Employee Services
Health Savings Account FAQ's

1. What is a Health Savings Account (HSA)?
2. What deductible amount does a High Deductible Health Plan require?
3. What happens once I meet the deductible?
4. Who is eligible for a Health Savings Account?
5. Who can contribute to the Health Savings Accounts?
6. How much can be contributed to the health savings account?
7. What types of medical expenses can I pay for with the funds I accumulate?
8. Can I save money in my HSA account for future expenses?
9. Will I get penalized if I use the money for non-qualified expenses?
10. Can I open a HSA at any bank?

1. What is a Health Savings Account (HSA)?
A Health Savings Account is a qualified High Deductible Health Plan (HDHP), coupled with a savings account, that employees can make contributions to, earn interest on, and make withdrawals from, all tax-free for qualified medical expenses now or in the future.

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2. What deductible amount does a High Deductible Health
Plan require?
To be considered a high deductible health plan, a plan design must require a minimum deductible of $1,100 for employee or $2,200 for family in calendar year 2007. This deductible is subject to change annually and moves with the cost of living adjustment (COLA). Please check with your insurance carrier to determine which plan designs qualify as high deductible health plans.

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3. What happens once I meet the deductible?
The insurance carrier will pay for eligible costs incurred after the deductible according to the level of coinsurance covered by the plan. For example, if the plan covers 100% coinsurance, all eligible medical costs will be covered at 100% after the deductible has been met.

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4. Who is eligible for a Health Savings Account?
You can open and contribute to a Health Savings Account if, on the first day of the month, you are also covered under a high deductible health plan. You are eligible if you are:

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5. Who can contribute to the Health Savings Accounts?

You. If your employer offers a Cafeteria 125 Plan, you can contribute through a payroll deduction. You may also contribute after-tax money to your HSA and take an above-the-line deduction on IRS Form 1040 at tax time.

Your employer. Your employer is not required to contribute to your HSA. However, if your employer does, the contributions are excluded from your federal taxable income.

A third party. Another individual, such as a family member or friend, may contribute to your HSA and you are able to take an above-the-line tax deduction for this contribution
as well.

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6. How much can be contributed to the health savings account?
The total annual contribution amount is limited to the lesser of the deductible or, for 2007, $2,850 for employee-only coverage and $5,650 for family coverage. These limits are adjusted each year for inflation.

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7. What types of medical expenses can I pay for with the funds
I accumulate?
You can use the money in the account for qualified medical expenses covered under Code Section 213(d) Medical Expenses. Additionally, you may use the funds for certain types of insurance premiums including COBRA premiums, long- term care insurance premiums (limitations apply), health insurance premiums during a period when an individual is receiving unemployment compensation and, for individuals over age 65, premiums for Medicare Part A, B or D.

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8. Can I save money in my HSA account for future expenses?
Any money accumulated in a Health Savings Account earns interest (tax-free) and can be saved to offset future medical expenses. Unlike flexible spending accounts offered by employers, which require that you use all the money you save in that year, the money in a health savings account is your money and can be used for qualified medical expenses now or in the future.

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9. Will I get penalized if I use the money for
non-qualified expenses?
If you use the money for non-qualified expenses, the money will be subject to applicable income tax and you will also be assessed a 10% penalty tax. You are responsible for reporting distributions for non-qualified expenses in your federal tax return.

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10. Can I open a HSA at any bank?
Banks and/or financial institutions need to be qualified to offer Health Savings Accounts. Most insurance carriers have banking arrangements integrated with the high deductible health plan. Otherwise, check hsafinder.org for a list of banks that qualify to offer HSAs.

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