Health Benefits FAQs

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a special tax-advantaged savings account similar to a traditional Individual Retirement Account (IRA) but designated for medical expenses. An HSA allows you to pay for current eligible health care expenses and save for future qualified medical and retiree health care expenses on a tax-favored basis.

HSAs provide triple-tax advantages: contributions, earnings, and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

Unused HSA dollars roll over from year to year, making HSAs a convenient and easy way to save and invest for future medical expenses. You own your HSA at all times and can take it with you when you change medical plans, change jobs or retire.

Who is eligible to contribute to an HSA?

After you open your HSA, making contributions helps you build a balance to assist with current and future health care expenses. Anyone, including your employer or family members, may contribute to your HSA. You can make contributions by payroll deduction (if available) or by after-tax contributions.

Payroll deductions: If your employer offers the option, you may specify a regular contribution to be deducted from your paycheck. This contribution will be made before Social Security, federal, and most state income taxes are deducted.

After-tax contributions: You may choose to make all or part of your annual account contributions to your HSA by making “after-tax” contributions to your account. These contributions may be deducted on your income tax return, using IRS Form 1040 and Form 8889.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

If you meet all the criteria listed below, you are eligible to open and contribute to an HSA:

  • Are covered by a qualified high-deductible health plan (HDHP) on the first day of a given month;
  • Are not covered by another health care plan, such as a health plan sponsored by your spouse’s employer;
  • Are not enrolled in Medicare or TriCare;
  • Have not received VA benefits at any time during the preceding three months. However, if you are a veteran with a service-connected disability, this exclusion does not apply;
  • Are not claimed as a dependent on another individual's tax return;
Who is eligible to open an HSA?

If you meet all the criteria listed below, you are eligible to open and contribute to an HSA:

 

  • Are covered by a qualified high-deductible health plan (HDHP) on the first day of a given month;
  • Are not covered by another health care plan, such as a health plan sponsored by your spouse’s employer;
  • Are not enrolled in Medicare or TriCare;
  • Have not received VA benefits at any time during the preceding three months. However, if you are a veteran with a service-connected disability, this exclusion does not apply;
  • Are not claimed as a dependent on another individual's tax return;
How much can I contribute to an HSA?

For 2019, the combined maximum contributions to your HSA, including any made by your employer to your account, are $3,500 if you have individual coverage and $7,000 if you have family coverage. If you turn age 55 or older in 2018, you may add up to $1,000 more as a “catch up” contribution.

These amounts are valid as long as you enroll in qualified HDHP coverage before the first day of December, meaning you have held at least one full month of HDHP coverage, and so long as you continue to maintain qualified HDHP coverage for the next 12 months. Otherwise, you may be eligible to contribute a prorated amount to your HSA account.

The IRS determines these maximum contribution limits annually.

How do my HSA dollars work in conjunction with my health plan?

You can request that your provider submit your claim to your health plan. Once the medical claim has been processed, if applicable, out-of-pocket expenses will be billed. At this time you may choose to use your HSA dollars to pay for any out-of-pocket expenses, or choose to write a personal check and reimburse yourself at a later time. You should always ask that your medical claim be submitted to the health plan before you seek reimbursement from your HSA. This will ensure that provider discounts are applied. Also, remember to keep all medical receipts and EOB's as proof your HSA dollars were used for qualified medical expenses.

What are the advantages to having an HSA?
  • Tax-advantages:

    • Contributions-  Payroll deposits are made with pretax dollars, meaning they are not subject to federal (or state, for most states) income taxes. Deposits made with after-tax dollars can be deducted from your gross income, meaning you pay less income tax at the end of year. Employers may make contributions to your account; these contributions are excluded from your gross income.
    • Earnings- The interest you earn on your HSA grows tax free.
    • Distributions- Withdrawals from your HSA used to pay for qualified medical expenses are not subject to pay federal (or state, for most states) income taxes.
  • Flexible: There are no "use it or lose it" rules. Even if you are no longer eligible to make contributions, funds in your account may still be used to pay for qualified medical expenses tax-free. And after age 65, or in cases of disability, the funds in the account can be used for nonqualified expenses.
  • Portable: The money is yours; accounts move with you when you change medical plans, change employers or retire.
  • Invest*: Unused funds can grow through interest and/or be invested. Any earnings and can be "banked" for future medical expenses.

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

 

Can I rollover or transfer funds from my IRA to my HSA?

