Frequently Asked Questions 
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What is a Health Savings Account (“HSA”)?
A Health Savings Account is a special type of savings account like an Individual Retirement Account (IRA) that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and/or 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 interference from a third party or a health insurer. You 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 be covered by 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 2014, an HDHP must have a deductible no lower than $1,250 for individuals with self-only coverage or $2,500 for family coverage.  In addition, the HDHP must limit your out-of-pocket expenses to no more than $6,350 (self) or $12,700 (family).  HDHPs can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket (copays & coinsurance) for services received outside the plan’s provider network.

 
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 certain types of insurance like 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. You can still be eligible for an HSA even if the policy is in your spouse’s 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).

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 to contribute to 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 to contribute to an HSA. If you have only received dental, vision or preventive care services from a VA facility or clinic within the past three months, you will remain eligible to contribute to 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 if you are enrolled in Tricare.

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 obtain your HDHP coverage from your job – you can purchase your HDHP coverage on your own.

Does my income affect whether I can have an HSA?
Unlike some IRS's 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.

Do I have to have earned income from work to qualify for an HSA?
You do not have to have earned income from a job to qualify for an HSA.  If all your income comes from sources other than a job, you can still be eligible for an HSA.  Even better, if you have no income (e.g., a non-working spouse), you may still be eligible for an HSA.  HSAs are different from IRAs in this regard.


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 a child/relative that can be claimed as a dependent for tax purposes, and this dependent also has non-HDHP coverage. Can I still have an HSA?
Yes, you can still have an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are also covered by your HDHP.

Is there a limit on how much I can contribute?

 
For 2014, the maximum can you can contribute to a Health Savings Account is a $3,300 for individuals with self-only coverage and $6,550 if you have family coverage.

For 2013, the maximum you may contribute is $3,250 if you have self-only coverage or $6,450 if you have family coverage.

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 make a contribution depends on when your HDHP coverage begins. In generally, you must be covered by an HDHP as of the first day of the month to be eligible to make a contribution to your HSA for that month. For example, if your HDHP coverage begins on March 15, you cannot make a contribution for the month of March (or January or February). The first month for which you would be eligible to make a contribution is April. Likewise, if your HDHP coverage ends November 2, you would be eligible to make a contribution for the month of November (but not December). If you do not have HDHP coverage for every month of the year, you must pro-rate your annual HSA contribution for the number of months that you have HDHP coverage.


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.

I elected to have money withheld from my paycheck through payroll deduction to be deposited in my HSA.  How quickly does my employer have to deposit my money in my account?

The answer depends on the size of your company.  On January 14, 2010, the U.S. Department of Labor published final regulations (available online at http://www.gpo.gov/fdsys/pkg/FR-2010-01-14/html/2010-430.htm) that apply only to companies with less than 100 employees.  If the business has less than 100 employees, the company has 7 business days to deposit HSA contributions withheld from employees' wages.  Larger companies are still governed by the "old rules" which require companies to transmit employee contributions "as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions were received or withheld by the employer."

Do my contributions provide any tax benefits?
Your personal contributions can be deducted on your personal income taxes and 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 (not the person making the contribution) 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 as an employee (excluded from income and employment taxes).

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 and employment taxes are applied). The amount you contribute in this way is not deducted on your personal income taxes.

Can I deduct my HSA contributions and also claim 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.  If you are self-employed, you may be able to deduct your HDHP premium as a business expense.

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” contribution allowed to an HSA is $1,000 annually.

I turned 55 this year. Can I make the full “catch-up” contribution?
Yes, if you were covered by an HDHP for the entire year. If you were not covered by an HDHP for the entire year, you will need to pro-rate your catch-up contribution just like you would have to pro-rate your standard contribution.

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, and each spouse’s contribution cannot exceed the contribution limit of $3,100 for individuals for 2012.  If either spouse is age 55 or older, they can also make a $1,000 catch-up contribution as well.

Does tax filing status (joint vs. separate) affect my contribution?
Tax filing status does not affect your contribution.

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 deduct their HSA contributions on their personal income taxes.

