What is a Health Savings Account ("HSA")?
A Health Savings Account is an alternative to traditional health insurance;
it is a savings product that offers a different way for consumers to pay for
their health care. HSAs enable you to pay for current health expenses and
save for future qualified medical and retiree health expenses on a tax-free
basis.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.
You own and you control the money in your HSA. Decisions on how to spend the
money are made by you without relying on a third party or a health insurer.
You will also decide what types of investments to make with the money in the
account in order to make it grow.
What Is a "High Deductible Health Plan" (HDHP)?
You must have an HDHP if you want to open an HSA. Sometimes referred to as a
"catastrophic" health insurance plan, an HDHP is an inexpensive health
insurance plan that generally doesn't pay for the first several thousand
dollars of health care expenses (i.e., your "deductible") but will
generally cover you after that. Of course, your HSA is available to help
you pay for the expenses your plan does not cover.
For 2006, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,050 (self-only coverage) or $2,100 (family coverage). The annual out-of-pocket (including deductibles and co-pays) for 2006 cannot exceed $5,250 (self-only coverage) or $10,500 (family coverage). HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.
How can I get a Health Savings Account?
Visit our PBNB main bank location at 912 S. Poplar and ask for the New
Accounts department. We can also set up these accounts at our Redfield and
Star City locations. If you have questions, you can contact our main bank
new accounts department at 870-535-7222, our Redfield location at
501-397-6500 or our Star City location at 870-628-6600.
How much does an HSA cost?
An HSA is not something you purchase; it's a savings account into which you
can deposit money on a tax-preferred basis. The only product you purchase
with an HSA is a High Deductible Health Plan, an inexpensive plan that will
cover you should your medical expenses exceed the funds you have in your HSA.
Who is eligible for a Health Savings Account?
To be eligible for a Health Savings Account, 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" (see below) and will not
jeopardize your eligibility for an HSA.
Can I get an HSA even if I have other insurance that pays medical bills?
You are only allowed to have auto, 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.
Does the HDHP policy have to be in my name to open an HSA?
No, the policy does not have to be in your name. As long as you have
coverage under the HDHP policy, you can be eligible for an HSA (assuming you
meet the other eligibility requirements for contributing to an HSA). You can
still be eligible for an HSA even if the policy is in your spouse's name.
I don't have health insurance, can I get an HSA?
You cannot establish and contribute to an HSA unless you have coverage under
a HDHP.
I'm on Medicare, can I have an HSA?
You are not eligible for an HSA after you have enrolled in Medicare. If you
had an HSA before you enrolled in Medicare, you can keep it. However, you
cannot continue to make contributions to an HSA after you enroll in
Medicare.
I am a Veteran, can I have an HSA?
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 for an HSA.
I'm active-duty military and have Tricare coverage, can I have an HSA?
At this time, Tricare does not offer an HDHP options so you are not eligible
for an HSA.
My employer offers an FSA, can I have both an FSA and an HSA?
You can have both types of accounts, but only under certain circumstances.
General Flexible Spending Arrangements (FSAs) will probably 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 plan deductible is met) FSA, then you can still be
eligible for an HSA.
My employer offers an HRA, can I have both an HRA and an HSA?
You can have both types of accounts, but only under certain circumstances.
General Health Reimbursement Arrangements (HRAs) will probably 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 plan 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 can still be eligible for an HSA.
My spouse has an FSA or HRA through their employer, can I have 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.
I don't have a job, can I have an HSA?
Yes, if you have coverage under an 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.
Does my income affect whether I can have an HSA?
There are no income limits that affect HSA eligibility. However, if you do
not file a federal income tax return, you may not receive all the tax
benefits HSAs offer.
Can I start an HSA for my child?
No, you cannot establish separate accounts for your dependent children,
including children who can legally be claimed as a dependent on your tax
return.
I'm a single parent with HDHP coverage but have child/relative 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.
How much can I contribute to my HSA each year?
