HSA Center

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Key Facts About HSAs & Eligibility

  • HSAs are like "medical" IRAs. They are tax-free accounts that individuals with an HSA compatible, high deductible health insurance policy can fund and use to pay for medical expenses. Because they are tax-advantaged and balances can accumulate over time, HSAs can also be used to accumulate savings.
  • To be eligible to open an HSA, the subscriber must be covered only by an HSA compatible, high deductible health plan (HDHP) and must not be a dependent on another person's tax return. Individuals age 65 and older are eligible to open an HSA as long as they have not elected Medicare Parts A, B, C or D. An HSA accountholder cannot have access to a general purpose healthcare FSA or HRA through their employer or their spouse's employer.
  • A high deductible health plan (HDHP) is one with an annual deductible of at least $1,200 for individuals and $2,400 for families.
  • Health Insurance carriers label which plans are High Deductible Health Plans.  The majority of plans offered by insurance carriers are not High Deductible Health Plans so it is important for you to make sure that the plan you choose is a High Deductible Health Plan. 
  • HSAs are portable and move with an employee if there is a change in employment.
  • Unused HSA funds roll over from year to year and interest continues to grow on a tax-deferred basis.
  • HSA contributions can come from the employee, employer or both, all in the same tax year. Each year the IRS changes the maximum annual contribution. For 2013 the maximum is $3,250 for individuals and $6,450 for families. Catch-up contributions can be made by individuals 55 and over up to $1,000.
  • HSA funds can be used to pay for a variety of qualified healthcare services, including many that are not traditionally allowed under other plans. For example, dental and vision care services, long term care insurance premiums and medical insurance premiums during periods of unemployment can all be paid for with HSA funds. More information is available in the Internal Revenue Service's IRS Publication 502, Medical and Dental Expenses.

Contributions

  • HSA contributions can come from the employee, employer or both, all in the same tax year. Each year the IRS changes the maximum annual contribution. For 2013 the maximum is $3,250 for individuals and $6,450 for families. Catch-up contributions can be made by individuals 55 and over up to $1,000.
  • HSAs are portable and move with an employee if there is a change in employment.
  • Unused HSA funds roll over from year to year and interest continues to grow on a tax-deferred basis.

Use of Funds & Eligible Medical Expenses

An eligible medical expense is an expense that pays for healthcare services, equipment or medications as described in IRS Publication 502.

Download  IRS Publication 502 (complete listing of Eligible Expenses).

Download a "quick reference list" of eligible and ineligible medical expenses from HSA Bank.

In general, your HSA can be used for:

  • Expenses applied to your health plan deductible
  • Dental care services
  • Vision care services
  • Prescription services
  • Certain over-the-counter medications
  • Certain medical equipment
  • Insurance premiums in the following cases:
    • for a qualified Long-Term Care policy
    • Premiums for continuation coverage under COBRA or ERISA for the accountholder, spouse or dependents
    • A health plan maintained while the accountholder, spouse or dependent is receiving unemployment compensations under any Federal or State Law
    • Premiums for those over the age of 65, including Medicare or retirement health benefits provided by a former employer

Keep In Mind

  • Funds used to pay for qualified medical expenses are always tax-free, regardless of age or HSA-compatible health plan coverage.
  • Prior to age 65, funds used to pay for "non-eligible" medical expenses are subject to normal income tax and a 10% penalty. After age 65, HSA funds may be withdrawn for non-eligible expenses with no penalty (regular income tax will apply).
  • HSA funds can be used to reimburse yourself for past medical expenses if the expense was incurred after your HSA was established.
  • If you have questions regarding the eligibility of medical expenses, always contact a qualified tax advisor or the IRS.

HSA Bank FAQ Resource Center (a very good resource for your FAQ's)
+ Administration
+ Contributions
+ Distributions
+ Eligibility
+ Employers
+ HDHPs
+ HSAs
+ MSAs
+ Tax Reporting
+ Taxes