Health Savings Account

Frequently Asked Questions

Am I eligible for an HSA?
To qualify for an HSA, you must be covered by a High-Deductible Health Plan (HDHP). You are ineligible for an HSA if you are covered by any health insurance plan other than an HDHP, receive Medicare benefits or are claimed as a dependent on another person's tax return. 

Are there HSA income limits?
There are no income limits to qualify for an HSA. Any person or entity can make HSA contributions on behalf of any eligible individual.

What is a High-Deductible Health Plan (HDHP)?
An HDHP is a type of health insurance that has lower monthly premiums and higher annual deductibles than traditional health plans (deductibles - a minimum of $1,200 for individual and $2,400 for family coverage for 2012). Choosing an HDHP can reduce the amount you pay in premiums each year, and increase take-home pay. Annual out-of-pocket costs (including deductible and co-pays) cannot exceed $6,050 for individual coverage and $12,100 for family plan for the year 2012.

What expenses can I cover with my HSA?
Any qualified medical expenses. To determine if your medical expense qualifies or not, visit www.irs.gov.  View the listing under IRS forms and publications (Publication 969).  If distribution is made from an HSA for medical expenses, those same medical expenses cannot be itemized as a deduction on the individual's federal tax return.

Are over-the-counter medications or products considered a qualified expense?
No, as of 2011 over-the-counter medications or products are not considered as a qualified expense.  Only if a doctor has issued a written prescription.

What happens if I use my HSA for ineligible expenses?
The withdrawal would be included in the taxable income of the individual and would be subject to the 20% additional tax.  The additional 20% does not apply if you are age 65 or older.    

Can I make "catch-up" contributions at age 55?
If you're 55 or older, you can deposit additional funds each year to help your account "catch up" before retirement. The maximum annual catch-up contributions is $1,000.

Does the money in my HSA earn interest?
Yes. We pay competitive interest rates on the account. It is FDIC-insured and earnings are tax-free when used to pay for qualified medical expenses.

Can my spouse be on my account?
Yes. The HSA can only be established as an individual account but you can assign your spouse to be a Power of Attorney on the account. However, you can use funds from your HSA to cover qualified medical expenses for your spouse and/or dependents.

Does my HSA roll over each year?
Yes. The money in your HSA is always yours to keep, with no "use it or lose it" rules. Funds are allowed to grow year after year, with no maximum cap.

What happens to my HSA when I turn 65?
You can continue to use the account tax-free for eligible out-of-pocket expenses.  When your Medicare coverage takes effect, your HSA can take care of Medicare premiums, deductible and co-pays.  At this age, you can also use HSA funds for non-medical reasons, this amount will be taxable as income, but is not subject to penalties.

What happens to my HSA when I die?
If you are married and your spouse is named sole primary beneficiary, they will become the owner of the account and assume it as their own HSA. For non-spouse primary beneficiaries, your account will cease to be an HSA.  It will pass to beneficiaries or become a part of your estate, and be subject to applicable taxes.

What if I lose my HDHP coverage?
You can continue to pay for qualified medical expenses without having to pay tax or penalties. However, you won't be able to make any more contributions to the account. There is no time limit on using the funds. They will remain in your HSA until you need them.

Contact one of our professional account representatives for more information at 515.733.4396 or email info@RandallStory.com.