Your annual HSA contribution cannot exceed the deductible of your HDHP. For
example, if you choose a plan with a deductible of $1,100, you may not
deposit more than $1,100 in your HSA for that year. If you want to save
more, you must choose an HDHP with a higher deductible. If you are age 55
or older, you can also make additional "catch-up" contributions (see below).
I have a very high deductible, is there a limit on how much I can
contribute?
The most you can put into your account for 2006 is $2,700 if you have single
coverage and $5,450 for a family. These amounts will be increased for
inflation in future years.
Do my HSA contributions have to be made in equal amounts each month?
No, you can contribute in a lump sum or in any amounts or frequency you
wish. However, your account trustee/custodian (bank, credit union, insurer,
etc.) can impose minimum deposit and balance requirements.
Does my contribution depend on when I establish my HSA account or when my
HDHP coverage begins?
Your eligibility to contribute to an HSA is determined by the effective date
of your HDHP coverage. Your annual contribution depends on the number of
months of HDHP coverage you have during the year (technically, the months
where you have HDHP coverage on the first day of the month). The amount
you can contribute is not determined by the date you establish your
account. However, medical expenses incurred before the date your HSA is
established cannot be reimbursed from the account.
Can my employer contribute to my HSA?
Contributions to HSAs can be made by you, your employer, or both. All
contributions are aggregated to determine whether you have contributed the
maximum allowed. If your employer contributes some of the money, you can
make up the difference..
Do my contributions provide any tax benefits?
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 my employer contributes to my HSA, does that also provide me any tax
benefit?
If your employer makes a contribution to your HSA, the contribution is not
taxable to you the employee (excluded from income).
Can I make contributions through my employer on a "pre-tax" basis?
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.
Can I take a tax deduction for my HDHP premium?
Not at this time. President Bush has proposed allowing individuals not
covered by an employer plan to deduct their HDHP premiums as well as their
HSA contributions. However, this proposal will not be effective until
enacted by Congress.
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 each year until they enroll in Medicare. The
additional "catch-up" contributions to HSA allowed are as follows:
2006 - $700
2007 - $800
2008 - $900
2009 and after - $1,000
I turned 55 this year. Can I make the full "catch-up" contribution?
If you had HDHP coverage for the full year, you can make the full catch-up
contribution regardless of when your 55th birthday falls during the year.
If you did not have HDHP coverage for the full year, you must pro-rate your
"catch-up" contribution for the number of full months you were "eligible",
i.e., had HDHP coverage.
If both spouses are 55 and older, can both spouses make "catch-up"
contributions?
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
amount of the deductibles under their respective policies. However, each
spouse's contribution cannot exceed the contribution limit of $2700 for
individuals for 2006. (The catch up contributions are in addition to these
limits.)
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 1: 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 $5,000 to an HSA.
Example 2: 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 $2,200 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 $5,000, to be divided between them by agreement.
Example 3: 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 with the lowest annual deductible ($3,000). The maximum combined HSA contribution by husband and wife is $3,000, to be divided between them by agreement.
Example 4: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has family coverage with a $200 deductible. Husband and wife are treated as having family coverage with the lowest annual deductible ($200). Neither husband nor wife is an eligible individual and neither may contribute to an HSA.
Example 5: 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 $5,000 to an HSA.
Does tax filing status (joint vs. separate) affect my contribution?
Tax filing status does not affect your contribution.
I'm a single parent with HDHP coverage but have child/relative 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 amount of your HDHP deductible to your HSA.
May a self-employed person contribute to an HSA on a pre-tax basis?
No. Self-employed persons may not contribute to an HSA on a pre-tax basis
and may not take the amount of their HSA contribution as a deduction for
SECA purposes. However, they may contribute to an HSA with after-tax
dollars and take the above-the-line deduction.
Does an HSA pay for the same things that regular insurance pays for?
HSA funds can pay for any "qualified medical expense", even if the expense
is not covered by your HDHP. For example, most health insurance does not
cover the cost of over-the-counter medicines, but HSAs can. If the money
from the HSA is used for qualified medical expenses, then the money spent is
tax-free.
