About HSAs

What is an HSA?

An HSA is a tax-advantaged savings account, similar to a traditional Individual Retirement Account (IRA), but designated for qualified medical expenses. An HSA allows you to pay for current qualified medical expenses and save for future qualified medical expenses on a tax-favored basis.

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

Unused HSA dollars roll over from year to year, making HSAs an easy way to save and invest for future qualified medical expenses. You own your HSA and can take it with you when you change medical plans, change jobs, or retire. This means the funds in your account, contributed by you and your employer, are non-forfeitable and portable.

Funds in your account not needed for short-term expenses may be invested, providing the opportunity for funds to grow. Investment options include money market accounts and mutual funds.

To be eligible to set up and contribute to an HSA, you must be covered by a qualified HDHP and not have other coverage (e.g., Medicare).

How does an HSA work?

If you enroll in a qualified HDHP and meet other IRS criteria, you may open and contribute to an HSA. All of the money deposited into your HSA, up to the maximum annual contribution limit determined by the IRS each year, is 100% tax-deductible for federal income tax, FICA (Social Security and Medicare) tax, and state income tax (for most states).

If you choose, you may use your HSA funds, to pay for expenses under your HDHP that you incur before you have met your deductible, for coinsurance or copayments you owe after meeting your deductible or for any other qualified medical expenses.

The funds in your account can be used for other, non-medical expenses, but distributions used for non-medical expenses are subject to ordinary income taxes, 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.

Funds remaining in your account at the end of the year roll over and accumulate for your future qualified medical expenses. You may choose not to spend your HSA dollars and instead use after-tax dollars for your qualified medical expenses, leaving your HSA dollars to grow for the future. Choosing which expenses to pay with out-of-pocket after-tax dollars and which to pay with your HSA dollars is entirely up to you.

  1. Funding. You and your employer may contribute to your HSA on a pre-determined schedule throughout the year. (Please contact your Human Resources office for a copy of your employer's contribution schedule if applicable.)
  2. Accessing Funds. When you have an eligible healthcare expense, pay for them with your healthcare payment card, or pay out of pocket and request reimbursement online. Remember to always keep your receipts. Even if they are not needed for substantiation, you may need them for an IRS audit.
  3. Requesting Reimbursement. If your payment was out-of-pocket, you will need to submit a request for reimbursement. Log on to your online account and visit the Claim Center.
  4. Reimbursement Processing. We will promptly process your request and reimburse you either by check or direct deposit if you sign up for that feature. Please note that you will receive your money sooner if you use direct deposit.
  5. Account Management. Log on to your online account regularly to check your account balance and access health education tools.

Who is eligible to open an HSA?

You are eligible to open an HSA if you are:

  • Covered by a qualified HDHP;
  • Not covered by another health care plan, such as a health plan sponsored by your spouse's employer, including a general purpose FSA, Medicare or TRICARE; and
  • Not claimed as a dependent on another individual's tax return.

You are still eligible if you:

  • Have certain limited coverage approved by the IRS, (e.g., dental, vision and long-term care insurance) or
  • Are entitled to benefits under an Employee Assistance Plan (EAP), disease management or wellness program or have a discount card for prescriptions

Who is eligible to contribute to an HSA?

HSA, contributions help you build a balance to assist with current and future qualified medical expenses. Anyone, including your employer or family members, may contribute to your HSA. You are eligible to make or receive contributions to your HSA if you are:

  • Covered by a qualified HDHP;
  • Not covered by another health care plan, such as a health plan sponsored by your spouse's employer, including a general purpose FSA, Medicare or TRICARE; and
  • Not claimed as a dependent on another individual's tax return.

You are still eligible if you:

  • Have certain limited coverage approved by the IRS, (e.g., dental, vision and long-term care insurance) or
  • Are entitled to benefits under an Employee Assistance Plan (EAP), disease management or wellness program or have a discount card for prescriptions.
  • If you no longer participate in a HDHP or enroll in Medicare, you can no longer make or receive HSA contributions.

How is money deposited to my HSA?

Money may be deposited to your HSA through payroll deduction, if your employer participates in such a program, or you may deposit funds directly to your account. Deposits may be made periodically or in one lump sum.

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

Deductible contributions: You may choose to make all or part of your annual account contributions to your HSA by writing a personal check or completing an electronic transfer and deducting your contribution on your income tax return, using IRS Form 1040 and Form 8889.

Please note, you must file IRS Form 1040 to take a deduction for your HSA contributions, not the short form 1040A or 1040EZ. This deduction is taken "above the line" and you do not need to itemize contributions on Schedule A in order to claim the deduction for HSA contributions.

A tip: you can contribute up to the maximum annual contribution at any time until the deadline for filing your income tax return (generally, April 15 of the following year for calendar year tax payers). Your employer may contribute to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income. Employer contributions are counted toward the maximum annual contribution.

What is the value of a lower premium higher deductible HSA plan?

The value of an HSA includes the pre-tax growth of account balances as well as greater control over the use of health care dollars. Consider the following: unless you have a catastrophic medical claim, it is unlikely that you will recoup the amount of money you pay in premiums for traditional health care plans (e.g., PPO).

Another value component of an HSA is the insurance premium you pay. Compare the costs of available plans, and you are likely to find that the HDHP offers lower premiums in exchange for the higher deductible, but includes the same coverage for significant health expenses and preventive care as more expensive traditional plans.

How do I open a BenefitWallet HSA?

To open an HSA, enroll in a qualified HDHP and elect the BenefitWallet HSA option.

Once you submit your election, you will receive a Welcome Kit in the mail or a link to open your account electronically. Both methods collect personal information, required by federal banking regulations under the USA Patriot Act, needed to open a banking account.

You must open your HSA before funds can be deposited (including any employer contributions) or withdrawn to pay for qualified medical expenses.

The form titled, "Master Signature Card", found in your Welcome Kit or online, gives you the ability to designate a beneficiary for your account. Even if you electronically provide your signature to open your account, you must mail in this card to name a beneficiary for your account.

Why establish an HSA? What are the advantages?

There are many advantages associated with establishing an HSA including:

Tax-advantages:

  • Contributions made through payroll deposits are made with pre-tax dollars, meaning they are not subject to federal income tax or state income tax (for most states).
  • Contributions to your HSA that are not made with pre-tax dollars can be deducted from your gross income, meaning you pay less income tax at the end of the year.
  • The interest you earn on your HSA balance is not subject to federal income tax or state income tax (for most states).
  • Withdrawals from your HSA for qualified medical expenses are not subject to federal income tax. As long as you use your HSA funds for qualified medical expenses, you will not have to pay federal income tax or state income tax (for most states).
  • Employers may contribute to your account; these contributions are excluded from your gross income.

