Health Savings Accounts

 

For answers to some of the most frequently asked questions about Health Savings Accounts, please select a question.

 

What is a Health Savings Account?
A Health Savings Account (HSA) is a trust or custodial account established by an eligible individual to pay qualified medical expenses exclusively. Annual HSA contributions within certain limitations are fully deductible and distributions for qualified medical expenses are not taxable.

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Who can establish and contribute to an HSA?
An individual is eligible for a regular HSA contribution if he/she, with respect to the first day of such month, is:

  • Covered under a high-deductible health plan (HDHP), 
  • Not covered by another health plan that is not an HDHP (certain exceptions apply),
  • Not enrolled in Medicare Part A or Part B, and
  • Not eligible to be claimed as a dependent on another individual's federal income tax return.

An individual who meets these requirements can contribute to an HSA or have contributions made by his/her employer, or by any other person on his/her behalf, with his/her annual HSA contribution limit.

 

An HSA owner is responsible for determining his/her eligibility for an HSA contribution and for calculating the allowable amount. An HSA custodian/trustee is not responsible for these determinations, but is responsible for tracking an HSA owner's age.

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What is a High-Deductible Health Plan (HDHP)?
A HDHP is a health plan that meets certain deductible and out-of-pocket expense limits. Coverage may be only for an individual or it may include his/her family. A plan does not fail to qualify as a HDHP merely because it does not have a deductible (or has a small deductible) for preventative care. However, except for preventative care, a plan may not provide benefits for any year until the participant meets the annual deductible.

 

Tax Year

HDHP Coverage

Minimum Deductible

Out-of-Pocket Expense Limit

2012

Self-Only

$1,200

$6,050

2012

Family

$2,400

$12,100

2013

Self-Only

$1,250

$6,250

2013

Family

$2,500

$12,500

 

Out-of-pocket expenses include deductibles, co-payments, and other amounts, but not premiums. All amounts are subject to cost-of-living adjustments (COLAs).

 

In case of family coverage, a plan is a HDHP only if, under the terms of the plan and without regard to which family member or members incur expenses, no amounts are payable from the HDHP until the family has incurred annual covered medical expenses in excess of the minimum annual deductible.

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How much can an eligible individual contribute to an HSA each year?
An individual's maximum annual contribution to all of his/her HSAs is the sum of the limits determined separately for each month, based on his/her eligibility status as of the first day of the month.

 

Tax Year

HDHP Coverage

Standard Limit

2012

Self-Only

$3,100

2012

Family

$6,250

2013

Self-Only

$3,250

2013

Family

$6,450

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What is an HSA "catch-up" contribution?
An HSA eligible individual and his/her spouse (if eligible) between ages 55 and 65 (or older if not enrolled in Medicare) have a larger annual HSA contribution limit due to a special catch-up contribution.

 

Like a regular HSA contribution, an individual computes his/her contribution on a monthly basis.

 

Tax Year

HDHP Coverage

Catch-Up Contribution

Total Contribution Limit

Age 55 or Older

2012

Self-Only

$1,000

$4,100

2012

Family

$1,000

$8,250

2013

Self-Only

$1,000

$4,250

2013

Family

$1,000

$8,450

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What reporting requirements does a HSA owner have?
A HSA owner files IRS Form 8889, Health Savings Accounts (HSAs), each year he/she makes an HSA contribution and/or takes an HSA distribution. Form 8889 provides a worksheet for determining a HSA owner's allowable annual contribution and deduction. It also reports the taxable portion of annual HSA distributions is a HSA owner does not use all of his/her distributions for qualified medical expenses.

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