Yes. The government does allow a one-time transfer of funds from an IRA to an HSA. The transferred amount, when combined with other HSA contributions for the year, may not exceed your annual maximum contribution.

Also, after making such a transfer, you must continue to participate in a qualifying high-deductible health plan for 13 consecutive months, beginning in the month of the IRA-to-HSA transfer. If you do not, you will be subject to income taxes and a 20 percent penalty tax on the transferred amount, except in the case of death or disability. Such a transfer may be an option if you incur significant medical expenses and find yourself unable to afford to make the maximum HSA contribution.

What happens to the money in my HSA when I die?

Your HSA is an inheritable account. What happens to your HSA when you die depends who you named as your beneficiary.

Spouse designated beneficiary- If your spouse is your designated beneficiary, the account will be treated as your spouse's HSA after your death. The account will continue to be tax-free for qualified medical distributions. If your spouse is covered by a qualified HDHP, contributions to the account may also be made tax-free, up to maximum annual contribution limits.

Other than Spouse designated beneficiary- If you designate someone other than your spouse as the beneficiary of your HSA:

  1. The account stops being an HSA on the date of your death;
  2. The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die (without penalties); and
  3. The amount taxable to a beneficiary (other than your estate) is reduced by any qualified medical expenses you incurred prior to your death that are paid from the HSA by the beneficiary within one year after the date of death.

Your estate is the beneficiary- If your estate is the beneficiary of your HSA, the value of your account is included on your final income tax return.

NO designated beneficiary on file- If you do not have a beneficiary on file, the funds are payable to the accountholders estate.

What are the penalties for taking a non-qualified withdrawal from my HSA?

Nonqualified distributions will be subject to ordinary income tax, and in some cases, a 20 percent penalty.  The only time tax is ever owed on principal or interest from your HSA is if the money is distributed for non-qualified expenses prior to your reaching age 65, becoming disabled or dying. Even if you use the funds for non-qualified expenses after you are 65 or disabled, you will only be subject to ordinary income tax on the money you withdraw without the 20 percent penalty.

What health care expenses does my HSA cover?

You can use your HSA funds for a variety of IRS-qualified medical expenses, including many that aren’t covered by your HDHP. This includes deductibles, co-insurance, prescriptions, dental and vision care, and many more. Refer to IRS Publication 502 for a more complete list of qualified medical expenses

Who is eligible for an HSA?

Year

Annual Deductible

Out-of-Pocket Expenses

2019 At least $1,350 for individual coverage and $2,700 for family coverage Not exceeding $6,750 for individual coverage and $13,500 for family coverage
2020 At least $1,400 for individual coverage and $2,800 for family coverage Not exceeding $6,900 for individual coverage and $13,800 for family coverage
  • Are covered by a qualified high-deductible health plan (HDHP) on the first day of a given month.
  • Are not covered by another non-HDHP, such as a health plan sponsored by your spouse’s employer.
  • Are not enrolled in Medicare or TriCare.
  • Have not received VA benefits at any time during the preceding 3 months. If you are a veteran with a service-connected disability, this exclusion does not apply.
  • Are not claimed as a dependent on another individual’s tax return.

*Other exceptions & restrictions may apply. Please consult a tax or legal professional to discuss your personal circumstances.

What are the HSA contribution limits?
Year Family Coverage Individual Coverage Catch-Up for Those Age 55+
2019 $7,000 $3,500 $1,000
2020 $7,100 $3,550 $1,000

The Internal Revenue Service (“IRS”) has established the following annual contribution limits. At age 55, an additional $1,000 can be contributed annually.

What is a Health Care Flexible Spending Account?

A Health Care Flexible Spending Account (FSA) is a pre-tax benefit account used to pay for eligible medical, dental, and vision care expenses that are not covered by your health insurance plan. The money you contribute to a Health Care FSA is not subject to payroll taxes, allowing you to pay fewer taxes and take home more of your paycheck.

How does a Health Care FSA work?

You decide how much to contribute to your Health Care FSA each year, and funds are withdrawn automatically from each paycheck and deposited into your account before taxes are deducted. The total amount you elect to contribute to your health care FSA each year is available on the first day of your plan year.

What happens to my Health Care FSA funds at the end of the year?

It depends on the type of Health Care FSA program your employer has in place. There are three scenarios for funds that are left unspent in your account at the end of the plan year:

  • If you have a Health Care FSA with Carryover, you can carry over up to $500 into the next plan year.
  • If you have a Health Care FSA with Grace Period, you have up to 2½ months after the end of the plan year to use unspent funds before you lose them.
  • If you have a standard Health Care FSA, you lose any unspent funds at the end of the plan year.

