- A Health Savings Account is a savings account used to pay for health care expenses.
- To qualify for a Health Savings Account, a member must be enrolled in a qualifying High Deductible Health Plan (HDHP).
- Qualifying HDHP’s are those which have:
- Minimum Deductible of $1,050 per single and $2,100 per family.
- Provide for no first-dollar coverage except for some preventive services – no co-pays.
- Have a maximum out of pocket that is not more than $5,250 per single and $10,500 per family.
- High Deductible Health Plans generally have premiums that are significantly lower than a traditional Preferred Profider Organization Plan.
- Contributions made by the employee AND the employer are excluded from taxable income.
- HSA Contributions reduce the FICA liability for the employee AND the employer.
- Over 50% of employers make some contribution to the HSA.
- Contributions are limited to the deductible or the maximum contribution level, whichever is lower.
- The maximum contribution level for 2006 is $2,700 per single and $5,450 per family.
- Catch-up contributions are allowed for individuals age 55 or older – up to an additional $1,000.
- HSA funds are NEVER taxed when used for qualified medical expenses (QME’s).
- HSA funds may be used to cover QME’s for family members – even if they are not covered under the employee’s plan.
- HSA funds can be invested.
- The earnings on HSA funds are not taxed.
- A listing of QME’s can be found at www.irs.gov/publications/p502/ar02.html
- Non-Qualified spending from the HSA are subject to taxes and penalties.
- Medicare enrollees may not establish or contribute to an HSA.
- At age 65, or Medicare enrollment, HSA funds may be used for Non-Qualified Medical Expenses without penalties.
- Patient’s or members assume the responsibility of being better consumers of health care.
- Unused HSA funds carry over from year to year – there is no “use it or lose it” penalty with an HSA.
- HSA’s are portable – if you change plans or employers, you retain the balance in your HSA.
- HSA’s are not only for the healthy and the wealthy. Everybody benefits from paying for medical expenses with pre-tax dollars.
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