Overview on Health Savings Accounts

Health Savings Accounts Overview

So you want to know more about Health Savings Accounts (HSAs)?

An HSA is a tax-advantaged benefit account for people enrolled in a high-deductible health plan (HDHP). Account owners make pre-tax contributions each payday (or post-tax, which can be deducted on tax returns) to their HSA in order to pay for IRS-approved eligible expenses for themselves and their dependents.

Health Savings Accounts Offer a Triple Tax Advantage

  • Contributions are tax-free (or tax-deductible)
  • Withdrawals for qualified expenses are tax-free
  • Account funds grow tax-free, with interest or investment returns

HSA Benefits Include:

  • Account ownership – You own the account! If your employment status changes for whatever reason, you keep the account forever and can continue using the funds.
  • Balance rollover – At the end of each plan year, the unused balance in your account rolls over to the following year. There is NO “use it or lose it” rule with an HSA!
  • Investing options – Invest your HSA funds once the account balance reaches your administrator’s minimum threshold in order to grow your funds quickly.
  • Additional contributions – In the year you turn age 55, you can contribute an additional $1,000 over the annual limit. These are known as “catch up contributions.”
  • Retirement fund supplement – Use your funds as a retirement account.  Starting at age 65, any withdrawals for non-qualified expenses are taxed as regular income.

2018 and 2019 Annual Contribution Limits

  • Participants with individual coverage: 2018 – $3,450; 2019 – $3,500
  • Participants with family coverage: 2018 – $6,900; 2019 – $7,000
  • The IRS recently published 2019 HSA regulations for contribution limits, annual deductibles, and out-of-pocket expenses. Learn more about 2019 HSA regulations.

Need to Know!

  • You can only use the current balance in the account
  • You may file a claim for an eligible expense at any time, so long as the expense occurred after the HSA was established
  • If you’re under age 65 and withdraw HSA funds for unapproved expenses, you’ll be penalized 20 percent in addition to having to file the withdrawal as income on your annual tax return

Eligible Expenses

Visit the IRS webpage for a complete list of eligible medical expenses. Contact your Benefits Representative for more details.

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Additional Information about Health Savings Accounts

For more information about HSAs, check out these blogs from the Captain:

  • “When Can I Open an HSA?” and other HSA FAQs – When people learn about HSAs, they have a lot of questions. One of the most frequently asked questions is, “When can I open an HSA?” The Captain has answers to this question and more!
  • Can I have an FSA and HSA at the same time? – Generally speaking, you cannot have a health Flexible Spending Account (FSA) and HSA at the same time. However, there are a couple of exceptions: limited purpose FSAs and dependent care FSAs.
  • Want to Grow Your HSA? Try Investing – While HSAs earn tax-free interest, interest rates are at historic lows. There is, however, another way to grow your account quickly. Consider investing your HSA funds to see substantial growth.