Flexibility: There are no "use it or lose it" rules; the money is yours. It grows and remains with you, even when you change medical plans, change employers or retire. Even if you are no longer eligible to contribute, funds in your account may still be used to pay for qualified medical expenses, tax-free.

Portability: Accounts move with you when you change medical plans, change employers or retire.

Asset Accumulation:Unused funds can grow through interest and investment earnings and saved for future qualified medical expenses.

Contributions can come from multiple sources: As long as you are covered by a qualified HDHP, you, your employer, family members or anyone else may contribute to your HSA up to the maximum annual contribution limit.

What is an HDHP?

An HDHP provides comprehensive health care coverage like a traditional health plan and like a traditional plan; you are responsible for paying for your medical expenses before the deductible is satisfied. However, the deductible is higher than a traditional plan and must meet or exceed the amount determined annually by the IRS.

After the annual deductible is met, you are responsible for a portion of your medical expenses through coinsurance or co-payments, just as with a traditional health plan.

  • For 2013, the HDHP Deductible must be at least $1,250 for individuals and $2,500 for families.
  • For 2014, the HDHP Deductible must be at least $1,250 for individuals and $2,500 for families.
  • For 2013, the maximum out-of-pocket expenses (including deductible and co-payments, but not including premiums) cannot exceed $6,250 for individuals and $12,500 for families.
  • For 2014, the maximum out-of-pocket expenses (including deductible and co-payments, but not including premiums) cannot exceed $6,350 for individuals and $12,700 for families.
The deductible and maximum out-of-pocket expenses are indexed annually for inflation.

How do I know if my health plan is a "qualifying (or qualified)" HDHP?

Your health insurer or employer can verify the status of your coverage. You can also check the declaration page of your policy or official communications from your insurance company for the words "qualifying (or qualified) High Deductible Health Plan" or a reference to Internal Revenue Code Section 223.

To be a qualified HDHP, the deductible and out-of-pocket maximums must meet the following requirements:

  • The annual deductible must be at least $1,250 for individual coverage or $2,500 for family coverage in 2013.
  • The annual deductible must be at least $1,250 for individual coverage or $2,500 for family coverage in 2014.
  • The maximum out-of-pocket expenses must be capped at $6,250 for individual coverage and $12,500 for family coverage in 2013.
  • The maximum out-of-pocket expenses must be capped at $6,350 for individual coverage and $12,700 for family coverage in 2014
Deductibles and out-of-pocket maximums are adjusted annually for inflation.

How do HSAs differ from health care Flexible Spending Accounts (FSAs)?

Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. One key difference is that HSA balances can accumulate and roll over from year to year, while FSA money left unspent at the end of the year or after a designated grace period, is forfeited.

Can I be covered by an HSA and FSA?

Generally, you are not eligible for an HSA if you have other health care coverage including coverage under a General Purpose FSA. However, you may have coverage under a Limited Purpose FSA and be eligible for an HSA. A Limited Purpose FSA may be used to reimburse yourself for expenses not covered by your HDHP, such as:

  • Vision expenses, including:
    • Glasses,
    • Frames,
    • Contacts,
    • Prescription sunglasses,
    • Goggles,
    • Vision co-payments,
    • Optometrists or ophthalmologist fees, and
    • Corrective eye surgery.
  • Dental expenses, including:
    • Dental care,
    • Deductibles and co-payments,
    • Braces,
    • X-rays,
    • Fillings, and
    • Dentures.

How is an HSA different from an HRA?

A Health Reimbursement Arrangement (HRA) is an account established by an employer to reimburse employees for qualified medical expenses. Unlike an HSA, which requires an individual to be covered under a qualified HDHP to be eligible to make or receive contributions, HRAs do not require any specific type of health plan coverage as a condition of eligibility. Only an employer can contribute to an HRA and there is no limit on the amount the employer can contribute. Upon termination of employment, an employer is not required to pay unused HRA funds to the employee. By comparison, HSAs are owned by the employee and any funds in the account belong to the employee regardless of employment status.

How is an HSA different from a savings account?

While there are no restrictions on the use of the funds deposited in a regular savings account, savings accounts do not provide the tax advantages of an HSA.

Can my spouse and I have a joint HSA, like our regular checking account?

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

If both you and your spouse have family coverage under a qualified HDHP, the combined maximum tax-deductible HSA contribution both of you can make (including employer contributions) is the maximum annual contribution for family coverage. In 2013, that amount is $6,450. For 2014, that amount is $6,550. The maximum annual contribution can be divided between you and your spouse any way 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.

Why is my employer offering an HSA in conjunction with a qualified HDHP?

Offering an HSA is an excellent way to help you save for future medical expenses and pay for current expenses on a tax-advantaged basis.

May I have more than one HSA?

Yes, you may have more than one HSA and you may contribute to them all. However, this does not give you any additional tax advantages, as the total contributions to your accounts cannot exceed the annual maximum contribution limit. Contributions from your employer, family members or anyone else are included in when determining your total contributions.

Do HSA funds remaining at the end of the year roll over?

Yes. Unused funds roll over from year to year. The money in your HSA is yours, so there are no "use it or lose it" rules. The less money you spend, the more you have that may earn interest or be invested in investment options.

Who has control over the money invested in my HSA?

You have full control over the assets in your HSA. When the total funds in your account reach certain limits, you have the option to invest excess monies. You choose which fund to invest in from the available options.

If I have an HSA, does it limit which doctors or hospitals I can use?

With an HSA, you are free to use any doctor and any hospital you choose. However, significant cost savings are available to you when you use providers in your plan's provider network. Provider networks offer a wide variety of physicians and service providers at discounted rates.

Eligibility and enrollment

Can I have an HSA in addition to an IRA or other qualified retirement plan?

Yes, you can have both an HSA and an IRA.

Although HSAs operate under many of the same rules that apply to traditional IRAs, an HSA is not an IRA; it is a tax-advantaged savings account for current and future qualified medical expenses. An HSA may be used to pay for non-medical expenses without penalty after you turn 65, so it can be used to save for retirement.

I am covered under my spouse's plan. If I enroll in my employer's qualified HDHP, am I eligible for an HSA?

No. You are not eligible for an HSA if you are covered by any other health plan that is not a qualified HDHP.

I am entitled to benefits from Veterans Affairs [VA]. Am I eligible for an HSA?

