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To learn more about Health Savings Accounts.
Health Savings Account Basics
A health savings account (HSA) is a new way to secure more affordable health coverage for you and your family while you save on
federal taxes. Flexible, affordable and easy to use.
Participating in an HSA
To participate in an HSA, you must be enrolled in a high-deductible health plan (HDHP). An HDHP is a comprehensive health plan with an
annual deductible of at least $1,050 for an individual and $2,100 for two or more family members. Maximum annual out-of-pocket for in-
network expenses cannot exceed $5,250 for an individual or $10,500 for two or more family members.
To participate in an HSA, you cannot be covered by a low-deductible plan that provides coverage for a benefit that is covered by the
HDHP. There are two other requirements that you must meet in order to participate in an HSA. You cannot:
Contributing to Your HSA
When you participate in an HDHP; you set aside money to pay for eligible out-of-pocket expenses. Money can be contributed to your HSA
by you and/or your employer up to the amount of the deductible to a maximum of $2,700 single/$5,450 family for 2006. Contribution
maximums are based on monthly limits. For example, if you enroll in an HDHP on September 1 and your deductible is $1,200, you can
contribute only $400 (4/12 of $1,200). If you are age 55 or older, you can make an additional contribution amount of $700 in 2006. The
additional amount increases by $100 each year until it reaches $1,000 in 2009. Like the annual contribution limit, this additional
contribution limit is calculated monthly. The HSA cannot receive contributions after the individual has enrolled in Medicare. Contributions
to your HSA are tax-deductible at the federal level (tax-deferred if made by your employer), and withdrawals are not taxed as long as they
are used to pay for qualified medical expenses. State taxes vary - please consult your tax advisor.
Contributions that your employer makes to your HSA are yours. There are no vesting requirements or forfeiture provisions. And unlike
flex spending accounts, HSAs do not have a "use it or lose it" requirement. Your account balance rolls over from year to year and may
earn interest - tax-free at the federal level at the federal level.
Investing Your Money
Federal law requires that contributions be deposited with a qualified trustee or custodian. As a qualified trustee, Wells Fargo holds your
HSA contributions exclusively for your benefit, ready for you to use whenever you have qualified medical expenses to pay. In the
meantime, you have the opportunity to make your HSA grow by investing it in your choice of six Wells Fargo investment funds. The funds
range from a conservative money market fund to a more aggressive stock fund. A brief overview of each of the available funds is
provided in your enrollment materials. Review the materials, and choose funds that best match your risk tolerance.
Using Your HSA
Money in your HSA can be used to pay for a variety of healthcare-related expenses ranging from routine physicals to prescription drugs.
To pay for expenses, you simply present your HSA Visa® debit card to your provider, and money will be deducted directly from your HSA.
You may also submit a claim manually via mail, or fax to receive reimbursement, typically within 4 business days.
Your HSA money is tax-free at the federal level as long as it is used to pay for qualified medical expenses. If you use the money for any
other reason, you will be required to pay income tax and a 10% tax penalty on that amount (you will not pay a penalty if you are disabled
or age 65 or older). It is up to you to keep the supporting records to show the Internal Revenue Service whether you used the funds to
pay qualified medical expenses.
FAQ
Q: Are HSAs and HDHPs the same?
A: No. Health insurance companies provide HDHPs. HSAs are offered through financial institutions. Individuals who enroll in an HSA-
eligible HDHP may be eligible to open an HSA. You should consult with a financial advisor to determine if you meet HSA-eligibility criteria
and whether or not an HSA and HDHP are a good fit for you financially.
Q: What types of insurance and other coverage can I have and still be eligible to take advantage of an HSA?
A: Permitted insurance includes worker's compensation, property insurance, insurance for a specific disease, such as cancer coverage,
and insurance that pays a fixed amount per day of hospitalization. Coverage for dental, vision, long-term care, accidents, and disability
are also permitted.
Q: Can I use the money in my HSA to pay medical insurance premiums?
A: Generally, you cannot use your HSA to pay premiums for health insurance coverage. Exceptions include COBRA premiums, long-term
care premiums or premiums payments that allow you to retain health coverage while you are receiving unemployment compensation.
Q: What is a qualified expense?
A: Qualified medical expenses are services that are typically covered by a healthcare plan, such as office visits, emergency room
services, and hospitalization. Qualified medical expenses also include prescription drugs and many over-the-counter drugs, vision
expenses, including eyeglasses and contact lenses, medical plan deductibles and co-pays, as well as non-cosmetic dental expenses. The
covered items are defined by IRS code 213(d) and are listed in IRS publication 502.
Q: What if I use my HSA to pay for something other than a qualified medical expense?
A: You will need to include that amount in your gross income when you file your state and federal taxes. It will be treated as regular
income and if you are less than age 65, it will be subject to a 10% excise tax.
A health savings account (HSA) is a new way to secure more affordable health coverage for you and your family while you save on
federal taxes. Flexible, affordable and easy to use.
