What Is an HSA?

A smarter way to save for healthcare

A health savings account, or HSA, is a personal savings account that can be used to pay for medical, dental, vision, and other qualified expenses now or later in life.

  • You must be enrolled in a qualified high-deductible health plan
  • Your HSA balance rolls over from year to year, earning interest along the way
  • You can even opt to invest the funds in your account*
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Triple the tax benefits

Money goes in tax-free

Most employers offer a payroll deduction through a Section 125 Cafeteria Plan, and your contribution can be deposited into your HSA before taxes are applied to your paycheck, making your savings immediate. You can also contribute to your HSA post-tax and claim the deduction when filing your annual taxes.

Money grows tax-free

The interest you earn on the money in your health savings account is accumulated on a tax-free basis. And, unlike most savings accounts, the interest earned on HSA funds is not considered taxable income when the money is used to pay for eligible medical expenses.

Money comes out tax-free

Eligible health care purchases can be made tax-free with your HSA. You can pay for these expenses directly from your HSA, whether it's through your benefits debit card, ACH, online bill pay, or by reimbursing yourself with HSA funds for out-of-pocket purchases.

Contribution Limits

Health savings accounts

Year Family
Coverage
Individual
Coverage
Catch-Up for
Those Age 55+
2020 $7,100 $3,550 $1,000
2021 $7,200 $3,600 $1,000
2022 $7,300 $3,650 $1,000

 

Frequently Asked Questions

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Are over-the-counter medications eligible for reimbursement from my HSA?

Yes, over-the-counter (OTC) medications are an eligible expense. An OTC medication is a product with an active drug ingredient. A few of the most common items are pain relief medication, cold and flu products, allergy products, and heartburn medication. You can find a comprehensive list on the HSA Store website.

Is tax reporting required for my Omnify HSA?

Yes, IRS Form 8889 is used to report HSA contributions and distributions. You must complete this form each year with your tax return. Please consult a tax professional regarding tax rules.

Are an employer’s contributions to an HSA treated as a deductible health care expenses?

The tax treatment of employer HSA contributions depends on how the business is incorporated. For sole proprietors, partnerships, and S-corporations, contributions to a partner’s HSA will be treated as a distribution to the partner and included in the partner’s income and may be deductible by the partner but not by the business (see IRS Notice 2005-8 for treatment of HSA contributions in exchange for guaranteed payments of services rendered for partners and two percent shareholder employees of S-corporations). For larger corporations, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan.

May an employer fully fund the employee’s HSA at the beginning of the year?

Yes. An employer may fully fund the employee’s HSA at the beginning of the year, however HSAs belong to the individual and not the employer and the employer has no further control over the accounts after they have been funded. As a result, many employers elect to fund employee’s HSAs periodically throughout the year.

Does an employer have to make contributions to an employee’s HSA?

No. Employers are under no obligation to make any contributions to their employees’ HSAs. Many employers find that contributing to employees’ HSA accounts may help improve adoption of HDHPs and HSAs, especially if they are transitioning from a more traditional type of health coverage.

Do employees get a tax benefit from an HSA?

Employee contributions to an HSA can be made by payroll deductions or personal deposits. When an employee makes contributions through a payroll deduction and is ran through a Section 125 plan (also called a salary reduction or cafeteria plan) these dollar are pre-tax, including social security tax. If employees make personal deposits into their HSA it is on a post tax basis. The amount can be deducted from their taxable income but they will not recover the social security tax.

*Investment products: Not FDIC Insured — No Bank Guarantee — May Lose Value.