Yes, as long as you haven't received any VA medical benefits during the preceding three months and you are currently enrolled in a qualified HDHP, you are allowed to open and contribute to an HSA.

I am 65 years old, and have kept my employer's health plan instead of enrolling in Medicare. Am I eligible to open an HSA?

Yes. You are eligible to open and contribute to an HSA as long as you are not enrolled in benefits under Medicare and are covered by a qualified HDHP.

My employer is offering a choice between a low-deductible health plan and a qualified HDHP. If I elect the HDHP, can I contribute to an HSA?

Yes. If you choose to be covered by the qualified HDHP, you may open and contribute to an HSA. It does not matter what options your employer offers. It matters only which option you elect.

My employer is offering dental and vision plans in addition to a qualified HDHP. If I elect the dental and vision plan and the HDHP, can I contribute to an HSA?

Yes. As long as you are covered by a qualified HDHP you may also have other "permitted insurance" coverage. Permitted insurance includes:

  • Insurance for a specified disease or illness, such as cancer, diabetes, asthma or congestive heart failure or
  • Policies that provide coverage for accidents, disability, dental care, vision care or long-term care.

Are over-the-counter OTC products eligible for purchase with my account?

Many OTC items are eligible for purchase on a tax-free basis with your account, and they fall into three categories:

  1. Eligible - Insulin and health items that do not contain any medicine or drugs (bandages, contact lens solution, hearing aid batteries, diagnostic and testing products, reading glasses, etc) are eligible and do not require a prescription, letter of medical necessity or doctor's directive.
  2. Eligible with Prescription - Over-the-counter items that contain a drug or medication (cold and allergy medicine, pain relievers, sleep aids, etc.).
  3. Eligible with Letter of Medical Necessity or Doctor's Directive - Dual Purpose items can be used for a medical reason or for general health purposes and require a prescription, letter of medical necessity or doctor's directive. These items include products such as dietary, fiber and weight loss supplements, vitamins, orthopedic shoes and inserts, and snoring cessation aids.

Though you will not be required to submit the prescription or doctor's note, be sure to retain them for your tax records.

I joined my company in mid-June and am eligible for my employer's qualified HDHP effective August 1st. Am I eligible for an HSA this year? How much can I contribute for the plan year?

Yes. You may contribute for this year, provided you are covered by a qualified HDHP no later than December 1 and are eligible on that date.

If you enroll by December 1 of any year, you are eligible to contribute up to the annual maximum to your HSA as long as you continue to participate in a HDHP for the next 12 consecutive months (13 months in total). During this time, you cannot have other non-qualifying health care coverage.

For 2013, the maximum annual contribution you (and your employer) may contribute is $3,250 if you have single coverage, or up to $6,450 if you have family coverage. For 2014, the maximum annual contribution is $3,300 for individual coverage and $6,550 for family coverage. In addition, if you are 55 or older, you may add up to $1,000 in additional monies as part of a "catch up" contribution.

What if I fail the "testing period" participation requirement?

Your contribution for any given year depends on your enrollment in HDHP coverage by December 1 of that year and maintaining HDHP coverage during a testing period (i.e., the next 12 consecutive months, 13 months total). Account holders who fail to maintain the required coverage during the testing period must fill out Part 3 of Form 8889 to determine if there is an applicable penalty.

I enrolled in a HDHP on January 1, but I changed jobs in June and my new employer does not offer a HDHP. What do I do?

If you enroll in the HDHP, but end your coverage during the 12-month period, contributions to your HSA will be limited to a pro-rated share of the maximum annual contribution. The prorated contribution limit is based on your actual months of HDHP coverage.

For example: if you maintain HDHP coverage for six months (January through June), and the IRS maximum contribution limit for the year is $3,250, then your maximum contribution would be $1,625. [$3,250 divided by 12 times 6]. If you are 55, catch-up contributions are permitted and must also be pro-rated using the same formula.

What other coverage makes me ineligible for an HSA?

The following types of coverage may make you ineligible for an HSA:

  • Medicare
  • Medicaid
  • Flexible Spending Arrangements (FSA)
  • Health Reimbursement Arrangements (HRA)
  • Coverage under a spouse's plan, including:
    • Low-deductible health insurance coverage
    • FSA or HRA coverage

Can an HSA have more than one account owner?

No, only one person can be named the account owner.

Are there any age restrictions regarding opening an HSA?

Once an HSA owner becomes enrolled in Medicare, contributions to the account must stop. Generally this means at age 65. If, however, you become disabled and entitled to Medicare, contributions to the account must stop for the month in which you become enrolled.

If you can be claimed as a dependent on someone else's tax return, you are ineligible to open an HSA. Although this is not an age restriction, generally you cannot open an HSA for your child if you, or someone else, claims them as a dependent.

My spouse is contributing to a health FSA. Can I make contributions to my HSA if I participate in a qualified HDHP?

No. A general-purpose health FSA or HRA is other coverage that makes you ineligible to contribute to an HSA, because it is available to reimburse the qualified expenses of the employee and the employee's spouse and dependents. Consequently, if either you or your spouse participates in a general-purpose health FSA or HRA, neither of you will be eligible to contribute to an HSA.

Do I have to earn a minimum salary to open an HSA or is there a maximum salary that prevents me from opening an HSA?

No. There are no salary restrictions - minimum or maximum - that make you ineligible to open and contribute to an HSA.

Do I have to have my HSA with the same company that has my HDHP?

No. You may open your HSA with any qualified financial institution, regardless of which insurance company provides your HDHP. However, you should check with your benefits department, as they may only provide contributions via payroll deduction with a specific HSA administrator.

Contributions

What does it mean to have my HSA checking account FDIC-insured?

The custodian of the BenefitWallet has is The Bank of New York Mellon (BNY Mellon). Deposits to your HSA checking account are FDIC-insured up to the FDIC coverage limit.

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government. The FDIC insures your deposits up to a specified limit in the unlikely event of the failure of the insured bank or savings institution. Please visit the FDIC Web site at www.fdic.gov for more details.

The FDIC does not insure the money in your HSA investment account.

Can I contribute stock to my HSA?

No. You may only contribute cash to your BenefitWallet HSA. You may set up an HSA investment account where you may invest your HSA contributions in a select group of mutual funds or securities.

Does how much I contribute to my IRA limit how much I can contribute to my HSA?

No. Your contributions to your HSA are limited to a maximum annual contribution adjusted each year by the IRS. Your contributions to an IRA have no bearing on your HSA and vice versa.

