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What is an HSA?
An HSA is a special tax free account designed exclusively for the benefit of account holders covered under a high-deductible health plan (HDHP) to use towards qualified medical expenses. The medical expenses can be incurred by the account holder, his or her spouse or dependents. Small businesses can combat rising medical insurance costs by switching to an HDHP/HSA combination for their employees.
What is an HDHP?
A high-deductible health plan (HDHP) is a health insurance policy that meets certain dollar limits. The annual deductible must be at least $1,000 for individual coverage and at least $2,000 for family coverage. The annual deductible plus out-of-pocket expenses cannot exceed $5,100 for individuals and $10,200 for families. Anyone under the age of 65, who is enrolled in a qualified HDHP, can make tax-free contributions into an HSA.
What are Qualified Medical Expenses?
In order for HSA assets to retain their tax-free status, they may only be withdrawn and used for certain expenses. These expenses include:
- Actual medical expenses, including doctors visits, prescriptions, transportation to get to medical care, and dental care.
- Long-term care insurance.
- Healthcare coverage when unemployed.
- Certain continuation-of-benefit healthcare coverage.
- Certain health insurance after age 65.
Contribution Limits.
Contributions into your HSA are limited. The annual contribution limit is the lesser of your annual plan deductible or $2,650 for an individual and the lesser of your deductible or $5,250 for a family. Both an employee and an employer can contribute to their HSA as long as the total annual contribution does not exceed their limit.
Advantages of HSAs.
HSAs offer several advantages to eligible individuals. They include:
- Contributions are excluded from income.
- Earnings are tax deferred.
- If used for qualified medical expenses, HSA assets are never taxed.
- Unused HSA assets may be used for retirement; however, they will be subject to a 10 percent penalty until the HSA account beneficiary turns age 65. If not used for medical expenses, they will be subject to income taxes.
- Upon death, HSA assets become the property of a named death beneficiary, or the HSA account beneficiary's estate.
- Assets contributed to an HSA by an employer belong to the employee. Thus, if an employee leaves a company, he can take the HSA assets with him.
- Money not spent remains in the account from year to year.
- Employees can withdraw funds from their HSA either by cash, check or debit card.
Account Features.
This is a variable interest rate checking account which offers the following features:
- Unlimited check writing.
- Free first order of checks
- Free debit card.
- Free online banking.
- $100 minimum balance to open the account.
- $20.00 plan setup fee
- $2.00 monthly fee.
- $20 transfer/closure fee
To learn more about the benefits of Health Savings Accounts and to learn how First Federal Bank can help, stop by or give us a call at 253-2605 ext. 335.
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