FAQ: Health Savings Accounts (HSA)

What is a Health Savings Account (HSA)?

A Health Savings Account is a pre-tax benefit created for the purpose of saving and paying for qualified medical expenses in connection with a High Deductible Health Plan (HDHP).  Funds are taken out pre-tax via payroll deduction.

A HSA is an individual account and is “portable” should the participant change employers or leave the work force.  The funds will stay with the individual and not the former employer.

Who is eligible for an HSA?

An individual eligible to enroll in a HSA is:

  • covered under a HDHP as of the first day of the month
  • not also covered by any other plan that is not a HDHP
  • not entitled to Medicare benefits
  • may not be claimed as a dependent on another person’s tax return

What are the tax advantages of an HSA?

  • Contributions are tax free
  • Earnings are tax free
  • Withdrawals are tax free when made for eligible medical care expenses

What is a High Deductible Health Plan (HDHP)?

A HDHP is a health plan with an annual deductible for an individual (self only) or a family (coverage for more than one individual) that meets the minimum deductible amount published annually by the U.S. Treasury Department.

The insurance carrier should verify and guarantee that the HDHP meets IRS regulations to ensure your HSA is qualified.

How much can I contribute to my HSA?

You choose how much to set aside for healthcare expenses, up to the IRS maximum.

2017:

  • $3,400 for single HDHP coverage
  • $6,750 for family HDHP coverage

2018:

  • $3,450 for single HDHP coverage
  • $6,900 for family HDHP coverage

Age 55 and older can contribute an additional $1,000 annually (Catch-up Contribution)

Who can make contributions to an HSA?

The HSA account holder, employer, family member, or any other person is able to make an HSA contribution.  Employer contributions are subject to the IRS Comparability Rules if the HSA is not offered through the cafeteria plan.  The Comparability Rules do not apply when the HSA is offered through a cafeteria plan.  The HSA is subject to the cafeteria plan non-discrimination rules when offered this way.

What is the contribution deadline?

April 15th following the year for which the contributions were made is the HSA contribution deadline.

Who can participate in an HSA?

Individuals who are covered by a High Deductible Health Plan (HDHP) may participate in an HSA.

Individuals may be excluded from an HSA if they are:

  • Covered under a spouse’s or dependent employer’s health plan that is not a HDHP.
  • Claimed on someone else’s taxes
  • Covered by Medicare (Part A and/or Part B)
  • Covered under a health FSA or HRSA, unless the coverage under the HRA or FSA is limited to permitted benefits or specific benefits not provided by the HDHP

The eligibility requirements of the cafeteria plan apply if the HSA is offered through an employer’s cafeteria plan.  Sub S Corporation owners, their spouses and dependents employed by the company may not participate in an HSA.  Neither can sole-proprietors, 2% or more owners in partnership, limited liability partnerships or limited liability corporations.

When can I start using my HSA funds?

The HSA becomes effective immediately following the individual passing the U.S.A. Patriot Act. Once the individual passes the U.S.A. Patriot Act, the individual will receive an email notifying them of their HSA account activation and to login to the portal to view their account and use their funds.

The HSA effective date cannot be backdated to when your HDHP was established.

Can I participate in both an HSA and an FSA or HRA?

If the Flexible Spending Account (FSA) or Health Reimbursement Account (HRA) is unlimited, through your employer or your spouse’s employer, you are not eligible for an HSA.

If you have a Limited FSA or HRA is limited to dental, vision and/or preventive care expenses, you can have it with the HSA.

It is the participant’s responsibility to maintain IRS compliance within their employees benefit plan.

Do I need to submit documentation for HSA transactions or distributions?

No, HR Simplified does not require documentation for transactions or withdrawals/distributions from your HSA.  HR Simplified recommends that you keep documentation of any expenses for your personal records should you be audited.

How and when can money be taken out of an HSA?

A distribution or withdrawal from the HSA may be taken out at any time by the account holder.  Qualified medical expenses not covered by the high deductible health plan are distributed tax-free.  If you need help logging into your account, please contact HR Simplified.

How do I authorize my spouse and/or another individual to obtain information about my account?

According to HIPAA regulations, HR Simplified cannot disclose your personal health information (PHI) to any unauthorized representatives.

Please complete the Release of Information Form that is located in the participant portal under the Resource tab.  Once this form is completed to its entirety, the individual will have authorization to discuss account details.  Should the account holder want to have the authorized individuals denied access to their account in the future, the account holder would need to send a request in writing to HR Simplified with their signature.

Why is my account blocked?

The U.S.A. Patriot Act requires all financial institutions to obtain, verify, and record information that identifies each person who opens an HSA. Your name, street address, date of birth, and other information that will allow us to identify you will be asked upon enrollment. Once the individual completes the U.S.A. Patriot Act requirement and your identity has been verified, access to your HSA account will be unblocked and made available to you. If your identity is not verified (i.e. if you moved recently and your new address is not on file with the appropriate government agency), you may be asked to provide proof of your identity by providing a cop of your utility bill to verify your address or a copy of your Social Security card if the number does not match the verifying source’s records.

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