How do I know what is included as "qualified medical expenses"?
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). There have been thousands of cases involving the many nuances
of what constitutes "medical care" for purposes of section 213(d) of the
Internal Revenue Code. A determination of whether an expense is for "medical
care" is based on all the relevant facts and circumstances. To be an expense
for medical care, the expense has to be primarily for the prevention or
alleviation of a physical or mental defect or illness. The determination
often hangs on the word "primarily."
Who decides whether the money I'm spending from my HSA is for a "qualified
medical expense?"
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.
What happens if I don't use the money in the HSA for medical expenses?
If the money is used for other than qualified medical expenses, the
expenditure will be taxed and, for individuals who are not disabled or over
age 65, subject to a 10% tax penalty.
Are dental and vision care qualified medical expenses under a Health Savings
Account?
Yes, as long as these are deductible under the current rules. For example,
cosmetic procedures, like cosmetic dentistry, would not be considered
qualified medical expenses.
Can I use the money in my HSA to pay for medical care for a family member?
Yes, you may withdraw funds to pay for the qualified medical expenses of
yourself, your spouse or a dependent without tax penalty. This is one of
the great advantages of HSAs.
Can I use my HSA to pay for medical services provided in other countries?
Yes.
Can I pay my health insurance premiums with an HSA?
You can only 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.
Can I purchase long-term care insurance with money from my HSA?
Yes, if you have tax-qualified long-term care insurance. However, the
amount considered a qualified medical expense depends on your age. See IRS
Publication 502 for the amounts deductible by age.
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.
What happens to the money in my HSA if I lose my HDHP coverage?
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.
Do unused funds in a Health Savings Account roll over year after year?
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.
What happens to the money in a Health Savings Account after you turn age 65?
You can continue to use your account tax-free for out-of-pocket health
expenses. When you enroll in Medicare, 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 a 10% penalty on the amount withdrawn.
Can I use my HSA to pay for medical expenses incurred before I set up my
account?
No. You cannot reimburse qualified medical expenses incurred before your
account is established. We recommend you establish your account as soon as
possible.
Who will be the "bookkeeper" for my HSA?
It is your responsibility to keep track of your deposits and expenditures
and keep all of your receipts. If you run out of HSA funds (and therefore
need to use your HDHP), you may need to send those receipts to your insurer.
How do I use my HSA to pay my physician when I'm at the physician's office?
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 will probably 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 may then send you a bill for payment.
Who has control over the money invested in a Health Savings Account?
The account holder controls all decisions over how the money is invested.
You can also choose not to invest your funds.
Can the funds in an HSA be invested?
Yes, you can invest the funds in your HSA. The same types of investments
permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual
funds, and certificates of deposit.
Will my bank notify me if I've exceeded my allowable contribution amount?
No, it is your sole responsibility to keep track of the amounts deposited
and spent from your account, just like a normal savings or checking account.
Can I borrow against the money in my HSA?
No. You may not borrow against it or pledge the funds in it. For more
information on prohibited activities, see Section 4975 of the Internal
Revenue Code.
Can I roll the money in a Health Savings Account over into an IRA?
You cannot roll the HSA funds over into an IRA. They will stay in the HSA or
be rolled into another HSA.
Can I roll over an IRA, 401(k) or other retirement plan into an HSA?
You cannot directly roll funds in an IRA, 401(k) or other retirement plan
into an HSA. You can withdraw funds from one of these accounts, pay
applicable taxes (and penalties) on the amount you withdraw, and then use
the remaining funds to make a contribution to your HSA. However, the amount
you contribute to your HSA is still limited by the annual contribution
limits.
Can I roll funds in my Archer MSA into my HSA?
Yes, if you do so within 60 days of withdrawing the funds from the Archer
MSA.
What happens to the money in my HSA when I die?
What happens depends on how the HSA is designed. If your spouse is
designated as the beneficiary by you, your spouse becomes the owner of the
HSA when you die. If you provide that it goes to your estate or other
entity, the value of the HSA at death is income to the estate or other
entity.
