Question: How do I access the money in my health savings account?
Answer: It depends on where you've set up your HSA account. You can simply make a withdrawal for qualified expenses if you like. However, the most convenient way is to use an HSA account provider who issues debit cards. You would use your debit card at the doctor's office, pharmacy, hospital, etc. This would be extremely helpful in keeping records of your HSA spending.
Answer: You can do so. However, any money withdrawn is fully taxable. Also, there is a 20% tax penalty for non-qualified withdrawals.
Question: What if I cancel my high deductible health plan, for example if I go to work for an employer with a traditional health plan?
Answer: You still own the account. You can continue to withdraw funds to pay for qualified expenses. However, you can't continue to contribute to the MSA after the high deductible health plan has been cancelled.
Q. What are the deductible options?
A. A high deductible health plan must offer a deductible of no less than $1,150 for an individual plan and $2,300 for a family plan. Insurance companies will also offer higher deductible plans, however, the deductible plus coinsurance (the employee's share of expenses over the deductible) cannot result in an individual paying more than $5,800 out of his/her own pocket in a calendar year. The out-of-pocket maximum for a family is $11,600. The deductible is included as part of the $5,800 or $11,600 maximum.
Q. How much can I contribute to the health savings account (HSA) in 2012?
A. You can contribute the lesser of your deductible or the IRS limits ($3,100 for an individual, or $6,250 for a family). The limits have been raised from the 2011 limits of $3,050 for an individual, and $6,150 for a family.
Question: Can I adopt an HSA if I'm over age 65?
Answer: No
Q. How often can I change the amount I contribute to the HSA?
A. You can change the contribution at any time and you can contribute as often as you like as long as you don't contribute more than the allow maximum.
Q. Where is my HSA contribution invested?
A. Your money can be invested in an interest bearing account or a mutual fund. You must set up your HSA account with a qualified financial institution. Many insurance companies have formed an alliance with a banking partner to fund the HSA. However, you are not obligated to use any specific HSA custodian. You can find the financial institution that best meets your needs and open an HSA account. There is not requirement that the HSA (Health Savings Account) and HDHP (High Deductible Health Plan) be associated.
Q. Are there specific fees for the HSA account?
A. There are fees associated with the HSA account that will vary by financial institution.
Q. If I am covered by my spouse's non-high-deductible health plan, can I still have my own HSA?
A. No.
Q. When can I make contributions to my HSA?
A. Anytime. Contributions made prior to April 15th can be deducted for the prior year's income taxes.
Q. Who is responsible to make sure I use my card for qualified expenses? Who does the recordkeeping?
A. You are responsible for the verification of qualified expenses for tax purposes. You do the recordkeeping.
Q. Is an MSA better than a 401(k) or IRA plan with respect to retirement?
A. It really is better and here's why: You can deposit money into both an HSA and a 401(k) account on a tax deferred basis. You can earn interest or capital gains for both plans with out paying current taxes. However, the big difference is that you can withdraw money from the HSA without ever paying taxes as long as the withdrawals are for qualified expenses. Qualified expenses include Medicare premium (currently $96.40 monthly for Part B--$192.80 for a married couple), Long term care premium or medical expenses, out of pocket vision, hearing, dental, or medical expenses. You can withdraw the money for non-qualified expenses too, but those withdrawals subject to taxes just like the 401(k) withdrawals. To the extend that you can use the HSA account to pay qualified expenses in retirement, the HSA has a great advantage over a 401(k) or other retirement plan because you can avoid taxes altogether.
Q. What expenses are qualified expenses for the purposes of HSA accounts?
Q. I take prescription medication. Would the HSA still work for me?
A. It depends. If the cost of your prescriptions is significant and would require you to withdraw most or all of the deposits you make to your HSA account, you may be better off with a traditional health insurance plan that provides a prescription drug card.
Q. What if I don't have enough money in the HSA to cover my expenses? Can I withdraw money later to pay for accumulated expenses?
A. This can happen during the first year or two after you adopt the HSA plan. You are allowed to accumulate expenses and reimburse yourself for expenses you've already paid out of your own pocket.
Q. At age 65, are ther restrictions for withdrawals?
A. No, you can withdraw your HSA account to supplement your retirement income or to pay qualified medical expenses. If you use the withdrawals for qualified expenses, the withdrawal is not taxed. If you withdraw money to supplement retirement income, it would be taxed in the same manner as your IRA or 401(kl).
Q. Can I have another health plan in addition to the HDHP (high deductible health plan)?
A. No, the regulations don't allow it.
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Frequently Asked Questions
The Basics
The Health Savings Account
- How much can I contribute to my HSA each year?
- How often can I change the amount I contribute to the HSA?
- Is an HSA better than a 401(k) or IRA plan with respect to retirement?
- What expenses can I pay for with my HSA funds?
- What happens to my health savings account if I cancel my high deductible health plan; for example if I go to work for an employer with a traditional health plan?
- What if I don't have enough money in the HSA to cover my expenses? Can I withdraw money later to pay for accumulated expenses?
- When can I make contributions to my HSA?
- Where is my HSA contribution invested?
- Who is responsible to make sure I use my card for qualified expenses? Who does the record keeping?
The Qualified High Deductible Health Plan
- If I am covered by my spouse's non-qualified health plan, can I still have my own HSA?
- I take prescription medication. Would the qualfied high deductible health plan and health savings account solution still work for me?
- What are the deductible choices for the high deductible health plans?
- What does "qualified" mean?
- What if I want to switch insurance companies for the High Deductible Health Plan?
- Can I have other health insurance in addition to the qualified high deductible health plan)?
Question: What is a qualified high deductible health plan (QHDHP)?
Answer: A qualified high deductible health plan is a health insurance plan that offers affordable monthlly premiums, and quality major medical coverage. However, these plans don't cover day to day expenses like office visits and prescriptions, until after the deductible has been met. All plans are required by law to pay for preventive care at 100% before you are required to pay toward your medical deductible.
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Question: How does this solution work?
Answer: There are two parts you must participate in for this solution to work; the qualified high deductible health plan and the health savings account. Once you are covered under a qualified high deductible health plan, you are eligible to open a health savings account. Once the health savings account is open, you can make pre-tax deposits into the account and use the funds to pay for qualified medical, dental, vision and other expenses tax-free.
Question: What is a health savings account (HSA)?
Answer: A health savings account is a tax advantaged financial account that allows the account owner to deposit pre-tax money and use it to pay for medical, dental, and vision expenses tax-free.
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