Health Savings Account Resources

by | Sep 13, 2021

Cost Savings

  1. To determine how much cost savings the HSA may provide you and/or your family, you will need to consider several items.
  2. Your Total Contributions (Remember: Contributions as well as accrued interest to the HSA are tax free.)
  3. Your Total Estimated Expenses (Remember: Distributions on qualified medical expenses from the HSA are tax free.)
  4. The Premium Difference Between Your HSA Plan and Other Plan Options (Remember: Monthly premiums for the HDHP insurance are typically lower than those of a Traditional PPO.)

Your Estimated HSA Cost Savings Example

Traditional PPO + FSA HDHP + HSA
Gross Annual Pay $60,000 $60,000
Maximum Annual Health Care FSA Contribution $3,050 $7,750
Estimated Annual Family Premium -$13,000 -$11,000
Adjusted Gross Pay $43,950 $41,250
Estimated Tax Rate (15%) $6,622.50 $6,255
Estimated Annual Expenses $3,050 $3,050
Remaining FSA vs. HSA Balance + $0 $4,450
Remaining Take Home Pay with FSA vs. HSA $34,677.50 $37,045

YOUR TAKE HOME PAY COULD BE $2,367.50 MORE WITH THE HSA

All figures in this table are estimates and based on an annual salary and maximum contribution limits to the benefit account. Your salary, tax rate, health care expenses, and tax savings may be different.

Who Is Eligible?

In order to be eligible to enroll and contribute to a Health Savings Account (HSA), you must first ensure you meet the necessary requirements. If your answers to the below questions match ours then you are likely eligible to open and contribute to an HSA.

Question Answer
Are you currently enrolled or covered by a HSA-qualified high deductible health plan? YES
Is the annual deductible for your health insurance plan higher than $1,350 for individual coverage or higher than $2,700 for family coverage? YES
Is the annual maximum out-of-pocket for your health insurance plan less than $6,750 for individual coverage or less than $13,500 for family coverage? YES
Are you covered by any other health plan (such as a spouse or parent) that is not considered a HDHP? NO
Are you currently enrolled in Medicare (Part A or Part B) NO
Are you currently enrolled in either a Health Care Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) that reimburses you for medical expenses in addition to dental and vision expenses? NO

Contribution Limits

Self-Only Coverage 2023 2024 2025
Maximum Annual HSA Contribution $3,850 $4,150 $4,300
HSA Catch-up Contribution (Age 55 or Over) $1,000 $1,000 $1,000
Minimum Annual Deductible for HDHP $1,500 $1,600 $1,650
Maximum Out-of-Pocket Limit for HDHP $7,500 $8,050 $8,300
Family Coverage 2023 2024 2025
Maximum Annual HSA Contribution $7,750 $8,300 $8,550
HSA Catch-up Contribution  $1,000 $1,000 $1,000
Minimum Annual Deductible for HDHP $3,000 $3,200 $3,300
Maximum Annual Out-of-Pocket Limit for HDHP $15,000 $16,100 $16,600

 

Do I get taxed on distributions from my HSA?

by | Sep 13, 2021

Distributions from your HSA used exclusively to pay for qualified medical expenses for you, your spouse, or dependents are excluded from your gross income. Your HSA funds can be used for qualified expenses and will continue to be free from federal taxes and states taxes (for most states) even if you are not currently eligible to make contributions to your HSA. If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or for the year in which you die, the 20 percent penalty may not apply.

How are contributions made to my HSA?

by | Sep 13, 2021

Money may be deposited to your HSA through payroll deduction, if your employer allows, or you may make deposits directly to your account. Deposits may be made periodically or in a lump sum, but only up to the contribution limits set by the IRS.

  • 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, which you can make by writing a personal check, 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.

Note: You will use IRS Form 1040 for your HSA contributions, not the short form 1040A or 1040EZ. This deduction is taken “above the line”: you do not need to itemize contributions on Schedule A in order to claim the deduction for HSA contributions.

How does the HSA work?

by | Sep 13, 2021

  1. To be eligible to contribute to an HSA, you must be covered by a qualified high-deductible health plan (HDHP) and have no other first dollar coverage (insurance that provides payment for the full loss up to the insured amount with no deductibles).
  2. You may use your HSA to help pay for medical expenses covered under a high-deductible health plan, as well as for other common qualified medical expenses.
  3. Unused HSA funds rollover from year to year, and may be able to be invested in a choice of investment options, providing the opportunity for funds to grow.
    • HSAs work in conjunction with an HDHP. All the money you (or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible from federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax.
    • You can use your HSA to pay for expenses not covered under your HDHP until you have met your deductible. The insurance company then pays covered medical expenses above your deductible, except for any co-insurance. Any coinsurance costs you incur can be paid for using your HSA. In addition, you can use your HSA to pay for qualified medical expenses not covered by the HDHP, such as dental, vision and alternative medicines.
    • If the funds in your account are used for other, nonmedical expenses, your dollars are subject to ordinary tax, plus a 20% penalty if you are under age 65.
    • The 20% penalty does not apply if the distribution occurs after you reach age 65, become disabled or die; however ordinary income tax may still apply.
    • Choosing which expenses use your HSA dollars vs. which to pay out-of-pocket with after-tax dollars is entirely up to you.