pays, which typically means Doctor visits, Urgent Care, Emergency Room, & Prescriptions are covered after your annual deductible has been meet

For 2019, the IRS defines it as follows;

Individual Plans

  • Out-of-Pocket maximum of $6,750
  • Minimum Deductible of $1,350

Family Plans

  • Out-of-Pocket maximum of $13,500
  • Minimum Deductible of $2,700

What are the benefits of an HSA?

1.Money goes in tax-free.  Contributions are made on a pre-tax basis, and are also tax deductible.

2.Money comes out tax-free.  Eligible healthcare purchases can be made tax-free.  Purchases can be made directly from the HSA account, either by using a healthcare debit card (if included with your HSA), ACH, online bill-pay or check; or, you can pay out of pocket and reimburse yourself from your HSA.

3.Earn interest, tax-free.  The interest on HSA funds grows on a tax-free basis.

4.Your HSA balance can be carried over year after year.

5.An HSA balance can be invested.  Depending on your HSA, you may be eligible to invest your HSA in an interest-bearing account, a mutual fund, stocks or bonds.

6.You can use your HSA as retirement funds.  After you turn 65, you can withdraw funds from your HSA for any reason without penalty.

What expenses are considered eligible?

Common eligible expenses include, but are not limited to;

  • Health plan co-pays
  • Deductibles
  • Co-insurance
  • Vision
  • Dental care
  • Acupuncture
  • Ambulance
  • Artificial Teeth
  • Chiropractor
  • Contact Lenses
  • Prescription Medicines
  • Eyeglasses
  • Hearing Aids
  • Surgery
  • Psychiatric Care
  • Pregnancy Test
  • Weight Loss Programs
  • Wheelchair
  • Wigs
  • X-rays

How can I contribute to my HSA?

  • Payroll Deduction
  • Direct Contribution

Who can contribute?

  • Employee
  • Employer

Who controls an HSA account?

Health Savings Accounts are owned & controlled by each individual employee, and any money deposited belongs to the employee immediately

What are the contribution limits for 2019?

  • $3,500 for an individual
  • $7,000 for a Family
  • $1,000 Catch-up if age 55 or greater

Where can I set up an HSA account?

Most major financial institutions can offer HSAs, so you may be able to open an HSA through your bank.  Make sure you understand what fees, if any, will be charged for maintenance of the account

How are contributions treated for owners and shareholders of S corps?

  • More than 2% owners of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the “above-the-line” deduction on their personal income taxes.
  • Rules of attribution apply to more than 2% owners of an S corporation, therefore the more than 2% owner’s spouse, parents, children and grandchildren may not contribute to an HSA on a pre-tax basis. However, they may contribute on a post-tax basis and deduct the contribution at the end of the year on their personal tax return.

Who do I contact to get started with an HSA plan?

Please reach out to me in any of the following ways that work best for you;

  • Call or text me at 1-740-397-1234
  • Email us at team@dumbaughinsurance.com
  • Email me directly at liz@dumbaughinsurance.com


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