Can my employer contribute to my HSA?

Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated to determine whether you have contributed the maximum allowed (see above). If your employer contributes some of the money, you can make up the difference. If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee.

How much will my employer contribute to my HSA?

The annual employer contribution, if any, is determined by your employer. Please consult with your Human Resources office for more information.

Can I make catch-up contributions to an HSA?

Yes. If you are 55 or older and covered by a qualified HDHP, you can make catch-up contributions each year until you are enrolled in Medicare benefits. The maximum annual catch-up contribution for 2013 and after is $1,000.

If you will reach age 55 before the close of the calendar year, you may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1.

If you and your spouse are 55 or older, then you are each permitted to make the full catch-up contribution, provided you are both covered by a qualified HDHP for the entire year. You each must contribute the catch-up contribution to your own account.

Does an HSA have a mandatory distribution requirement?

No. Unlike 401(k)s and IRAs, there are no mandatory distribution requirements for an HSA.

I am 65 years old, which makes me eligible for Medicare, but I'm still working and have kept my employer's health plan instead of enrolling in Medicare. I am enrolled in the HDHP offered by my employer. Am I eligible to make catch-up contributions?

Yes. You can make catch-up contributions each year until you are enrolled in Medicare benefits. The maximum annual catch-up contribution for 2013 and after is $1,000.

You may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1.

If your spouse is 55 or over, then you are each permitted to make the full catch-up contribution, provided you are both covered by a qualified HDHP for the entire year. You each must contribute the catch-up contribution to your own account.

How much can I contribute to my HSA?

  • For 2013, the annual contribution limit is $3,250 for individual coverage and $6,450 for family coverage.
  • For 2014, the annual contribution limit is $3,300 for individual coverage and $6,550 for family coverage.
If you are age 55 or older, you may contribute up to $1000 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 (Thirteen months in total).

May I own and contribute to more than one HSA?

Yes. You may have more than one HSA and you may contribute to them all. However, this does not provide any additional tax advantages, as the total contributions to your accounts cannot exceed your maximum annual contribution. Contributions from your employer, family members or any other person must be included in the total.

What is the tax treatment of my HSA contributions?

Contributions to your HSA are not subject to federal income tax or state tax (for most states) unless used for non-qualified medical expenses.

Contributions may be made either directly to your HSA or through payroll deduction, if your employer participates. If you make your contributions through payroll deductions, the amount is taken from your payroll before taxes are calculated. If you make deposits directly to your account, you may take an "above the line" deduction when filing your annual tax return.

Although you do not take a deduction for employer contributions, they are not included in your gross income.

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 contributes 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 funds on your own.

If your employer contributes to your account, you do not take a deduction for these contributions, but they are not included in your gross income.

All contributions to the account are combined and subject to the maximum annual contribution.

Can I contribute one lump-sum to my HSA or spread contributions out during the year?

Contributions for the taxable year can be made in one or more payments at your convenience. If your employer contributes to your account, they, too, may make either one lump-sum or periodic deposits to your account.

Maximum contribution limits are determined annually by coverage type (single or family). The annual total of all contributions to your account, from all sources, cannot exceed the maximum annual contribution.

I have an HSA from my previous employer. I am now enrolled in an HMO. Am I eligible to contribute to my HSA now?

No. You are not eligible to contribute because you are not covered by a qualified HDHP. However, any distributions you make from your HSA for qualified medical expenses continue to be free of federal taxes and state tax (for most states) and excludable from your gross income.

Remember that unused HSA dollars roll over from year to year. You may invest unused HSA dollars in investment options, providing the opportunity for funds to grow.

What are "catch-up" contributions?

Catch-up contributions are permitted contributions in excess of the maximum annual contribution, made by HSA owners who are covered by a qualified HDHP and are age 55 or older.

Catch-up contributions to your HSA are allowed for the calendar year in which you reach age 55. If you will reach age 55 before the close of the calendar year, you may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1.

My spouse is contributing to a health FSA. Can I make contributions to my HSA if I participate in a qualified HDHP?

No. A general-purpose FSA or HRA is other coverage that makes you ineligible for an HSA, because it is available to reimburse the qualified expenses of the employee, spouse and dependents. Consequently, if either you or your spouse participates in a general-purpose FSA or HRA, neither of you will be eligible to contribute to an HSA.

What happens if I contribute more than my maximum annual contribution to my HSA?

If you contribute more than the maximum annual contribution to your HSA, you may withdraw the excess without penalty until the deadline (including extensions) for filing your tax return for the tax year for which the excess contribution was made. After that time, the funds are subject to both income taxes and an excise tax.

If I contribute more than my maximum annual contribution can I take the full amount as an above the line deduction?

No. You cannot take the excess as an above the line deduction. You have until the filing date of your federal tax return (including extensions) to take a distribution of the excess contribution from your HSA without incurring a 6% excise tax. The amount of the excess contribution is includable in your gross income for tax purposes.

If I contribute to my HSA through pre-tax contributions to a Section 125 cafeteria plan, can I change the per payroll deduction at any time?

You may increase, decrease, start or stop your HSA contributions at any time, provided the change is prospective only. Remember, you are still restricted by the maximum annual contribution limit.

My qualified HDHP coverage was effective January 1, but I didn't establish my HSA until June. Can I still make my maximum annual contribution, or is my contribution reduced by the number of months I didn't have an HSA?

You can still make your maximum annual contribution. Your eligibility to contribute to an HSA is determined by the effective date of your qualified HDHP coverage. Your contribution for any given year depends on your enrollment in HDHP coverage by December 1 of that year and maintaining qualified HDHP coverage for the next 12 full months (13 months total).

If you maintain qualified HDHP coverage for less than 12 full months, the maximum is prorated by the number of full months of coverage.

What is my HSA establishment date?

The "Establishment Date" of your HSA is generally the later of :

  • The effective date of your qualifying HDHP coverage, or
  • The date you provide evidence of intent to open the account (e.g., completion of a form or application acknowledging your desire to open an HSA).

You can only receive tax-free distributions from your HSA for qualified medical expenses incurred after the "Establishment Date". Because you are ultimately responsible for determining which expenses are reimbursable from your HSA, you should consult with your personal tax advisor to determine how tax guidance on this issue should be applied to your specific situation.

What is the last date that I may deposit the remainder of my maximum annual contribution and still take an "above the line" deduction for the year?

You have until April 15, 2014 to contribute with respect to the 2013 tax year if you are a calendar year taxpayer.