Please contact your employer to find out why type of Health Care FSA program applies to you.

What is a grace period? How do I know if I have a grace period associated with my Health Care FSA?

A grace period is a timeframe in the new plan year during which you can incur new expenses and file claims. This timeframe, established by your employer, is up to 2½ months after the end of the plan year. If your plan year ends on December 31, and you have a grace period, you have until March 15 to incur new expenses and use money left in your Health Care FSA to pay them. To find out if you have a grace period associated with your Health Care FSA, please contact your employer.

What is a run-out period? How do I know if I have a run-out period associated with my Health Care FSA?

A run-out period is a timeframe in the new plan year during which you can still file claims for expenses incurred in the previous plan year. This timeframe is established by your employer—not the IRS. While timeframes vary from employer to employer, a 90-day run-out period is common. If your plan year ends on December 31, and you have a 90-day run-out period, you have until March 31 of the following plan year to use money left in your Health Care FSA. To find out if you have a run-out period associated with your Health Care FSA, please contact your employer.

What is carryover? How do I know if I have carryover associated with my Health Care FSA?

The carryover option lets you carry over up to $500 remaining in your account from one plan year to the next. You don’t have to worry about losing money left unspent in your account at the end of the plan year, or the end of a run-out or grace period. A Healthcare FSA with Carryover minimizes your “use it or lose it” risk. To find out if you have a Health Care FSA with Carryover, please contact your employer.

Can I change my FSA election during the plan year?

The election to your Healthcare FSA can be changed if you meet one of these special circumstances determined by the IRS:

  • A change in marital status (such as marriage, divorce, or death of your spouse)
  • A change in the number of your dependents (such as the birth or adoption of a child, or death of a dependent)
  • A change in employment status of you, your spouse, or your dependent
  • An event that causes your dependent to satisfy or cease to satisfy an eligibility requirement for a specific benefit
  • A change in residence of you, your spouse, or your dependent
  • A change in coverage cost
What happens to my Health Care FSA funds when I leave my employer?

Unfortunately, there is no universal answer to this question, because it depends on your employer's Health Care FSA program. Often employers offer an extended grace period when claims can still be submitted to spend down the remaining funds in your Health Care FSA. You may also be able to extend the time to use your Health Care FSA funds if you elect COBRA after you leave your job. Keep in mind that you need to incur all eligible expenses before your last day of work. Please contact your employer for the options available to you.

How do I get reimbursed for expenses I pay for directly?

There are three ways to submit a receipt for reimbursement:

  • Through the Health Benefit Solutions mobile app. Use your mobile device to snap a photo of your receipts and submit them for reimbursement.
  • Though your Health Benefit Solutions online account.
  • By completing a Health Benefit Solutions FSA Healthcare Expense Claim Form.
How do I access my Health Care FSA funds?

There are several ways you can use the funds in your Health Care FSA:

  • You can use the Health Benefit Solutions VISA Card associated with your Health Care FSA to pay for eligible healthcare products and services.
  • You can be reimbursed for the eligible expenses you pay out of pocket.
How is a Health Care FSA funded?

Your Health Care FSA is funded through your employer. During your company's Open Enrollment period, you tell your employer how much you would like to contribute to your account for the coming year. The maximum amount you can contribute is determined by the IRS. For 2019, it is $2,700. Your employer then deducts your contribution amount (in equal portions) from your paychecks throughout the plan year. However, the entire annual election amount is available to you on the first day of your plan year. Any funds carried over from the previous plan year (up to $500) do not count toward your maximum annual contribution limit, so you could have a balance of up to $3,200.

What expenses are not covered by a Health Care FSA?
  • Cosmetic surgery and procedures
  • Dental whitening
  • Expenses for healthcare services rendered outside the coverage period
  • Expenses reimbursed by an insurance provider or another health plan
  • Family or marriage counseling
  • Herbs, vitamins, supplements, or other over-the-counter items used for general health
  • Insurance premiums
  • Personal use items (e.g., toothpaste, shaving cream, cosmetics)
What expenses are covered by a Health Care FSA?

Your Health Care FSA covers hundreds of eligible healthcare expenses: co-payments for doctor visits, prescription drugs, new eyeglasses or contact lenses, etc. Keep in mind that IRS rules determine which expenses are eligible, and some expenses require a doctor's note or prescription to be eligible for reimbursement under your Health Care FSA.