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?”
The IRS has the final say, but the question may not arise unless your tax return is audited. You are responsible for reporting on your tax return the amount you withdraw from your HSA that is used for qualified medical expenses and the amount that is not (and is therefore taxable). It is recommended that you 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 as income and, for individuals who are not disabled or over age 65, subject to a 20% tax penalty.

Are dental and vision care considered “qualified medical expenses” for purposes of a Health Savings Account?
Yes, many dental and vision care expenses are considered “qualified medical expenses.” However, cosmetic procedures, like cosmetic dentistry, would not be considered a “qualified medical expense.”

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 serviced 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 these amounts.

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. 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 are no longer subject to a 20% penalty on withdrawals that are used for purposes other than qualified medical expenses. You would still have to pay income tax on the amount of these withdrawals.  But this makes putting funds in an HSA better than an IRA.

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 the date 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, you cannot pay for any further medical expenses until more funds are deposited into your account. If you have already deposited the maximum amount in your HSA for the year, you will need to wait until next year to make additional contributions.

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 likely be responsible for paying 100% of the negotiated rate agreed to by your insurance carrier and your 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.

What do I have to do to “establish” my account?
Your account trustee/custodian will determine what you need to do, which may include completing and processing appropriate paperwork, and making a minimum deposit.

What is the difference between an HSA “custodian” and an HSA “trustee”?
The differences between a “custodian” and a “trustee” are minor. A trust is a legal entity under which assets are actually owned and held on behalf of a beneficiary. The trustee has some level of discretionary fiduciary authority over the assets of the fund. The trustee must exercise that authority in the best interests of the beneficiary. A custodial arrangement, on the other hand, is like a trust, but the custodian simply holds the assets on behalf of the owner of the assets. Other than holding the assets and doing as the owner orders, the custodian has no fiduciary obligations to the owner. What constitutes a trust or custodial arrangement is a determination made under state law.

Can couples establish a “joint” account and both make contributions to the account, including “catch-up” contributions?
“Joint” HSA accounts are not permitted. Each spouse should consider establishing an account in their own name. This allows you to both make catch-up contributions when each spouse is 55 or older.

Must couples open separate accounts?
If both husband and wife are eligible to contribute to an HSA, they are both eligible to establish separate HSAs. However, if both spouses want to make “catch-up” contributions when they are age 55+, they must establish separate accounts. HSAs are similar to IRAs in this regard.

How soon can I open my account?
Your account can be established as early as the effective date of your HDHP coverage. Your state’s trust laws govern how early your account can be considered “established.”

I want to make sure my HSA is “established” as soon as possible. Can I establish my account before my HDHP coverage begins?
You can complete all the paperwork and make a minimum deposit to your account prior to the effective date of your HDHP coverage. However, your account is not officially “established” as an HSA until your HDHP coverage begins. But completing the necessary steps before your coverage begins ensures that your HSA will be “established” as early as possible. This is especially important when your HDHP coverage is effective on a non-business day.

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 or pledge the funds in your HSA. 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 funds must stay in the HSA or be rolled into another HSA.

Can I roll over an IRA into an HSA?
You are allowed to make a one-time tax-free rollover of funds from an Individual Retirement Account (IRA) to your HSA. The contribution must be made in a direct trustee-to-trustee transfer. This type of rollover is not taxable as income or subject to any penalties for early withdrawal from the IRA. The transfer is limited to the maximum HSA contribution for the year in which the transfer is completed, and the amount contributed is not allowed as a deduction on personal income taxes like normal HSA contributions. Be aware that if you do not remain covered by an HDHP for the 12 months following the IRA to HSA rollover, the transferred amount must be included in your income and is subject to a 10% tax penalty.

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?
When the HSA account owner dies, the HSA becomes the property of the named beneficiary.  If the spouse is the beneficiary, he or she becomes the owner of the account and may continue to use the HSA as their own (i.e., pay for qualified expenses tax-free).

If any other person (or entity) is the named beneficiary, the HSA ceases to be an HSA as of the date of the account owner’s death. However, the beneficiary may continue to pay (tax-free) qualified expenses incurred by the deceased account holder, if paid within one year of their death. Any remaining funds become part of the deceased account holder’s estate and subject to any applicable taxes upon transfer of ownership of the estate assets

As an employer, do I own my employees’ HSAs? Can I control how they spend the money in them?
No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation.

