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| Q |
What is a Health Savings Account? |
| A |
An HSA is a tax-free account like an Individual Retirement Account (IRA). It
allows you to pay for current health expenses and save for future qualified
medical and retiree health expenses on a tax-free basis. The account is owned
by the individual. It allows for:
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Post-tax employee contribution (above-the-line deduction on your tax return );
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Pre-tax employee contribution through §125 Cafeteria plan;
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Employer contributions – tax-free to you;
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Post-tax friends and family contributions (above-the-line deduction on your tax
return).
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Tax-free earnings
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No taxes on qualified medical distributions
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Unused balances roll over from year to year.
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| Q |
Who can qualify to contribute to an HSA? |
| A |
Anyone who meets the following criteria is qualified to contribute to an HSA:
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Covered under a qualified high deductible health plan (HDHP);
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Not covered by another health plan that is not an HDHP;
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Not claimed as a dependent on another person’s tax return.
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| Q |
What is a high deductible insurance plan (HDHP)? |
| A |
For 2011, a high deductible health insurance plan is a health plan with a minimum deductible of $1,200 for self-only coverage and $2,400 for family coverage. The maximum out-of-pocket expenses cannot exceed $5,950 for self-only coverage and $11,900 for family coverage.
For 2012, a high deductible health insurance plan is a health plan with a minimum deductible of $1,200 for self-only coverage and $2,400 for family coverage. The maximum out-of-pocket expenses cannot exceed $6,050 for self-only coverage and $12,100 for family coverage.
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| Q |
Can I be covered by any other health plan and still contribute to an
HSA? |
| A |
No. Generally, you are not eligible to contribute to an HSA while covered under
a HDHP and also covered under a health plan (as an individual, a spouse, or a
dependent) that is not an HDHP. |
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| Q |
Are there other kinds of health care coverage I may have, without
losing my eligibility to contribute to an HSA? |
| A |
Yes. Certain types of “permitted insurance” primarily related to liabilities
are allowed. Coverage for workers compensation, homeowners, automobile,
insurance for a specific disease or illness, and insurance that pay a fixed
amount per day for hospitalization are allowed. Additionally, coverage for
accidents, disability, dental, vision and long term care will not negate your
eligibility to contribute to an HSA. |
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| Q |
Can I have an FSA with my HSA? |
| A |
Generally, you are not allowed to have an FSA in conjunction with an HSA
because an FSA is considered a health plan that is not a HDHP. However, the IRS
created two exceptions to this rule:
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A “limited-purpose” FSA that only covers Dental and Vision care benefits is
permitted to be coupled with an HSA.
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A “post-deductible” FSA that provides reimbursements after the minimum annual
deductible has been satisfied.
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| Q |
Who can contribute to an HSA? |
| A |
Individuals, employees, friends, family and employers on behalf of the
qualified individual. |
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| Q |
How much can be contributed to the HSA? |
| A |
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For self-only coverage, in a high deductible health plan, eligible HSA participants may contribute up to $3,050 for 2011 and $3,100 for 2012.
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For family coverage in a high deductible health plan, eligible HSA participants may contribute up to $6,150 for 2011 and 6,250 for 2012.
Mid-year enrollees will be allowed to make full-year contributions. If an individual becomes HSA eligible on or before December 1st of any year, that individual may be treated as if he or she had been covered by the same high deductible health plan all year, for purposes of calculating their annual maximum HSA statutory contribution limit.
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| Q |
What happens if you contribute too much to the HSA? |
| A |
FBMC will monitor your contribution limits relative to your payroll
contribution to the HSA. In the event that you make additional deposits outside
of the payroll system and your contributions exceed the legal limit, the bank
will notify you of the correction process for excess contributions. You must
withdraw the excess contributions by the due date, including extensions, of
your tax return along with any earnings on the withdrawn contributions. |
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| Q |
How do you make contributions to an HSA? |
| A |
The most convenient way to contribute to an HSA is through your payroll
deduction. Additionally, the participant could make lump sum or catch-up
contributions directly into the account anytime during the calendar year up to
and including your federal income return due date of April 15 of the following
year. Extensions are not included in this time period. Contributions must be
made in cash or its equivalent. |
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| Q |
Can you change your HSA contribution during the year? |
| A |
Yes. You may start or stop the contribution or increase or decrease the amount
of your HSA contribution at any time, as long as the change is effective
prospectively. |
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| Q |
When is the deadline for contributions to an HSA for a taxable
year? |
| A |
Contributions for any taxable year can be made in one or more payments, at any
time prior to the deadline, without extensions, for filing your federal income
tax return for that year, but not before the beginning of that year. For
calendar year taxpayers, this deadline for contributions is generally April 15
following the year for which the contributions are made. |
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| Q |
Can my HSA receive rollover contributions? |
| A |
Yes. Your Trustee or Custodial will also accept rollovers or transfers of
assets from a Medical Savings Account (MSA) or from another HSA, as permitted
by the Internal Revenue Code. |
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| Q |
What happens to unused fund balances? |
| A |
You are the owner of this account. Any monies not used during the year remain
in the account until you choose to use it. This feature allows you to plan for
some future medical expenses as well as for medical needs at retirement. |
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| Q |
When can I begin to withdraw money from the HSA? |
| A |
The HSA functions like a regular bank checking account. You may begin
withdrawing funds from the account at any time as long as there are funds in
the account. |
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| Q |
What kind of expenses can be paid for by the HSA? |
| A |
Funds withdrawn for qualified medical expenses are tax-free. However, funds
withdrawn for expenses other than qualified medical expenses are subject to
taxation. Further, taxable withdrawals are subject to an additional 10 percent
penalty if you are below age 65.
Funds used to pay for the following are tax-free and penalty-free:
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Qualified medical expenses as defined under Section 213 of the IRS Code. This
is the same code section that governs qualified medical expenses under Medical
Flexible Spending Accounts (FSAs).
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Insurance premiums for coverage continued under COBRA insurance.
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Qualified long-term care insurance premiums.
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Health insurance premiums for individuals receiving unemployment compensation.
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Medicare and retiree health insurance premiums, but not Medicare Supplement
premiums.
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| Q |
How do the tax savings work? |
| A |
You will receive a monthly statement listing all deposits and withdrawals, as
well as an end-of-year tax statement. The contributions made to your HSA are
fully deductible*; any earnings continue to grow tax deferred. Distributions
for qualified expenses are tax-free. If you contributed more than the maximum,
there will be an excess contribution penalty. Taxes and additional penalties
apply to any withdrawals made for non-qualified medical expenses prior to age
65**
* If you fund the HSA through payroll deduction, your contributions will be
made using pre-tax dollars and you will not be allowed an additional deduction
on your federal income tax. If your contribution is made through any other
means, you will be allowed an above-the-line deduction at the end of the year
on your federal income taxes.
** Please consult your tax advisor. |
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| Q |
What happens to my HSA in the event of my death? |
| A |
If your surviving spouse is the named beneficiary, the account becomes the HSA
of your surviving spouse. Your spouse would only be subject to taxation
relative to any withdrawals made for non-qualified medical expenses. If your
named beneficiary is other than your surviving spouse, the HSA ceases as a
viable account effective the date of your death. The funds must be distributed
and included in the gross income of the named beneficiary. |
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