Participating in an HSA
To participate in an HSA, you must be enrolled in a high-deductible health plan (HDHP). An HDHP is a comprehensive health plan with an
annual deductible of at least $1,050 for an individual and $2,100 for two or more family members. Maximum annual out-of-pocket for in-
network expenses cannot exceed $5,250 for an individual or $10,500 for two or more family members.
To participate in an HSA, you cannot be covered by a low-deductible plan that provides coverage for a benefit that is covered by the
HDHP. There are two other requirements that you must meet in order to participate in an HSA. You cannot:
- be enrolled for Medicare;
- be a dependant on another person's tax return.
Contributing to Your HSA
When you participate in an HDHP; you set aside money to pay for eligible out-of-pocket expenses. Money can be contributed to your HSA
by you and/or your employer up to the amount of the deductible to a maximum of $2,700 single/$5,450 family for 2006. Contribution
maximums are based on monthly limits. For example, if you enroll in an HDHP on September 1 and your deductible is $1,200, you can
contribute only $400 (4/12 of $1,200). If you are age 55 or older, you can make an additional contribution amount of $700 in 2006. The
additional amount increases by $100 each year until it reaches $1,000 in 2009. Like the annual contribution limit, this additional
contribution limit is calculated monthly. The HSA cannot receive contributions after the individual has enrolled in Medicare. Contributions
to your HSA are tax-deductible at the federal level (tax-deferred if made by your employer), and withdrawals are not taxed as long as they
are used to pay for qualified medical expenses. State taxes vary - please consult your tax advisor.
Contributions that your employer makes to your HSA are yours. There are no vesting requirements or forfeiture provisions. And unlike
flex spending accounts, HSAs do not have a "use it or lose it" requirement. Your account balance rolls over from year to year and may
earn interest - tax-free at the federal level at the federal level.
Investing Your Money
Federal law requires that contributions be deposited with a qualified trustee or custodian. As a qualified trustee, Wells Fargo holds your
HSA contributions exclusively for your benefit, ready for you to use whenever you have qualified medical expenses to pay. In the
meantime, you have the opportunity to make your HSA grow by investing it in your choice of six Wells Fargo investment funds. The funds
range from a conservative money market fund to a more aggressive stock fund. A brief overview of each of the available funds is
provided in your enrollment materials. Review the materials, and choose funds that best match your risk tolerance.
Using Your HSA
Money in your HSA can be used to pay for a variety of healthcare-related expenses ranging from routine physicals to prescription drugs.
To pay for expenses, you simply present your HSA Visa® debit card to your provider, and money will be deducted directly from your HSA.
You may also submit a claim manually via mail, or fax to receive reimbursement, typically within 4 business days.
Your HSA money is tax-free at the federal level as long as it is used to pay for qualified medical expenses. If you use the money for any
other reason, you will be required to pay income tax and a 10% tax penalty on that amount (you will not pay a penalty if you are disabled
or age 65 or older). It is up to you to keep the supporting records to show the Internal Revenue Service whether you used the funds to
pay qualified medical expenses.
FAQ
Q: Are HSAs and HDHPs the same?
A: No. Health insurance companies provide HDHPs. HSAs are offered through financial institutions. Individuals who enroll in an HSA-
eligible HDHP may be eligible to open an HSA. You should consult with a financial advisor to determine if you meet HSA-eligibility criteria
and whether or not an HSA and HDHP are a good fit for you financially.
Q: What types of insurance and other coverage can I have and still be eligible to take advantage of an HSA?
A: Permitted insurance includes worker's compensation, property insurance, insurance for a specific disease, such as cancer coverage,
and insurance that pays a fixed amount per day of hospitalization. Coverage for dental, vision, long-term care, accidents, and disability
are also permitted.
Q: Can I use the money in my HSA to pay medical insurance premiums?
A: Generally, you cannot use your HSA to pay premiums for health insurance coverage. Exceptions include COBRA premiums, long-term
care premiums or premiums payments that allow you to retain health coverage while you are receiving unemployment compensation.
Q: What is a qualified expense?
A: Qualified medical expenses are services that are typically covered by a healthcare plan, such as office visits, emergency room
services, and hospitalization. Qualified medical expenses also include prescription drugs and many over-the-counter drugs, vision
expenses, including eyeglasses and contact lenses, medical plan deductibles and co-pays, as well as non-cosmetic dental expenses. The
covered items are defined by IRS code 213(d) and are listed in IRS publication 502.
Q: What if I use my HSA to pay for something other than a qualified medical expense?
A: You will need to include that amount in your gross income when you file your state and federal taxes. It will be treated as regular
income and if you are less than age 65, it will be subject to a 10% excise tax.
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Health Savings Accounts
Health Savings Accounts (HSA's) are a savings vehicle that allows people a different way to pay for
their health care. HSAs enable you to pay for current health expenses and save for future medical and
retiree health expenses on a tax-free basis.
You use HSAs in conjunction with traditional health insurance policies as long as the policies are "high
deductible" policies.
their health care. HSAs enable you to pay for current health expenses and save for future medical and
retiree health expenses on a tax-free basis.
You use HSAs in conjunction with traditional health insurance policies as long as the policies are "high
deductible" policies.
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