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HEALTH SAVINGS ACCOUNT (HSA)

<- See "Top 10 Questions" link at left regarding HSA's and new health care law.

Have HSA questions? Click on one of the following for more details

1   What is a Health Savings Account (HSA)?
2   What power does an HSA give you?
3   Who is eligible for a federally tax-deferred HSA?
5   What are the contribution limits?
6   How much does an HSA cost?
7   What Health Care Expenses are HSA Qualified?
8   Note on payment of health plan premiums.
9   Note on compliance with your health plan.
10 U.S. Treasury, IRS Publications.
11
Firms providing Health Savings Accounts

What is a Health Savings Account (HSA)?

  • An HSA is a savings account that you use to reimburse yourself for your routine health care expenses that are not reimbursed by your medical plan.  Of course if you have a major medical expense not covered by your medical plan, then you may pay the provider directly out of your HSA account.  (However, since most HSA plans allow limited fee free disbursals each month, it is best to accumulate small, un-reimbursed expenses to minimize the number of draws you make on your HSA account.)
  • HSAs contain funds that are owned and controlled by you, the account holder.
  • HSA savings rollover every year for your health care expenses and/or retirement.
  • An HSA is portable, the funds remain with you regardless of employment.

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What power does an HSA give you?

  • The power to choose the health care professionals, services, and products that are best for you.
  • The power to save money by purchasing a lower-cost, high-deductible insurance plan.  HSA funds reimburse you for your qualified and routine health care expenses; insurance kicks in when you have extraordinary health care expenses.
  • The power of financial security and retirement planning with HSA contributions that are tax deductible and earn interest tax deferred.

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Who is eligible for a federally tax-deferred HSA?

  • Individuals under the age of 65 are eligible to contribute to an HSA if they have a qualified High Deductible Health Plan (HDHP).
  • For self-only policies, a qualified HDHP must have a minimum deductible of $1,100 with a $5,600 cap on the out-of-pocket expenses (indexed annually).
  • For Family policies, a qualified health plan must have minimum deductibles and caps on out-of-pocket expenses (indexed annually). see below
  • Preventive care services are not subject to the deductible, In addition, coverage for accidents, disability, dental care, vision care, and long-term care are not subject to the deductible.
  • Critical: ALL providers must submit their bills to the insurance company:

  1. to ensure all covered charges are applied against the deductible and;

  2. to receive an insurance company's Explanation of Benefits (EOB) detailing the insurance company's review of all billed procedures and;
  3. listing the approval or disapproval of all procedures with appropriate explanations if disapproved; and
  4. perhaps more importantly, to receive details of the insurance company's negotiated rates for procedure, and;
  5. if the provider is a contracted provider with the insurance company, you are only responsible for paying the amount approved by the insurance company regardless of the amount billed by the provider; and;
  6. the EOB will suffice as proof of your having incurred qualified HSA charges .

Currently California tax law does not conform to federal HSA deduction rules.  Contact your tax advisor for more information.

Do you have to open an HSA if you have a High Deductible Health Plan?

  • No, you do not have to open an HSA.  Conversely, you cannot open an HSA unless you have a HDHP that meets IRS specifications.

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What are the 2011 contribution limits?

  • An accountholder is able to contribute Beginning in 2007, owners of any qualified HDHP may make the maximum contribution allowed by IRS limits without regard to the plan deductible. In other words, the If plan is qualified, the only limits are the below. The qualified plan deductible no longer is a limit. The IRS maximum limits are subject to change each year.

     

    2011 IRS Limits
      Single Plan Family Plan
    Minimum Deductible $1,200 $2,400
    Maximum Out-of-pocket $5,950 $11,900
    Maximum Contribution Limit $3,050 $6,150
    Catch-up Contribution (55+) $1,000 $1,000

     

    2010 IRS Limits
      Single Plan Family Plan
    Minimum Deductible $1,200 $2,400
    Maximum Out-of-pocket $5,950 $11,900
    Maximum Contribution Limit $3,050 $6,150
    Catch-up Contribution (55+) $1,000 $1,000

     

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How much does an HSA cost?

Most Health Savings Account Trust administers offer both qualified and non-qualified accounts. Some offer interest on the deposits you make into your HAS checking account and some trustees offer an investment option in mutual funds.  Most offer a Credit/Debit Check Card to provide easy access to the funds in your account.

Fee Examples

One-time Setup Fee:
Minimum Deposit Requirement:
Minimum Balance:
Annual Fee:

$35.00 - Set-up fees may be waived on rollovers.
$30.00 to $100.00
$30.00 to $100.00
$20.00 to $40.00

* Once paid/deducted, trustee fees are not refundable. Be sure your insurance is in effect before making HSA deposits.

Existing accounts may be rolled over to other trustees’ programs.  However, it is unlikely you will receive a fee refund from the trustee you are leaving.

