How Health Savings Accounts Work

Health Savings Accounts(HSA's) are designed for people seeking a better alternative to the high cost of health insurance – those looking for lower premiums, better value, and financial rewards for being responsible. Health Savings Accounts are "use it or keep it."

HSA Requirements

Health Saving Accounts consist of two parts—first a qualified high deductible health insurance policy with a low premium, and second, a tax deductible investment account owned by you. The high deductible policy must have a calendar year minimum of $1,200 for single policies, and $2,400 for family policies. There are a number of insurance agents and brokers that provide qualified Health Savings Account policies.

Calendar Year Contribution Maximums

The contribution limits change each year based on the Consumer Price Index and a formula employed by the Treasury Department. The new limits for the upcoming year are generally published in June or July. There are three different limits each year.

1. The limit for single accounts - where only one person is covered by the health care policy
2. The limit for family accounts - where more than one person is covered by the health care policy
3. The additional contribution for account holders who attain age 55 by December 31

Health Savings Account Investments

The investment account is yours and is 100% vested. It does not have to go to your insurance company or their selected partner bank. Contributions made by you are fully tax deductible to you. Any Employer contribution is tax free to you. Investment growth is not taxed while it is in the account. Withdrawals for eligible medical, dental and vision expenses are tax-free. You may withdraw for any non-medical expense anytime you like, but it will be subject to income tax plus 10% penalty (waived after age 65 or disability). You can even use a Health Savings Account as a supplemental retirement account. Once you reach retirement age, you can even use the funds for expenses not paid by Medicare: deductibles, co-insurance and even Part B and Part D premiums. Remember, it is use it or keep it — balances in Health Savings Accounts rollover from one year to the next.

Vanguard® Funds

The Vanguard® no load mutual funds are available at Health Savings Administrators. They provide an excellent vehicle to invest for the future. Your money is always available if you need it, but if not, it can grow, tax-deferred, for your future use. Look over the fund chart on the investments page. There are many to choose from, including a money market account. You can check the status of your account online, 24/7. You will also receive a quarterly statement from us so you can track your investment.

Health Savings Accounts can be a good fit for many people. For example:

• Healthy individuals or families. If you and your family rarely use your health insurance you can pay a lower premium and put the difference in your HSA. It’s use it or keep it!
• Often, individuals with chronic conditions can benefit from an HSA. They find that their total out-of pocket expenses are less with the HDHP insurance.
• People who want to build a savings account for future use can establish a tax free method with an HSA.
• Individuals looking at retirement. This account can be used for eligible medical expenses even after enrolling in Medicare. In fact, Medicare deductibles and Part B and Part D premiums can be paid tax free from the account.
• Taxpayers looking to reduce their Federal and State income taxes. Note that some states don't allow a state exemption.
• Those wishing to supplement their retirement income. Account holders can withdraw for any non-medical expense just like a pension or IRA plan. (The HSA early withdrawal penalties are waived after age 65.)

Generally, if you seek value in everything you purchase, you may find that a high deductible insurance program combined with an HSA will allow you to reduce health insurance costs and you retain the savings.

Benefits of Health Savings Accounts for Individuals

The benefits of investing in a Health Savings Account have become apparent over time. More and more people are moving towards HSA plans for the advantages they offer account holders:

• Tax Deductible Contributions
• May be eligible to claim contributions on Federal Tax Returns (even if you don’t itemize)
• Interest and Other Earnings on Health Savings Account’s are Tax-Free
• Withdrawals for qualified medical expenses are Tax-Free
• Possibly the best benefits of Health Savings Accounts is the security they provide, not only to peace of mind, but for the future.
• Full Portability
• No Year-End Loss – Health Savings Accounts Continue To Grow, Year to Year. It is use it or keep it!

To get started, please visit our HSA Quick Start Guide here >>