Distributions

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

Yes. You always have the option to choose when to use your HSA dollars. Many HSA participants elect to pay smaller expenses with after-tax dollars, allowing their balances to grow for the future.

What health care expenses does my HSA cover?

Your HSA funds can be used tax free to pay for out-of-pocket qualified medical expenses, even if the expenses are not covered by your HDHP. This includes expenses incurred by your spouse or dependents.

There are hundreds of qualified medical expenses, including:

  • Over-the-counter medications for which you have a prescription from your doctor;
  • Dental visits;
  • Orthodontics;
  • Glasses
All of these expenses may be paid for with distributions from your HSA, free from federal income tax or state income tax (for most states).

Refer to IRS Publication 502 for a more complete list of qualified medical expenses.

Can I pay for my spouse's/dependent children's qualified medical expenses from my HSA even if they're not covered by a qualified HDHP?

Yes, you may use funds from your HSA to pay qualified medical expenses for you, your spouse or a tax dependent free from federal income tax and state income tax (for most states). This is one of the great advantages of HSAs.

What happens if I take a non-medical distribution or a distribution for a non-qualified expense?

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20% penalty tax. If you are age 65 or older, disabled or your estate pays medical expenses after your death, the 20% penalty may not apply.

You are required to confirm that your distributions are for qualified medical expenses. It is your responsibility to keep all documents (such as receipts) that show how you used your HSA, including any distributions used for non-qualified transactions and self-report distributions on your annual tax return.

How are distributions from my HSA taxed?

Distributions from your HSA that are used exclusively to pay for qualified medical expenses for you, your spouse or tax dependents are excludable from your gross income. Your HSA funds can be used for qualified medical expenses and will remain free from federal income tax and state income tax (for most states) even if you are not currently eligible to contribute to your HSA.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20% penalty tax. If you are age 65 or older, disabled or for the year in which you die, the 20% penalty may not apply.

Are dental and vision care qualified expenses under an HSA?

Yes. Most dental and vision care expenses are qualified expenses. For example, glasses, contacts and braces are qualified expenses; cosmetic procedures, (e.g., cosmetic dentistry), are generally not considered qualified medical expenses

I already have an HSA. I am now enrolled in an HMO. Can I use the funds in my HSA to pay for expenses not covered by the HMO, such as when I go out-of-network?

Yes. Distributions used exclusively to pay for qualified medical expenses, even those incurred under a non-HDHP, continue to be free of federal income tax and state income tax (for most states). You may not, however, contribute to your HSA because you are not covered by a qualified HDHP at this time.

My qualified HDHP coverage was effective January 1, but I didn't open my HSA until June. Are the expenses I incurred in February and March eligible for tax-free distributions from my HSA?

No. Medical expenses incurred before you establish your HSA are not eligible for tax-free reimbursement from your HSA. You can receive tax-free distributions from your HSA for qualified medical expenses you incur after you establish your HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% penalty tax.

By what date do I have to establish my HSA in order to receive tax-free reimbursements for qualified expenses?

Your HSA must be established before qualified medical expenses are incurred to receive distributions free from federal income tax and state income tax (for most states).

How soon can I withdraw funds from my HSA for qualified expenses? For example, what if I incur a medical expense in January and need $1,000 for the cost of treatment, before my deductible has been met?

Just like a checking account, you can only access funds that are available in your account. However, as additional funds are deposited to your account, you can reimburse yourself for qualified medical expenses paid out of pocket, so long as those expenses occur after the date of the establishment of your HSA.

Can I use my HSA to pay for medical services provided in other countries?

Yes, provided the services are qualified medical expenses, the distribution would be free from federal income tax and state income tax (for most states).

If I have a qualified HDHP and an HSA and I see a doctor for treatment am I charged the typical co-payment for the visit, or am I responsible for paying the full charge?

Unless the treatment is for preventive care, which may be covered by the HDHP before the deductible is met, you are responsible for the full charge until you have met your deductible; then co-payments and co-insurance apply. However, you may use your HSA funds for these qualified medical expenses without paying federal income tax or state tax (for most states).

Is there a time/age by which I must begin withdrawing funds from my HSA?

No, you are never required to withdraw funds from your HSA. If you never use your funds, your spouse may inherit your account and continue its tax-free status, or your beneficiaries will receive the funds subject to estate taxes

Both my spouse and I have HSAs. Can we use both accounts to reimburse ourselves for a qualified expense?

No, a single expense can only be reimbursed by a single account. However, you may use both accounts to reimburse yourselves for different expenses. For example, you may use your spouse's HSA to reimburse the entire family's dental expenses; yourself included, and use your HSA to cover expenses incurred prior to reaching the deductible.

I took a distribution for a doctor's visit that I didn't know was considered preventive care. The insurance company later paid the expense. If I return the funds to my HSA, do I still have to include the distribution as gross income and add the 20% penalty when I file my taxes?

If there is clear and convincing evidence that this was a mistake, you may repay the mistaken distribution no later than April 15 following the first year that you become aware of the mistake. Under these circumstances, the distribution is not included in gross income and the 20% penalty does not apply. You will need to keep records that document the actions you took.

How will I be able to access my HSA funds?

You may access your funds through:

  • Your Healthcare Payment Card
  • Your HSA Checkbook
  • Online Bill Pay

You can also pay for eligible expenses with any other form of payment and request reimbursement from your account. See Healthcare Payment Card FAQs for more information about your payment card.

Be sure to retain all receipts and other documentation related to your distributions in the event you are later asked to substantiate an expense for tax purposes.

Can I borrow against my HSA?

No. You cannot borrow against or pledge funds in your HSA.

Can I reimburse myself with HSA funds for eligible expenses I paid with after-tax dollars?

Yes, as long as the eligible expense was incurred after the establishment date of your HSA, you can reimburse yourself with HSA funds in one of the following ways:

  • Writing yourself a check from your account (if you have an HSA checkbook)
  • Initiating a check reimbursement or transfer online
  • Withdrawing cash from the ATM (if you have ATM access)

Be sure to retain all receipts and other documentation related to your distributions in the event you are later asked to substantiate an expense for tax purposes.

If I have a qualified HDHP and an HSA and I see a doctor for treatment am I charged the typical co-payment for the visit, or am I responsible for paying the full charge?

Unless the treatment is for preventive care, which may be covered by the HDHP before the deductible is met, you are responsible for the full charge until you have met your deductible. After meeting your deductible, co-payments and co-insurance apply. You may use your HSA funds to reimburse yourself for these qualified medical expenses, tax-free.