What are the FSA contribution limits for 2019?

The Internal Revenue Service (IRS) has established a 2019 maximum contribution of $2,700.

What expenses can my FSA be used for?

Below is a quick reference list of eligible expenses that can be reimbursed from a Flexible Spending Account. For more detailed information, please refer to IRS Publication 502 titled “Medical and Dental Expenses,” online at  irs.gov/pub/irs-pdf/p502.pdf. For tax advice, please consult a tax or legal professional.

  • Acne Treatments**
  • Allergy Medicine**
  • Antacids**
  • Bandages
  • Chiropractic Care
  • Cold Medicine**
  • Contact Lenses & Cleaners
  • Copays, Co-Insurance & Deductibles
  • Dental Care
  • Diabetic Supplies
  • Eyeglasses
  • Hearing aids
  • Laser Eye Surgery
  • Orthodontia
  • Pain Relievers**
  • Pregnancy Tests
  • Prescription Drugs
  • Smoking Cessation Programs**

**over-the-counter (OTC) drugs and medicines (except insulin) are only eligible for reimbursement when prescribed by a physician.

What do I need to submit for supporting documentation for my reimbursement?

An itemized receipt or bill of service with the provider name, the patient’s name, a description of the service, the date(s) of service, and dollar amount.

How do I get paid back for expenses I pay for directly?

There are two ways to submit a receipt for reimbursement:

  • Through the Health Benefit Solutions mobile app. Use your mobile device to snap a photo of your receipts and submit them for reimbursement.
  • Through your Health Benefit Solutions online account.
What happens to my LPFSA funds when I leave my employer?

Unfortunately, there is no universal answer to this question, because it depends on your employer's Healthcare LPFSA program. Often employers offer an extended grace period when claims can still be submitted to spend down the remaining funds in your Healthcare LPFSA. You may also be able to extend the time to use your Healthcare LPFSA funds if you elect COBRA after you leave your job. Keep in mind that you need to incur all eligible expenses before your last day of work. Please contact your employer for the options available to you.

What happens to my LPFSA funds at the end of the year?

It depends on the type of LPFSA program your employer has in place. There are three scenarios for funds that are left unspent in your account at the end of the plan year:

  • If you have a LPFSA with Carryover, you can carry over up to $500 into the next plan year.
  • If you have a LPFSA with Grace Period, you have up to 2½ months after the end of the plan year to use unspent funds before you lose them.
  • If you have a standard LPFSA, you lose any unspent funds at the end of the plan year.
How much money is available during the plan year?

Your LPFSA is funded through your employer. During your employer's Open Enrollment period, you notify your employer how much you would like to contribute to your account for the coming year. The maximum amount you can contribute is determined by the IRS. For 2019, it is $2,700. Your employer then deducts your contribution amount (in equal portions) from your paychecks throughout the plan year. And the good news - you don't have to wait for funds to build up in your LPFSA! Your entire annual election amount is available to you on the first day of your plan year. If your plan utilizes the carryover feature funds carried over from the previous plan year (up to $500) do not count toward your maximum annual contribution limit, so you could have a balance of up to $3,200.

What time frame should expenses incur to be considered eligible?

LPFSAs, just like FSAs, have a start date and an end date, and the time in between is called the plan year. Expenses must be incurred during the LPFSA plan year. As noted in IRS guidelines, expenses are considered incurred on the date when the vision or dental care service was provided, not when you are formally billed or when you pay for the service.

When can an expense be reimbursed by more than one source?

Never. Expenses reimbursed under you LPFSA cannot be reimbursed under any other plan or program, including an HSA. Only eligible out of pocket expenses may be reimbursed. In addition, expenses reimbursed under an LPFSA may not be deducted when you file your tax return.

Who is eligible to have both a HSA and LPFSA?

A LPFSA covers qualified expenses for dental and/or vision care provided to your, your spouse, or qualified dependents. Typical eligible expenses include: Dental Vision Cleanings Contact lenses Fillings Eyeglasses Crowns Eye exams Braces Vision correction procedures

What is a Limited Purpose Flexible Spending Account?

A Limited Purpose Flexible Spending Account (LPFSA) is a type of benefit account that lets you use pre-tax dollars to pay for eligible expenses for you, your spouse, and your eligible dependents. It’s much like a typical Healthcare FSA; however, you may only use LPFSA funds to pay for qualifying dental and vision expenses.

