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Note: The Credit Union cannot give you tax or legal advice on how establishing an HSA, contributing to it, qualified medical expenses or making rollovers or transfers to and/or from an HSA applies to your particular situation. The information contained within these FAQs is believed accurate; however, you should talk to your attorney or other tax advisor about these matters before making any decision concerning an HSA.
Need more information about Health Savings Accounts? Check out the list below for the answers to some of the most common questions our members have.
What is a Health Savings Account?
A Health Savings Account (HSA) is an account that you can put money into to save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment.
Who Can Have an HSA?
Any adult can contribute to an HSA if they:
- Have coverage under an HSA-qualified "high deductible health plan" (HDHP).
- Have no other first-dollar medical coverage (other types of insurance like specific injury insurance or accident, disability, dental care, vision care, or long-term care insurance are permitted).
- Are not enrolled in Medicare.
- Cannot be claimed as a dependent on someone else's tax return.
Contributions to your HSA can be made by you, your employer, or both. However, the total contributions are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return.
Contributions to the account must stop once you are enrolled in Medicare. However, you can keep the money in your account and use it to pay for medical expenses tax-free.
What are High Deductible Health Plans (HDHPs)?
You must have coverage under an HSA-qualified "high deductible health plan" (HDHP) to open and contribute to an HSA. Generally, this is health insurance that does not cover first-dollar medical expenses. Federal law requires that the health insurance deductible be at least $1,100 in 2007 and 2008 for self-only coverage and $2,200 for 2007 and 2008 for family coverage. In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed $5,500 in 2007 and $5,600 in 2008 for self-only coverage and $11,000 in 2007 and $11,200 in 2008 for family coverage.
In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for "preventive care" services on a first-dollar basis (with or without a co-pay). "Preventive care" can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.
How Much Can I Contribute to my HSA?
You can make a contribution to your HSA each year that you are eligible. You can contribute up to $2,850 in 2007 and $2,900 in 2008 if you have self-only coverage and $5,650 in 2007 and $5,800 in 2008 if you have family coverage. Contributions are due April 15 of the following year.
The following table illustrates how this works.
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HDHP
Deductible |
Maximum
HSA Deposit
(2007) |
Maximum
HSA Deposit
(2008) |
Single
Coverage |
$1,100 |
$2,850 |
$2,900 |
| $1,500 |
$2,850 |
$2,900 |
| $2,000 |
$2,850 |
$2,900 |
| $2,500 |
$2,850 |
$2,900 |
| $3,000 |
$2,850 |
$2,900 |
Family
Coverage |
$2,200 |
$5,650 |
$5,800 |
| $3,000 |
$5,650 |
$5,800 |
| $4,000 |
$5,650 |
$5,800 |
| $5,000 |
$5,650 |
$5,800 |
| $6,000 |
$5,650 |
$5,800 |
Individuals age 55 and older can also make additional "catch-up" contributions. The maximum annual catch-up contribution is as follows:
| 2007 |
$800 |
| 2008 |
$900 |
| 2009 and after |
$1,000 |
What Expenses Can My HSA Account Cover?
You can use the money in the account to pay for any "qualified medical expense" permitted under federal tax law. This includes most medical care and services, and dental and vision care, and also includes over-the-counter drugs such as aspirin.
You can generally not use the money to pay for medical insurance premiums, except under specific circumstances, including:
- Any health plan coverage while receiving federal or state unemployment benefits.
- COBRA continuation coverage after leaving employment with a company that offers health insurance coverage.
- Qualified long-term care insurance.
- Medicare premiums and out-of-pocket expenses, including deductibles, co-pays, and coinsurance for Medicare Part A or B.
You can use the money in the account to pay for medical expenses for yourself, your spouse, or your dependent children. You can pay for the expenses of your spouse and dependent children even if they are not covered by your HDHP. Any amounts used for purposes other than to pay for "qualified medical expenses" are taxable as income and subject to an additional 10% tax penalty. Examples include:
- Medical expenses that are not considered "qualified medical expenses" under federal tax law (e.g., cosmetic surgery).
- Other types of health insurance unless specifically described above.
- Expenses that are not medical or health-related.
After you turn age 65, the 10% additional tax penalty no longer applies. If you become disabled and/or enroll in Medicare, the account can be used for other purposes without paying the additional 10% penalty.
What Happens to My HSA When I Die?
If your spouse becomes the owner of the account, your spouse can use it as if it were their own HSA. If you are not married, the account will no longer be treated as an HSA upon your death. The account will pass to your beneficiary or become part of your estate (and be subject to any applicable taxes).
How Do I Open An Affinity HSA?
Members can obtain an application online, or by calling 800-325-0808 or by visiting any Affinity branch location. Non-members must become a member before opening an Affinity HSA. To learn more about the benefits of joining Affinity and to apply, click here.
Need More Information about HSAs?
Visit our online Financial Answer Center, download a complimentary HSA Quick Guide, or contact our Member Service Center.
The Department of the Treasury's website has additional information about Health Savings Accounts, including answers to frequently asked questions, related IRS forms and publications, technical guidance, and links to other helpful websites. The Department of the Treasury's HSA website can be found through www.treas.gov (click on "Health Savings Accounts") or you can access it directly.
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