My doctor just prescribed a medication. Do I have to meet my HDHP deductible before I can be reimbursed for any of my medications?

Prescription medications are covered expenses under a qualified HDHP, but you will have to meet the deductible before you will be reimbursed by the insurance plan for these expenses. You may use tax-free HSA funds to pay for this expense before the deductible is met.

Some medications, however, are considered "preventive" and as such may be covered under the preventive care provisions of your HDHP. You should check with your plan customer service representatives to determine if your medication is considered preventive.

By what date do I have to establish my HSA in order to receive tax-free reimbursements for qualified expenses?

To receive tax-free distributions, you must establish your HSA before incurring the qualified medical expenses.

Change in circumstances

What happens to my HSA if I quit my job or otherwise leave my employer?

Your HSA is portable. This means that you can take your HSA with you when you leave and continue to use the funds and any earnings you have accumulated. If you are covered by a qualified HDHP you can continue to make tax-free contributions to your HSA

Distributions from your HSA that are used exclusively to pay for qualified expenses for you, your spouse or your dependents are excludable from your gross income. Your HSA funds can be used for qualified expenses even if you are not currently eligible to contribute to your HSA.

What happens to my HSA in the case of divorce?

In cases of divorce, an HSA can be transferred between spouses without taxation. This is not considered a taxable distribution. All HSA rules regarding continued tax-free status, contributions and distributions apply.

When is my HSA no longer an HSA?

Your HSA will no longer be considered an HSA if, upon your death, your estate or someone other than your spouse becomes the beneficiary of your account. Only if the account is transferred to your spouse will it remain an HSA.

Is there a time or age by which I must begin withdrawing funds from my HSA?

No, you are never required to withdraw funds from your account. Your HSA can continue to earn interest and grow until you decide to use the funds. If you never use your funds, your spouse may inherit your account and continue its tax-free status, or your beneficiaries will receive the funds subject to estate taxes.

Do I need to elect COBRA to continue my HSA if I leave my current employer?

Your HSA is not subject to COBRA provisions. It is your account to take with you and to maintain as you choose.

While you do not need to continue your qualified HDHP coverage through COBRA, you must maintain qualified HDHP coverage to continue making HSA contributions. You may pay your COBRA premiums with tax-free HSA dollars should you wish.

I no longer participate in a qualified HDHP. Can I still receive tax-free distributions to reimburse my or my family's qualified expenses?

Yes. Participation in a qualified HDHP is not required to maintain the tax-free status of HSA distributions if funds are used for qualified medical expenses.

How are distributions from my HSA taxed after I am no longer eligible to contribute?

If you are no longer eligible to contribute because you are enrolled in Medicare benefits, or are no longer covered by a qualified HDHP, distributions used exclusively to pay for qualified medical expenses continue to be free from federal income tax and state income tax (for most states).

I can't contribute to my HSA because I'm no longer covered by a qualified HDHP, but can I still use my HSA funds for qualified expenses?

Yes. You always have the option to use your HSA funds however you wish. Distributions used exclusively to pay for qualified medical expenses continue to be free from federal income tax and state income tax, (for most states). You may not, however, contribute to your HSA because you are not covered by a qualified HDHP at this time. Should you enroll in a qualified HDHP at another time, you may then contribute to your established HSA.

What happens to the money in my HSA after I reach age 65?

At age 65 and older, you may continue to use your HSA funds to pay for qualified medical expenses; for instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.

If you use your funds for qualified medical expenses, the distributions from your account remain tax-free, i.e., free from federal income taxes or state income tax (for most states). If you use the monies for non-qualified expenses, the distribution becomes taxable, but due to your age, exempt from the 20% penalty.

Once you are enrolled in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

What happens to the money in my HSA if I become disabled?

Building an account balance in in the event of increased medical expenses related to disability is one of the great benefits of an HSA.

If you become disabled and enroll in Medicare, contributions to your HSA must stop as of the first of the month in which you become enrolled. However, you can continue to use your funds to pay for qualified medical expenses, including payments for Medicare Parts A and B.

If you use your funds for qualified medical expenses, the distributions from your account remain tax free, i.e., free from federal income taxes or state income tax (for most states). If you use the monies for non-qualified expenses, the distribution becomes taxable, but due to your disability, may be exempt from the 20% penalty.

How do I designate a beneficiary for my HSA?

You should choose a beneficiary when you set up your HSA by completing a Master Signature Card. The Master Signature Card is included in your HSA welcome kit or available online for download.

Please note, the signature cards contain a barcode that is personalized for each account holder. As circumstances in your life change, be sure to review your beneficiary designation. You can change your beneficiary by submitting a new signature card.

Can I designate more than one beneficiary and can I designate primary and contingent beneficiaries?

You may designate one or more persons or entities as death beneficiary of your account (referred to as "Primary Beneficiaries") and may also designate one or more persons to receive your account if no primary beneficiary survives you (referred to as ("Contingent Beneficiaries"). Beneficiary designations can be made only on a form provided by or acceptable to us and will only be effective when filed with us during your lifetime. If you die before you receive all of the amounts in your account, payments from your account will be made according to your beneficiary designation(s).

What happens to my HSA when I die?

Your HSA is an inheritable account. What happens to your HSA when you die depends on whom 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.

Non-Spouse designated beneficiary. If you designate someone other than your spouse as the beneficiary of your has.

  • The account stops being an HSA on the date of your death;
  • The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die (without penalties); and
  • 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 designate a beneficiary or if all of the beneficiaries you have designated die before you, your account will be paid to your spouse if he or she is living or if your spouse is not living then your account will be paid to your estate.

Tax considerations

My employer allows HSA contributions to be made through payroll deduction on a pre-tax basis, what does pre-tax mean?

When you participate in a payroll deduction program through your employer, deductions can be taken from your payroll before calculating your taxable federal income, FICA (Social Security and Medicare) tax, and taxable state income (for most states). By taking deductions pre-tax, you reduce the dollars on which you are taxed and, as a result, reduce your total tax bill.

I want to make a contribution to my HSA with after tax-dollars, what is an "above the line" tax deduction?

If you contribute to your HSA with after-tax dollars, you may deduct the contribution amount, subject to the maximum annual contribution limits from your taxes at filing time. Above the line means you will reduce your taxable income regardless of whether you itemize or use the standard deduction on your income tax form.

Is there a limit on how much I may contribute to my HSA and deduct from my taxes each year?