My employees want to contribute to their HSAs but want to make sure they get a tax benefit out of doing so. How does that work?
Employee contributions to their HSAs provide tax benefits regardless of how they are made. If the company provides a salary reduction plan (also known as a “Section 125 plan” or “cafeteria plan”), the employees can make their HSA contributions on a “pre-tax” basis and not pay income or employment taxes (e.g., FICA) on the amount of their contributions. If the company does not provide this opportunity, employees can still deduct their HSA contributions on their personal income taxes.

How much do I have to contribute to my employees” HSA, as an employer?
There is no requirement that employer’s contribute to their employees’ HSAs. However, making contributions to your employees’ HSAs will encourage greater participation and change employees’ understanding of how health care is financed faster than without contributions. All contributions by the company are deductible as a business expense and are tax-free to employees.

As an employer, do I have to contribute the same amount to every employee’s HSA?
Employer contributions must be “comparable”, that is they must be in the same dollar amount or same percentage of the employee’s deductible for all employees in the same “class”. You can vary the level of contributions for “full-time” vs. “part-time” employees, and employees with “self-only” coverage vs. “family coverage”. You do not need to consider employees who do not have HDHP coverage as they are not eligible for HSA contributions.

Our company offers benefits through a Section 125 plan, do contributions have to be comparable under these plans as well?
Section 125 plans (also known as “salary reduction” or “cafeteria” plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet “non-discrimination” rules. These rules require the employer to ensure that contributions do not favor higher compensated employees. These rules are the same rules already in place that apply to retirement plans and other benefits.

Our company wants to offer “matching” contributions, can we do that?
Yes, but your company can only offer “matching” contributions through a Section 125 plan. Remember that the non-discrimination rules still apply.

I don’t offer health insurance, but some of my employees have opened HSAs and I’d like to help them out, what can I do?
Your company can make contributions to your employees’ HSAs as long as you do so for all eligible employees. However, the comparability rules (or non-discrimination rules, if you have a Section 125 plan) still apply.

How are contributions treated for owners and shareholders of S corps?
Owners and officers with greater than 2% ownership share of a Subchapter S corporation are not considered “employees” by the IRS, so these individuals cannot make pre-tax contributions to their HSAs through the company by salary reduction. Any contributions made to their HSAs by the corporation are taxable as income. However, these “owners” can always make their own personal contributions to their HSAs and deduct their contributions on their personal income taxes.

How are contributions treated for partners in a partnership or limited liability company (LLC)?
Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and deduct their contributions on their personal income taxes.

Will I be automatically signed up for Medicare Part A when I turn 65? If so, how can I stay decline Part A and stay eligible to contribute to my HSA?
It is our understanding that you can delay enrollment in Medicare Part A but you must also delay enrollment in Social Security. You can delay taking Social Security to age 70-1/2 but then you must take it (and therefore also Medicare Part A). We don't know the process for declining Part A. However, it is our understanding that if you took Social Security early (before age 65), you will be required to pay back all your Social Security benefits that you've collected to date. Medicare Parts B and D are voluntary so you are not automatically enrolled in them and can decline them easier. However, keep in mind that Medicare will charge you a late enrollment penalty if you sign up for Part B or Part D more than 6 months after your 65th birthday unless you had other coverage (e.g., employer-based coverage because you are still working) that is considered "creditable" by Medicare.

Medicare enrollment creates complications with HSA eligibility. We don't pretend to be experts on all the Medicare eligibility rules, but here's what we believe are the answers. First, you are usually enrolled automatically in Medicare Part A (which covers hospital and inpatient care) around the time of your 65th birthday. Usually, you don't have to do anything to "sign up" -- your Medicare card will be sent to you automatically because it is free for most people and you are legally entitled to the benefits if you have enough work history to qualify for Social Security. If your birthday falls on the first day of the month, you are enrolled in Medicare Part A on the first day of the month prior to your birthday. If your birthday falls on any day other than the first, you are enrolled on the first day of your birth month.

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