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HDHP) and Health Savings Accounts (HSA Understanding Qualified High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) What is a Qualified High Deductible Health Plan (HDHP)? A high deductible health plan (HDHP) is a health insurance plan with lower premiums and higher deductibles than a traditional health plan. The IRS determines the requirements of a qualifying HDHP. You are responsible for paying your eligible medical and prescription expenses up to the deductible(s) stated in the HDHP plan. Your deductible is the amount you must pay toward your health care and prescription before benefits are paid by the HDHP plan. All eligible in-network preventive services are covered at 100% and do not accumulate toward the deductible. What is a Health Savings Account (HSA)? A Health Savings Account (HSA) is a tax-advantaged medical savings account that can be established and combined with a qualified high deductible health plan to help pay for healthcare expenses today and down the road. Your HSA contributions accumulate in your account, earning interest, until you need them. The funds contributed to the account are not subject to federal income tax or even state taxes in most cases. They reduce your taxable income. And interest you earn on your HSA balance is tax free. How an HSA Works An HSA is opened like a typical bank account. Money that is deposited to your HSA can be used to pay for qualified healthcare expenses. You can deposit one lump sum for the year (up to the IRS contribution limit), or make smaller deposits throughout the year. You can also make a one-time, tax-free transfer from your IRA to your HSA. Contributions can be deducted on your federal tax form for the year in which the contributions are made. Funds in the HSA account can be used to pay for your health plan deductible and any “eligible medical expense”, even if the expense is not covered by the medical plan. Dental and vision expenses are also eligible to be reimbursed under an HSA account. See IRS Publication 502 “Medical and Dental Expenses” for a listing of eligible HSA expenses. Your HSA is yours to keep – you own the account from the day you open it. There is no “use it or lose it”. Any balance in your HSA Important Things to rolls over from year to year whether you change jobs, retire, or choose a different health care plan. Know About Your HSA • You will never lose any HSA Contributions contributions you make to your There are limits, set by law and adjusted annually, for how much you HSA. You own this bank account . can contribute to an HSA in a calendar year. For 2020 and 2021, • You are reimbursed for eligible those annual limits are as follows: expenses tax-free. $8,000 If you are age 55 or older, $7,100 $7,200 • If you do not use the HSA funds for $7,000 you can make “catch up” an eligible health expense, your $6,000 contributions, meaning you can purchase will be subject to tax, deposit an additional $1,000 $5,000 plus a 20% penalty if you are every year into your HSA. If younger than age 65. $4,000 $3,600 $3,500 your spouse is also 55 or older $3,000 and enrolled in an HDHP, he or • To avoid taxes on your $2,000 she may establish a separate contributions, you must file Form 8889 with your 1040 Form. $1,000 HSA and make a “catch up” contribution to that account. 0 • The TAC HDHP's deductible is 2020 2021 higher than the Standard PPO Individual Family but the premiums are lower. • The TAC HDHP and Standard HSA Eligibility Requirements PPO Out-of-Pocket Maximums Per IRS guidelines, you are allowed to open and fund an HSA if: are equal. • You are covered under an HSA-qualified high deductible Deductible and Out-of-Pocket health plan (HDHP). Maximum Comparison between • You or your spouse are NOT covered by a non-HSA plan (i.e. TAC Standard PPO and HDHP PPO). $4,500 $4,500 • You are not enrolled in Medicare*, TRICARE or TRICARE for Life. • You can't be claimed as a dependent on someone else’s tax return. • You have not received Veterans Affairs (VA) benefits within the past 3 months. • You or your spouse do not contribute to a Healthcare FSA. * Enrollment in Medicare Part A may be retroactive by up to 6 months when you begin taking $1,850 social security retirement after your Social Security Normal Retirement Age (SSNRA). This may affect your HSA eligibility. $1,000 Other restrictions and exceptions may also apply. For more information, visit www.irs.gov/publications/p969/. The official plan documents, summary plan descriptions, insurance contracts and company policies legally govern the administration of the plans. If there is any difference between the information presented here and the information in the official documents/contracts, decisions will be based on the official documents/contracts. How to set up an HSA: Contact your preferred bank or financial institution or HSA bank at: https://ioe.hsabank.com/home Provided by Alera Group: Texas Table of Contents What Are HSAs? ..................................................................................................................................................................... 3 Why Have an HSA? ................................................................................................................................................................ 3 Is an HSA Right for You? ........................................................................................................................................................ 4 How Do HSAs Work? .............................................................................................................................................................. 5 Saving With an HSA ................................................................................................................................................................ 8 HSA Recordkeeping ................................................................................................................................................................ 9 Case Studies and Examples ................................................................................................................................................. 10 Appendix A - HSA Expense Log ........................................................................................................................................... 13 Appendix B - Qualified Medical Expenses ............................................................................................................................ 15 This Know Your Benefits guide is provided by Alera Group: Texas and is to be used for informational purposes only and is not intended to replace the advice of an insurance professional. Visit us at https://tx.aleragroup.com/. © 2016 Zywave, Inc. All rights reserved. When you’re choosing a health plan, there are many factors that affect your decision. If you want an option with flexibility, a high level of choice and tax-advantaged savings, a high deductible health plan with a health savings account (HSA) might be the right choice for you. What Are HSAs? Health savings accounts (HSAs) are a great way to save money and efficiently pay for medical expenses. HSAs are tax-advantaged savings accounts that accompany high deductible health plans (HDHPs). HSAs were created in 2003 to provide individuals who have HDHPs with a tax-preferred method of saving money for medical expenses. There are certain advantages to putting money into these accounts, including investment earnings and favorable tax treatment. The rationale behind the HSA/HDHP combination is that people will have a clearer idea of their medical costs and more control over their spending, enabling them to reduce their medical costs. HSA money can be used tax-free when paying for qualified medical expenses, helping you pay your HDHP’s larger deductible. At the end of the year, you keep any unspent money in your HSA. This rolled over money can grow with tax-deferred investment earnings, and, if it is used to pay for qualified medical expenses, then the money will continue to be tax-free. Your HSA and the money in it belongs to you—not your employer or insurance company. An HSA can be a tremendous asset as you save for and pay medical bills because it gives you tax advantages, more control over your own spending and the ability to save for future expenses. Why Have an HSA? HSA/HDHPs take a different approach to health coverage than other plans with lower deductibles. Having an HSA provides you with many benefits, including flexibility and easy saving, helping you plan and pay for medical expenses. HSA Advantages Here are some of the advantages an HSA provides you with: Security – Your HSA can provide a savings buffer for unexpected or high medical bills. Affordability – In most cases, you can lower your monthly health insurance premiums when you switch to health insurance coverage with a higher deductible, and these HDHPs can be paired with an HSA. Flexibility – You can use your HSA to pay for current medical expenses, including your deductible and expenses that your insurance may not cover, or you can save your funds for future medical expenses, such as: • Health insurance or medical expenses if unemployed • Medical expenses after retirement (before Medicare) • Out-of-pocket expenses when covered by Medicare • Long-term care expenses and insurance Also, you do not have to use your HSA to pay for medical expenses. You can withdraw money from your HSA at any time and for any reason. However, if your HSA money is not used for medical expenses, you will have to pay income tax on your withdrawal.
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