For 2013, the maximum contributions to your HSA, including any made by your employer to your account, are $3,250 for individual coverage and $6,450 if you have family coverage.
For 2014, the maximum contributions to your HSA, including any made by your employer to your account, are $3,300 for individual coverage and $6,550 if you have family coverage. If you turn age 55 or older in 2012 or after, you may add up to $1,000 more as a "catch-up" contribution.

These amounts apply as long as you enroll in qualified HDHP coverage before the first day of December and as long as you continue to maintain qualified HDHP coverage for the next 12 months.

These maximum contribution limits are determined annually.

If I close my HSA are there any tax penalties?

There are no tax penalties for closing your HSA. However, if you use HSA funds for other than qualified medical expenses, those distributions will be subject to ordinary income tax, and in some cases, a 20% penalty.
You may close your account without incurring tax penalties as long as you:

  1. Use the funds in your account for qualified medical expenses
  2. Transfer your funds to another HSA custodian
  3. Transfer your funds to another HSA custodian

I took a distribution from my HSA for a non-qualified expense, when will the 20% penalty be assessed?

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.

How are distributions from my HSA taxed?

Distributions from your HSA that are used exclusively to pay for qualified medical expenses for you, your spouse or dependents are excludable from your gross income. Your HSA funds can be used for qualified expenses and will continue to be free from federal income tax and states taxes (for most states) even if you are not currently eligible to contribute to your HSA.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20% penalty tax. If you are age 65 or older, disabled or for the year in which you die, the 20% penalty may not apply.

How are distributions from my HSA taxed after I am no longer eligible to contribute?

If you are no longer eligible to contribute because you are enrolled in Medicare benefits, or are no longer covered by a qualified HDHP, distributions used exclusively to pay for qualified medical expenses continue to be free from federal income tax and state taxes (for most states).

What tax forms do I need to know about if I am enrolled in an HSA?

You need to be aware of the following three HSA-related tax forms. (Please note, not all forms need to be attached to the tax return when it is filed.):

Tax Form 5498-SA: This form reports contributions made to your HSA by you or by an eligible individual on your behalf, as well as contributions made by your employer, if applicable. The IRS requires the HSA custodian to issue Form 5498-SA to every member who had any contribution activity in their HSA during the previous tax year. Form 5498-SA reports the Fair Market Value of an account, so you will get this form if your account has a Fair Market Value – regardless if any contributions were made to the account in the last year. You can access this form online by accessing your HSA; selecting "Tax Forms" from the "Member Services" tab or the "Quick Links" menu, – making sure to select the year for which the form is needed. You can access forms online for the prior three years.

Note: If you make a prior year (2013) contribution by April 15, 2014 you will receive an amended Form 5498-SA in May 2014.

Tax Form 1099-SA: This form reports distributions made from your HSA. The IRS requires the HSA custodian to issue Form 1099-SA if you took a distribution from your HSA during the previous tax year. You can also access this form by logging into the HSA; selecting "Tax Forms" from the "Member Services" tab or the "Quick Links" menu – making sure to select the year for which the form is needed. You can access forms online for the prior three years.

IRS Form 8889: You must obtain, complete and file IRS Form 8889 as part of the federal tax filing unless you received a filing extension. This form can be downloaded from the IRS website, or at: http://www.irs.gov/pub/irs-pdf/f8889.pdf

Note: If both you and your spouse have an HSA, you must file two IRS Form 8889s (one for each account).

Am I taxed on the money that remains in my HSA?

All the dollars in your HSA, including earnings generated on those dollars, are completely free of federal income tax and state taxes (for most states) while in your account. You may have the option of selecting your own investment option(s) for savings above the minimum balance required for your transactional (checking) account.

The only time tax is ever owed on principal or interest distributed from your HSA is if the money is distributed for non-qualified expenses. If you use the funds for non-qualified expenses after you are 65 or disabled, you will only be subject to tax on the money you withdraw without the 20% penalty.

How is my HSA taxed?

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

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.

This does not include any contributions made to your account by your employer. You do not take any deductions for contributions made by your employer; rather employer contributions are excludable from income for federal income tax purposes and for most state income tax purposes.

By what date do I have to establish my HSA in order to receive tax-free reimbursements for qualified medical expenses?

Your HSA must be established before qualified medical expenses are incurred to receive distributions or reimbursements free from federal income tax and state income tax (for most states).

The "Establishment Date" of an HSA is important because you can only receive tax-free distributions to pay or be reimbursed for qualified medical expenses incurred after the date the HSA is considered "established". Remember to always keep receipts as proof for any expenses incurred in the event you are audited.

How do I report distributions from my HSA on my tax return?

How you report your distributions depends on whether or not you use the distribution for qualified medical expenses.

  • If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution, but you have to report the distribution on Form 8889. Follow the instructions for the form and file it with your Form 1040.
  • If you use a distribution from your HSA for non-qualified expenses, you must pay tax on the distribution. Report the amount on Form 8889 and file it with your Form 1040. You may have to pay an additional 20% tax on your distribution. There is no additional tax on distributions made after the date you are disabled, reach age 65 or die.

I took a distribution for qualified medical expenses, what records do I need to show the IRS so that the distribution remains tax free?

You must keep records (such as receipts) sufficient to show that:

  • The distributions were used exclusively to pay or reimburse qualified expenses;
  • The qualified expenses had not been previously paid or reimbursed from another source; and
  • The qualified expenses had not been taken as an itemized deduction in any year.
Do not send these records with your tax return. Keep them with your tax records.

What happens if I contribute more than my maximum annual contribution to my HSA?

If you contribute more than the maximum annual contribution to your HSA, you may withdraw the excess without penalty until the deadline (including extensions) for filing your tax return for the tax year for which the excess contribution was made. After that time, the funds are subject to both income taxes and an excise tax.

If I contribute more than my maximum annual contribution can I take the full amount as an above the line deduction?

No. You cannot take the excess as an above the line deduction. You have until the filing date of your federal tax return (including extensions) to take a distribution of the excess contribution from your HSA without incurring a 6% excise tax. The amount of the excess contribution is includable in your gross income for tax purposes.

I took a distribution for a doctor's visit that I didn't know was considered preventive care. The insurance company later paid the expense. If I return the funds to my HSA, do I still have to include the distribution as gross income and add the 20% penalty when I file my taxes?

If there is clear and convincing evidence that this was a mistake, you may repay the mistaken distribution no later than April 15 following the first year that you become aware of the mistake. Under these circumstances, the distribution is not included in gross income and the 20% penalty does not apply. You will need to keep records that document the actions you took.

