24 Hour Banking - Woodsville Guaranty Savings Bank

A Health Savings Account (HSA) is a tax-exempt trust account that you can put money into in order to save for future medical expenses, in conjunction with a ‘high deductible health plan’ (HDHP). Consumers who have an HDHP are often able to save money on healthcare costs by taking advantage of lower cost high-deductible insurance and paying out-of-pocket costs with pre-tax dollars.

For information about HSA Checking at Woodsville Guaranty Savings Bank, click here.

Frequently Asked Questions

What is a Health Savings Account?
What are the benefits of an HSA?
Who is eligible?
What is a ‘High Deductible Health Plan’ (HDHP)?
Does the HDHP policy have to be in my name to open an HSA?
I have family plan insurance coverage. Can my spouse and I open a joint HSA?
How much can I contribute to my HSA?
Can I start an HSA for my child?
If I’m on Medicare, can I have an HSA?
What are an HSA owner’s responsibilities?
Who can contribute to my HSA?
What are the federal tax benefits of an HSA?
When is the contribution deadline for funding an HSA?
How are HSA distributions taxed?
How is HSA activity reported?
What happens to my HSA in the event of my death?
What are qualified medical expenses?
What expenses are not qualified medical expenses?
Where can I go for more information?

What is a Health Savings Account?
A Health Savings Account (HSA) is a tax-exempt trust account established exclusively for the purpose of paying or reimbursing qualified medical expenses in conjunction with a ‘high deductible health plan’ (HDHP). Unlike with traditional ‘flexible spending plans’, funds in an HSA remain in the account from year to year, with no ‘use it or lose it’ rules. You can use the money in the account to pay for qualified medical expenses for yourself, your spouse, or your dependent children. You can pay for expenses of your spouse and dependent children even if they are not covered by your HDHP.

What are the benefits of an HSA?
Qualified individuals can enjoy significant benefits associated with paying qualified medical expenses. These benefits are similar to those found with IRA accounts. A summary of HSA tax advantages is shown below:

HSA assets are never taxed if used for qualified medical expenses.
HSA earnings are tax deferred.
Qualified contributions made by you or your employer are excluded from income.
Upon death, HSA assets become the property of a named beneficiary or of the HSA account holder’s estate. The spouse of the account holder may treat the assets as their own HSA; other beneficiaries must treat the funds as taxable income.
An HSA is portable, meaning it stays with the customer if you change employers or leave the workforce.

Who is eligible?
You are eligible if you:

Are covered under a high deductible health plan (HDHP);
Are not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing preventive care and limited types of permitted insurance and coverage);
Are not enrolled in Medicare; and
Cannot be claimed as a dependent on another person’s tax return.

What is a ‘High Deductible Health Plan’ (HDHP)?
You must have an HDHP if you want to open an HSA. An HDHP is a health insurance plan that provides consumers access to lower cost insurance in exchange for higher deductibles and payment of more out-of-pocket and ‘first dollar’ medical costs. For HSA purposes, an HDHP is one with an annual deductible of no less than $1,100 for Self-Only coverage and $2,200 for Family coverage for tax year 2008. In addition, an HSA-qualified HDHP must limit out-of-pocket expenses to no more than $5,600 for Self-Only coverage and $11,200 for Family coverage for tax year 2008.

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 are covered under an HDHP, you are eligible for an HSA, provided that you meet the other eligibility requirements. Spouses covered under a ‘family plan’ HDHP may each have their own HSA and make individual contributions, up to the aggregated contribution limit. For 2008, the standard contribution limit with family coverage in an HDHP is $5,800.

I have family plan insurance coverage. Can my spouse and I open a joint HSA?
No. While you may have ‘family’ coverage in an HDHP, an HSA is an individual revocable trust account and may only have one account owner. Spouses covered by a family plan HDHP may each have their own HSA, however their combined annual contributions, along with those made by an employer, may not exceed the standard family coverage contribution limits. For 2008, the standard contribution limit with family coverage in an HDHP is $5,800.

How much can I contribute to my HSA?
The amount that you may contribute to an HSA depends on the type of HDHP coverage you have. Additionally, eligible individuals who are age 55 or older and have not yet enrolled in Medicare may make catch-up contributions. The chart that follows shows the contribution limits for both.

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.

If I’m on Medicare, can I have an HSA?
You are not eligible to open 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. Note—if you are eligible for Medicare, but are not yet enrolled, you may continue to make contributions.

What are an HSA owner’s responsibilities?
If you are eligible, you can establish an HSA in much the same way you would establish an IRA—with a qualified trustee or custodian. Each year, you are responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with nontaxable HSA distributions.

Determining your eligibility to establish an HSA and determining your allowable contributions and distributions may require the guidance of a tax or legal professional. Your HSA custodian/trustee is not responsible for the determination of your allowable HSA contributions or whether you have qualified medical expenses.

Who can contribute to my HSA?
If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non-individuals) may contribute to your HSA. This is true whether you are self-employed or unemployed.

What are the federal tax benefits of an HSA?
Contributions to an HSA are fully deductible, the earnings grow tax deferred, and distributions for qualified medical expenses are tax free. Consult with your tax or legal professional for guidance.

When is the contribution deadline for funding an HSA?
The deadline for regular and catch-up HSA contributions is your federal income tax return due date, excluding extensions, for that taxable year. The due date for most taxpayers is April 15.

How are HSA distributions taxed?
HSA distributions used exclusively to pay for or reimburse qualified medical expenses incurred by you, your spouse, or your dependents are not included in gross income.
Any other distributions are included in income unless rolled over. Distributions not used to pay for or reimburse qualified medical expenses or not rolled over are subject to an additional 10 percent tax unless made after your death, your disability, or your attainment of age 65.

Important: HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses.

How is HSA activity reported?
Each year, your HSA custodian/trustee reports to the IRS on IRS Form 5498-SA the contributions made to your HSA and on IRS Form 1099-SA any HSA distributions you take. In addition, you file IRS Form 8889, Health Savings Accounts (HSAs), as part of your federal income tax return to show your HSA contribution and distribution activity.

What happens to my HSA in the event of my death?
If your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA. If your beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death and the fair market value of the account is included as income for the recipient in the tax year of your death. If no beneficiary is designated, fair market value of your HSA as of the date of your death is included in your estate and reported as income on your final income tax return.

What are qualified medical expenses?
Qualified medical expenses are those expenses that would generally qualify for a medical and dental expense deduction on your annual IRS tax return. Qualified expenses include doctor fees, prescription and non-prescription medicines, and necessary hospital services not paid for by insurance, and include those incurred by you, your spouse, and your dependents. To learn more about which medical expenses are qualified, visit the IRS website at www.IRS.gov and see IRS Publication 502.

What expenses are not qualified medical expenses?
To learn which medical expenses are NOT qualified medical expenses, visit the IRS website at www.IRS.gov and see IRS Publication 502.

Where can I go for more information?
The above document provides general HSA rules and contribution limitations current as of October 2007. It does not reflect any legislative or regulatory changes since then. It is also not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances or under your state tax laws.

For specific information, you are encouraged to consult your tax or legal professional. The following links also provide valuable information:

Internal Revenue Service
www.IRS.gov
See Publication 502 for a list of includible and non-includible medical expenses.

See Publication 969 for ‘Health Savings Accounts & Other Tax-Favored Health Plans’.

Department of the Treasury
www.treas.gov
Click on ‘Health Savings Accounts’

home | privacy | security | contact us