Frequently asked questions about HSAs.
HSAs are not “use it or lose it.” The money stays with the HSA year after year.
Insurance expert and broker Adam Eisenberg shares answers to frequently asked questions about personal health savings accounts:
What is an HSA?
A health savings account (HSA) is a tax-free way for employees to pay for healthcare expenses and/or save for future medical expenses.
Who is eligible?
Individuals covered by a qualified high-deductible health plan (HDHP) and not covered by other health insurance.
Contributions can be made by you, your employee or by both of you. Total contributions must not exceed the maximum allowed contribution.
What is the maximum allowed contribution?
The maximum annual HSA contribution is based on a statutory limit for individual or family coverage. Currently, individual coverage contributions cannot exceed $3,250 annually; family coverage contributions cannot exceed $6,450. If you are over 55, you are permitted to make an additional $1,000 annual “catch-up” contribution.
What tax benefits do contributions provide?
An HSA may reduce taxable income by the same amount contributed. Always check with a tax professional as regulations governing HSAs can and do change.
Does an HSA pay for the same medical expenses as insurance?
HSA funds can be used for any qualified medical expense, even those not covered by insurance. For example, HSAs can be used to cover the cost of over-the-counter medicines, while insurance is not. For a list of qualified medical expenses visit the IRS website.
Can HSA money pay for health insurance premiums?
Only if the individual is collecting federal or state unemployement benefits or is using COBRA continuation coverage.
What happens to unused money in an HSA?
If the money is used for something other than qualified medical expenses, it will be taxed and possibly penalized. Unused money stays in the HSA and rolls over from year to year.
Who is responsible for tracking HSA contributions and withdrawals?
Individuals are responsible for tracking all deposits and expenditures, as well as keeping receipts.