Got questions about health savings accounts? We’ve got answers!
Q: What is a Health Savings Account (HSA)?
A: An HSA is an account that allows individuals to save and pay for qualified medical expenses on a tax-free basis. The account is established with a trustee or custodian for the individual, much in the same way that an Individual Retirement Account (IRA) is established. Therefore, the HSA is completely portable and “owned” by the individual. Employer contributions to an HSA belong to the employee and are taken with the employee if s/he changes jobs.
Q: What are maximum contributions?
A: For 2010-2011, the maximum contribution that an individual is allowed to make to an HSA is $3050; for a family, the maximum contribution is $6150. An individual is allowed to set up multiple HSAs, but the maximum annual contribution applies to the combined value of all of the accounts. The value of your HSA “rolls over” from year to year – there are NO “use it or lose it” restrictions.
Q: Who can make contributions to an H.S.A.?
A: Contributions to an HSA can be made by an individual, an employer, or any other person. Contributions can be made in any amount or any frequency (i.e., an annual lump sum or monthly). However, only contributions by an individual to his/her own account can be deducted from annual adjusted gross income (after-tax contribution). Contributions from an employer are also not taxable to the individual (pre-tax payroll deductions). Because the HSA is a federal program, domestic partners are not eligible to pay for health expenses from their partner’s HSA; individual HSAs must be established.
Q: Who is eligible for a Health Savings Account (HSA)?
A: You are eligible to establish an HSA if you are enrolled in a high-deductible health insurance plan. A high-deductible health insurance plan is defined as a plan with an annual deductible of at least $1200 for individual or $2400 for a family.
To be eligible for an HSA, you cannot be enrolled in Medicare or be claimed as a dependent on someone else’s tax return.
Q: What are the advantages of having an HSA for an individual or family?