What are the 2019 LPFSA contribution limits?

The Internal Revenue Service (IRS) has established a 2018 maximum contribution of $2,700.

What expenses can I use my LPFSA to cover?

Below is a quick reference list of expenses that can be reimbursed from a Limited Purpose Flexible Spending Account. For more detailed information, please refer to IRS Publication 502 titled “Medical and Dental Expenses,” online at  irs.gov/pub/irs-pdf/p502.pdf. For tax advice, please consult a tax or legal professional.

  • Bridges
  • Crowns
  • Dentures
  • Dental Surgery
  • Orthodontia
  • Root Canals
  • Contact Lenses
  • Eye Exams
  • Eyeglasses
  • Eye Surgery
  • Prescription Sunglasses
  • Vision Correction Procedures
When can I make changes to my DCA election amount?

The election amount is decided at the beginning of each year. However, if you experience a qualifying event, such as the birth of a new child, or if your child care provider significantly increase their rates, you may be eligible to adjust your contribution.
 

What happens if I do not spend all my DCA funds by the end of the plan year?

It is essential to estimate conservatively during elections. Any unused funds at the end of the plan year are forfeited, also known as the “use it or lose it” rule.

Are there any restrictions about who can care for my dependents?

Dependent care FSA funds cannot be used for care provided by a spouse, a person you list as a dependent for income tax purposes, or one of your children under the age of 19.

When will I have access to my dependent care FSA funds?

You will have access to the funds once they have been deducted from your paycheck.

How much can I contribute to my DCA?

The IRS limits annual contributions to $5,000 for those filing taxes as single or married filing jointly, and $2,500 for married filing separately.

What type of care is not eligible?

Expenses that are not eligible include care for a child age 13 and over, overnight camp, babysitting that is not work related, school fees for kindergarten and higher grades, and long-term care services.

What type of care is eligible?

There are a wide variety of eligible services, such as preschool, summer day camp, before- and after-school programs, and child or elder daycare. Please keep in mind that IRS rules determine which expenses are eligible.

DCA funds cover care costs for your eligible dependents while you are at work:

  • Before school or after school care (other than tuition)
  • Custodial care for dependent adults
  • Licensed day care centers
  • Nursery schools or pre-schools
  • Placement fees for a provider, such as an au pair
  • Day camp, nursery school, or a private sitter
  • Late pick-up fees
  • Summer or holiday day camps
What is a work-related expense?
Who qualifies as a dependent for a DCA?

Under this type of account, a dependent is defined as a child under the age of 13, as well as adults or other relatives that are incapable of caring them themselves (if you provide more than 50% of their support). Please keep in mind that they must live with you and be claimed as a dependent on your tax return.

What is a Dependent Care Flexible Spending Account?

A Dependent Care Flexible Spending Account (FSA) is a pre-tax benefit account used to pay for dependent care services while you are at work. The money you contribute to a Dependent Care FSA is not subject to payroll taxes, allowing you to pay fewer taxes and take home more of your paycheck.

What is a qualified high deductible health plan? (HDHP)?

A high deductible health plan (HDHP) is a health insurance policy that offers higher deductibles and lower premiums than a traditional insurance plan. Like a traditional plan, you are responsible for paying for your qualified medical expenses up to the deductible. After the annual deductible is met, you are responsible only for a portion of your medical expenses through coinsurance or co-payments. Qualified HDHPs can be combined with a health savings account (HSA) to offer a tax-advantaged way to help pay for the medical expenses you may incur.

IRS Guidelines for a qualified HDHP for 2019:

  • The minimum HDHP deductible by law is $1,350 for individuals and $2,700 for families.
  • The maximum out-of-pocket expenses by law (including deductible and co-payments, but not including premiums) cannot exceed $6,750 for individuals and $13,500 for families.
  • The deductible and maximum out-of-pocket expenses are indexed annually for inflation by the IRS and the US Department of Treasury.

IRS Guidelines for a qualified HDHP for 2020:

  • The maximum HDHP deductible by law is $1,400 for individuals and $2,800 for families.
  • The maximum out-of-pocket expense by law (including deductible and co-payments, but not including premiums) cannot exceed $6,900 for individuals and $13,800 for families.
  • The deductible and maximum out-of-pocket expenses are indexed annually for inflation by the IRS and the US Department of Treasury.
Can my spouse and I have a joint HSA?

