Health Savings Account: What You Should Know
If you don’t know the ins and outs of a health savings account (HSA), it’s important to start learning. An HSA is a savings account used by individuals with high-deductible health plans. It can be used to pay for medical expenses. HSAs were first introduced under the Medicare Modernization Act of 2003 and is regulated under IRS Section 223.
Money is deposited into an health savings account pre-tax; the money grows tax-free; and is distributed tax-free as long as it is used on qualifying medical expenses.
However, the tax benefits of an HSA extend beyond the scope of just being tax-free and include:
- Tax-Free earnings on gains
- Flexible funding
- Funds available for non-medical purposes
- Unused funds accumulate
- No Use-it or-Lose-it Rule
- Provides savings for current and future health care needs
- Reduces payroll taxes
- Employee owned
- Completely portable
- Transferable upon death
But a health savings account also comes with many legislative requirements that must be met by anyone contributing to an HSA account.
These legislative requirements include, but are not limited to:
- Cannot be claimed by someone else as a dependent
- First dollar benefit restrictions
- QHDHP minimum deductibles*
- QHDHP maximum out-of-pocket limits*
- Annual contribution limits*
- Catch up contribution allowance
- SPD is required to allow pre-tax deductions by the employer
*Determined at the Federal level based on Consumer Price Index by the IRS annually
There is so much to know about a HSA such as how an HSA interacts with other medical plans such as Medicare. Listed above are just a few key things to know about HSAs.
Want to learn more? Register for our 2020 Spring Seminar at Somerset Inn in Troy, MI on Thursday, April 9, 2020, where our Corporate Compliance Director, Jennifer Young will take a deep dive into health savings accounts and Medicare.
Learn about the JS Clark Agency 2020 Spring Seminar and register.