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- I heard that a Health Savings Account (HSA) is a special
tax-sheltered account that is similar to an IRA, but overall how
does an HSA work?
- What is required in order to set up a qualified HSA?
-
Is there a limit on how much I can contribute to
my HSA each year?
- How much does it cost to set up an HSA and are there any
on-going administration fees once the account is set up?
- What will I receive once the account is set up?
- How do I make deposits to my account?
-
Do I have to fund my account every year?
- Is the bank account my only investment option?
- What expenses can I use my HSA account for?
- What happens to my HSA bank account if I never withdraw
funds or if I change jobs, leave the workforce or retire?
- What expenses are counted toward my deductible?
- What happens if my medical expenses exceed the amount of
my deductible?
- How do I pay for medical care with my HSA?
- Can I go see any doctor I want with the HSA plan?
- Where do I send my claim forms?
- What tax reporting to the IRS is required?
- I heard that a Health Savings Account (HSA) is a special
tax-sheltered account that is similar to an IRA, but overall how
does an HSA work?
-
- The savings account portion of the HSA plan works in conjunction
with a "high deductible" health insurance plan. All the
money deposited in the HSA is 100% tax-deductible which
makes those dollars "tax-free". The insurance company pays
the "big" bills (covered expenses in excess of the deductible)
and you pay the "small" bills with tax-free money in your
HSA account. You can even use these tax-free dollars to
pay for medical expenses not covered under the insurance
plan, such as dental, vision, alternative medicines etc.
What you don' t use is yours to keep and accumulate towards
your retirement.
- What is required in order to set up a qualified HSA?
-
- You must first be insured under a qualified high deductible
major medical plan offered by your employer. Once the qualified
high deductible plan is set up, you or your employer is
then eligible to establish and make contributions to your
HSA savings account. The account must be established and
maintained by a qualified HSA custodian, which simply means
a financial institution that has been approved by the IRS
as an HSA administrator.
- Is there a limit on how much I can contribute to my
HSA each year?
-
- You are allowed to deposit into your HSA up to 100% of
your annual health plan deductible.
- How much does it cost to set up an HSA and are there
any on-going administration fees once the account is set up?
- There is a low one time set up fee and a low monthly administration
fee.
- What will I receive once the account is set up?
-
You will receive a welcome packet from our HSA Administrator,
which will include detailed information on how to use the
account.
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A starter book of checks and a debit card, which will
be sent to you directly from the bank (under separate cover).
-
You will receive an Identification Card to present to
your providers whenever you receive service.
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You will receive a Certificate of Coverage detailing
your plan of benefits.
- How do I make deposits to my account?
-
- Deposits will be made through the billing services of
TPA One, the HSA Administrator, on behalf of Real Benefits
Association.
- Do I have to fund my account every year?
-
- No, you do not have to fund your account each year but
you do need to maintain a low minimum balance in the HSA.
However, it is to your advantage to make annual contributions
in order to take full advantage of the tax savings in accordance
with IRS guidelines as well as save money for retirement
(age 65). Remember, an HSA is similar to an IRA. You are
allowed to contribute to the account and fully deduct your
contributions 100% every year.
- Is the bank account my only investment option?
-
- No. You may select any qualified HSA account administrator
with various options.
- What expenses can I use my HSA account for?
-
Your HSA may be used for qualified medical, dental, vision
and prescription drug expenses as defined in IRS Publication
502. Your insurance premium cannot be paid through your
HSA, unless you are unemployed or on COBRA.
- Funds can be withdrawn as supplemental retirement income
at age 65. Funds withdrawn at that time are considered
taxable income.
- Funds withdrawn prior to age 65 for non-qualified expenses
are taxable income and are subject to a 10% penalty.
- What happens to my HSA bank account if I never withdraw
funds or if I change jobs, leave the workforce or retire?
-
- Your HSA account belongs to you and can be transferred
from one employer to the other. The less money you spend
on medical expenses, the more will remain in your HSA account
while earning interest. Your account grows with you towards
retirement and is treated as a typical IRA with all the
IRS guidelines applying. At age 65 funds can be withdrawn
in their entirety without penalty for any reason. Remember
that the HSA bank account is portable. You own it. You take
it with you wherever you go.
- What expenses are counted toward my deductible?
-
- Covered services are reimbursed based on the plan of benefits
elected. This reimbursement will appear on your Explanation
of Benefits Form and will be counted toward your deductible.
- What happens if my medical expenses exceed the amount
of my deductible?
-
- If your covered expenses for the year exceed the deductible
of your HSA major medical insurance plan, the plan will
take over and pay the balance of the qualified expense in
accordance with the plan of benefits elected.
- How do I pay for medical care with my HSA?
-
- You can access your HSA funds by using your HSA debit
card or your HSA checkbook.
- Can I go see any doctor I want with the HSA plan?
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- Yes! An HSA is NOT an HMO! With an HSA, you are free to
use any doctor and any hospital you choose. However, significant
savings are available to you for choosing an in-network
provider for care.
- Where do I send my claim forms?
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- Claims for medical services should be submitted to the
address shown on the back of your Identification Card.
- What tax reporting to the IRS is required?
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- You will be required to complete IRS form 8853 with your
income tax return each year. You do not have to itemize
to complete this form. This form reports to the IRS what
your total deposits and withdrawals are from your account
each year. The HSA Administrator will provide you with the
information necessary to complete this form and they will
also file the information electronically with the IRS.
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