No, only one person can be named the account owner. If both you and your spouse have qualified HDHP coverage, you must each have your own account.

 

If both you and your spouse have family coverage under qualified high-deductible health plans, the maximum total tax-deductible HSA contribution both of you can make (including employer contributions) is the IRS limit for family coverage. This contribution can be divided between you and your spouse however you wish. If you and/or your spouse are eligible to make catch-up contributions, you may each contribute your eligible catch-up contribution to your individual HSA.

What is the routing rumber for my Union Bank Health Benefit Solutions HSA?

The UBT Health Benefit Solutions HSA Routing Number is 104914160.

Can I pay out-of-pocket eligible expenses with after-tax dollars instead of using my HSA funds?

Yes. You always have the option to choose when and when not to use your HSA dollars. You may pay for qualified medical expenses with after-tax dollars, allowing your HSA balance to grow tax-free.

What health care expenses does my HSA cover?

You can use your HSA funds for a variety of IRS-qualified medical expenses, including many that aren’t covered by your HDHP. This includes deductibles, co-insurance, prescriptions, dental and vision care, and many more. Refer to IRS Publications 969 and 502 for a more complete list of qualified medical expenses.

What if I’m no longer covered by an HDHP?

Your HSA is portable. Funds are never lost due to changes in your employment or health insurance. If at some point you are no longer covered by an HDHP, you will still have access to use your funds to pay for qualified medical expenses. However, you are no longer eligible to make contributions.

How do I access my HSA funds to pay for qualified medical expenses?

You can pay for IRS-qualified medical expenses with funds from your HSA by using your debit card. You can also pay for part of all of your IRS-qualified medical expenses out-of-pocket and reimburse yourself later with HSA funds.

Do I need to submit receipts for my HSA expenses?

No. You do not need to submit any receipts to us. However, be sure to save receipts on any qualified medical expenses paid out of your HSA for tax purposes.

Can an HSA be used to pay previous year expenses?

Yes, as long as the eligible medical expenses were incurred after your HSA was established and your HDHP coverage was in effect.

When will the 20% penalty be assessed for a distribution for non-qualified expenses?

The 20% penalty will be assessed for the year in which you take the distribution for non-qualified expenses. The penalty will be due and payable when you file your annual tax return.

What tax forms will I receive from Union Bank & Trust Health Benefit Solutions?

You may receive both a 1099-SA and 5498-SA tax form. The 1099-SA notifies the IRS of any distributions you made from your HSA during the tax year. Form 5498-SA notifies the IRS of any contributions made to your HSA during the tax year.

What are the penalties for taking a non-qualified withdrawal from my HSA?

Nonqualified distributions will be subject to ordinary income tax, and in some cases, a 20% penalty.  The only time tax is ever owed on principal or interest from your HSA is if the money is distributed for non-qualified expenses prior to your reaching age 65, becoming disabled or dying. Even if you use the funds for non-qualified expenses after you are 65 or disabled, you will only be subject to ordinary income tax on the money you withdraw without the 20% penalty.

How is my HSA taxed?

Contributions, investment earnings, and distributions for qualified medical expenses all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states). or penalty.

What is the tax treatment of contributions made by a family member or anyone else to my HSA?

If a family member or anyone else makes a contribution to your HSA, the tax advantages apply to you and not the person making the contribution. You may deduct the contribution amount when filing your annual income taxes, in the same way you would if you had deposited the post-tax contribution on your own. All contributions to the account are combined and subject to maximum annual contribution limits

Can I roll over or transfer funds from an existing HSA or Medical Savings Account (Archer MSA) into an HSA?

Yes. Pre-existing HSA funds or MSA monies may be rolled into an HSA and will continue their tax-free status.

What is a high-deductible health plan (HDHP?)

An HDHP is a health insurance plan that offers higher deductibles and lower premiums than a traditional health insurance plan. With an HDHP, the annual deductible must be met before plan benefits are paid for services. In order for an HDHP to be paired with a Health Savings Account, it must meet the following requirements.

IRS Guidelines for a qualified HDHP:

Year Annual Deductible Out-of-Pocket Expenses
2019 At least $1,350 for individual coverage and $2,700 for family coverage Not exceeding $6,750 for individual coverage and $13,500 for family coverage
2020 At least $1,400 for individual coverage and $2,800 for family coverage Not exceeding $6,900 for individual coverage and $13,800 for family coverage
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.

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.

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.