As health care costs in the U.S. continue to rise, so does interest in Health Savings Accounts (HSAs) as a way to manage those costs.
However, HSAs are still a new and unfamiliar option to many employees and even some employers who offer benefit plans. HSAs are also complex, leading to many frequently asked questions (FAQ).
Saginaw Bay Underwriters created this helpful, three-part series of posts entitled “HSA FAQ” to address many of these questions and provide some clear answers, so that you can be better informed when making decisions about benefits for you and your family.
Here in Part 1, we’ll take a look at the first four of these questions. Our answers will serve as a general overview of HSAs.
1. What is an HSA?
An HSA is a personal savings account designed to pay for qualified health care expenses.
HSA contributions are 100% tax-deductible, up to an annual limit set by the IRS. Withdrawals from an HSA are tax-free, as long as they are used for qualified health care expenses. HSAs may also be interest bearing, but you pay no taxes on that interest.
You own your HSA as an individual – in other words, it is not in any way owned by the employer who provides your benefits. Therefore, you can transfer your HSA between jobs and financial institutions.
2. How do HSAs work?
You deposit funds into your HSA and later you can withdraw those funds to pay for qualified health care expenses. This includes costs that your health insurance may not cover, such as dental and vision expenses.
If you paid for a qualified health care expense out-of-pocket, you’re also able to reimburse yourself from your HSA at any later time, as long as you were not reimbursed for it in any other way.
Individuals can open HSAs, but they are typically offered as part of an employer’s benefit plan.
3. What are the benefits of an HSA?
Three primary things make HSAs a great option for many people:
4. Am I eligible for an HSA?
You’re eligible for an HSA if you meet all of the following criteria:
An HDHP is a health insurance plan that typically has a higher deductible (hence the name), but lower premiums than more traditional plans. HDHPs have a minimum deductible and out-of-pocket maximum that are set by the IRS annually. Your HDHP must also be designed so that you pay for health care expenses until the deductible is met.
Making the Complex Simple
HSAs are a great option for many, but people still have many frequently asked questions about them.
In our next two “HSA FAQ” posts, we’ll provide answers to even more of these questions. Please subscribe to our blog to be notified of future posts.
Call Saginaw Bay Underwriters at (989) 752-8600 if you’d like to speak with an employee benefits risk advisor more about HSAs.
Saginaw Bay Underwriters has made every attempt to ensure this information has been obtained from reliable sources. Current as of: January 2021