I opened my HSA with a minimum deposit when I enrolled in my HDHP. I have not yet reached my maximum annual contribution. What is the last date that I may deposit the remainder of my maximum annual contribution and still take an "above the line" deduction?

You have until April 15, 2014 to contribute with respect to the 2013 tax year if you are a calendar year taxpayer.

How are domestic partners treated in regard to HSAs?

Unless your domestic partner qualifies as your dependent under federal tax laws, you cannot withdraw funds tax-free to pay for your domestic partner's qualified medical expenses.

My domestic partner is covered by my HDHP can he or she have an HSA and contribute to that HSA?

If your domestic partner is covered by a HDHP, he or she may be eligible to open and contribute to an HSA.

Do I pay taxes on the fees charged by the financial institution to maintain my account?

No. IRS rules consider these to be allowable distributions. These charges are paid tax-free.

Rollovers transfers FSAs and HRAs

Can I roll over or transfer funds from my HSA or Medical Savings Account (or Archer MSA) into a BenefitWallet HSA?

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

Can I roll over or transfer funds from my HSA to my IRA?

No. You can only roll your HSA funds into another HSA.

Can I roll over or transfer funds from my IRA to my HSA?

Yes. You are allowed 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 maximum annual contribution limit. The transfer must be a direct transfer from the trustee of your IRA to the custodian or trustee of your HSA.

Also, after making such a transfer, you must continue to participate in a qualifying HDHP 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 10% penalty tax on the transferred amount, except in the case of death or disability.

Can I roll over or transfer funds from my HSA to a spouse's HSA?

No. You cannot rollover or transfer an account balance to another person's HSA. This would result in a taxable distribution (i.e., a distribution that was not used for a qualified medical expense). Rollovers and transfers are only tax free to the extent they go from your existing HSA to another HSA set up in your name.

Can I contribute to an HSA and be covered by an HRA and/or FSA?

Under certain circumstances, yes, provided that the HRA and/or FSA do not pay first-dollar for any benefit that is covered by the HDHP. In addition, there are specific rules for how these may be combined; review the basics here, and talk with your Benefits Department or IRS.gov for full information.

What is the difference between health care flexible spending accounts (FSAs) and HSAs?

Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year is forfeited.

What is the difference between MSAs and HSAs?

HSAs have significant advantages over MSAs, such as:

  • Everyone participating in a qualified HDHP is eligible to participate in HSAs. MSAs limit participation to self-employed individuals and employees of small employers only.
  • You, your employer, family members or anyone else may contribute to your HSA. Only you OR your employer, not both, may contribute to an MSA in the same year.
  • HSAs offer larger tax-free contribution limits. For an MSA, the tax-free portion is limited to 65% of the annual deductible for individual coverage and 75% of the annual deductible for family coverage.

Can I transfer funds from my 401(k) to my HSA?s

No. Transfers from your 401(k) to your HSA are not permitted.

Investments

May I invest my HSA dollars?

Yes. Unlike other savings accounts, the HSA has no provision insisting you "use or lose" your account dollars at the end of the year. Any funds you do not use in a given plan year remain in your interest-bearing account for future qualified medical expenses. Over time you can build a nest egg of savings. You can elect to move some of your HSA dollars into an HSA Investment Account.

When can I start the HSA investment process?

Your BenefitWallet HSA begins with an FDIC-insured, interest-bearing checking (transactional) account; all HSA deposits are first credited to this account. Once your HSA checking account balance reaches $1,000, you may:

  • Elect to transfer the excess balance to an HSA Investment Account.
  • Transfer additional HSA dollars from your HSA checking account to your HSA Investment Account or add additional investment options online.
  • Establish an automatic investment schedule, which allows you to make regularly scheduled investments each month. You specify up to two days per month and a dollar amount you would like to invest (you may modify the days and the dollar amounts online) and that amount is automatically transferred from your HSA checking account to your HSA Investment Account.
Your HSA Investment Account offers 22 investment options from a variety of fund families.

Is the interest earned from my HSA Investment Account taxable income?

No. Contributions, interest, investment earnings and withdrawals (for qualified medical expenses) are not taxed for federal income tax and state income tax (in most states). Current taxes and IRS penalties may apply to nonqualified withdrawals. (For a list of qualified medical expenses, visit the IRS Web site at www.irs.gov)

Is there a minimum investment amount I would need to make?

There is no minimum investment. That means that your initial investment minimum can be as little as $1.00, once your HSA checking account balance reaches $1,000.

How often can I change investments?

You can move your assets among investments as often as you like. You will have access to your HSA Investment Account online, 24 hours a day and 7 days a week (other than during periods of scheduled maintenance).

Is there a fee for transferring funds back into my HSA checking account?

No. You can transfer HSA dollars back and forth between your HSA checking account and your HSA Investment Account online, at any time.

It is important to know that funds are not automatically transferred from your HSA Investment Account into your HSA checking (transactional) account to cover your qualified medical expenses. You must move funds to cover your HSA checks, debit card and online transactions.

What are my HSA investment options?

The following investment options are available to you:

How do I set up an HSA Investment Account?

The chart below provides the step-by-step instructions for setting up an HSA Investment Account:

Steps to Creating Your HSA Investment Account:
Step #1 Log on To your HSA Web site. (The Web site address can be found on your BenefitWallet HSA statement.)
Step #2 Click The "Investments" link
Step #3 Click "Continue", after reviewing the disclaimer.
Step #4 Click "NEXT", after reviewing the disclaimer.
Step #5 Create Your HSA Investment Account:
Step #5(a) Once you have reviewed what you will need to register a new HSA Investment Account, click "NEXT".
Step #5(b) Verify your e-mail address, answer questions about your basic investment goals and occupation (unless you are employed by a bank or broker/dealer, you will skip the section that requests employer details). Click "NEXT".
Step #5(c) The 4 authorization boxes. Click "NEXT" to acknowledge and agree to the HSA Investment Account terms specified.
Step #6 Click "NEXT" to acknowledge your successful HSA Investment Account registration.
Step #7 Click "ADD INVESTMENT" on the "Portfolio" screen.
Step #8 Check Your investment. Note: If you need help selecting an investment, refer to the Assessment Wizard found in the upper right of the screen. Click on "NEXT".
Step #9 Enter An "Invest From" account and a "Dollar Amount" (you may also establish an Automatic Payment schedule on this screen). Click "NEXT".
Step #10 Click "NEXT" after verifying the information you are requesting is correct.
Note: Only one HSA investment selection may be added to your portfolio at a time. If you would like to add another investment, return to the "Portfolio" screen and repeat steps #8-11.