Examples of Trustee/Bank Fees
Monthly service charges, most about $2.00. (Monthly service charges may be waived if account balance during the month does not drop below a set amount, for example $2500.00)

After minimum allowable per month free transactions, per check charge likely to apply.
Other charges may apply based on use.

Tips for Using Your HSA Checkbook and HSA Credit/Debit Card
Because most HSA plans allow limited fee free disbursals each month, it is best to accumulate small, un-reimbursed expenses to minimize the number of draws you make on your HSA account.

Pay small medical charges such as co-pays, Rx medication deductibles, etc. using your regular non-HSA checking account.  After accumulating these smaller charges reimburse yourself using your HSA Credit/Debit card or HSA checking account.

Remember to keep receipts and insurance company issued Explanations of Benefits for your tax records.

Please note!  Your funds must be deposited with qualified HSA trustee.  Most financial institutions are qualified trustees and can accept HSA deposits. 

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What Health Care Expenses are HSA Qualified?

Following is a partial list of medical and health care expenses deemed qualified by the IRS or federal courts. Consult IRS Publication 502http://www.irs.gov/pub/irs-pdf/p502.pdf ) and your tax advisor for more complete information. (Visit http://www.irs.gov/formspubs/index.html for all IRS forms and publications)

   

  Acupuncture
  Alcoholism (treatment)
  Ambulance (hire)
  Autoette or wheelchair
  Blind persons services
  Braces
  Capital expenditures - Home modifications for handicapped. Primary purpose must be medical care
  Car equipped to accommodate wheelchair and/or handicapped controls
  Childbirth preparation classes (mother)
  Chiropractors
  Christian Science treatment
  Contact lenses, replacement insurance
  Crutches
  Deaf persons - Hearing aid and batteries, Hearing aid animal and care, Lip reading expenses, Special education, modified telephone
  Dental fees
  Dentures
  Diagnostic fees
  Diapers (adult disposable) used due to severe neurological disease
  Doctor's fees
  Domestic aid - rendered by nurse
  Drug addiction recovery
  Drugs (prescription)
  Dyslexia language training
  Elevator alleviation of cardiac condition
  Eyeglasses and examination fee
  Fluoride device (on advice of dentist)
  Halfway house (adjustment to mental hospital)
  Healing services fees
  Health Maintenance Organization
  Hospital care
  Insulin
  Iron lung
  Laboratory fees
  Laetrile (by prescription)
  Lead paint removal

  Legal expenses (authorizing treatment of mental illness

  Lifetime medical care (Prepaid; retirement home)
  Limbs (artificial)
  Lodging (limited to $50/night)
  Mattress (prescribed for alleviation of arthritis) CA
  Membership fees (association furnishing medical services, hospitalization, and clinical care)
  Nursing home (medical reasons)
  Nursing services (board and Social Security paid by taxpayers)
  Obstetrical expenses
  Operations (legal)
  Optometrists
  Orthodontia
  Orthopedic shoes (excess costs
  Osteopaths
  Oxygen/oxygen equipment
  Prosthesis
  Psychiatric care
  Psychologists
  Psychotherapists
  Reclining chair for cardiac patient
  Remedial reading
  Retarded person's costs for special home
  Retirement home Lifetime medical care
  Sanitarium rest home (medical, educational, rehabilitative services)
  Schools (special, relief, or handicapped)
  Sexual dysfunction treatment
  Surgical fees
  Swimming pool (treatment of polio or arthritis)
  Teeth (artificial)
  Television (closed-caption decoder)
  Therapy treatments (prescribed by a physician)
  Transportation (essentially and primarily for medical care)
  Vitamins (prescription)
  Wheelchair or autoette
  X-rays

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Note on payment of health plan premiums:
The following appears on page 7 of the 2004 edition of IRS Publication 502, under the heading of Insurance Premiums: “You can include in medical expenses insurance premiums you pay for policies that cover medical care.....” and on page 6 of the 2004 edition of IRS Publication 969, under the heading of Qualified Medical Expenses, “Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction.  These are explained in Publication 502,” and following under the heading of Special Rules for Insurance Premiums, “Generally, you cannot treat insurance premiums as qualified medical expenses for HSAs.....”  While it appears to be conflicting information, medical insurance premiums are NOT qualified and we believe that position will not be changed.  Therefore, do not use HSA funds for medical insurance plan premiums.  As always, we cannot give tax advice and you must seek such definitive guidance from your qualified tax advisor.

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Note on compliance with your health plan:
This is a brief description of Health Savings Accounts.

We are not qualified to and do not provide legal, health, or tax advice. Please consult your own legal, medical, and tax counsel for guidance on issues that may be affected by your specific circumstances.

U.S. Treasury, IRS Publications:

We suggest you or your advisor obtain copies of the IRS Publication 502, Medical and Dental Expenses, ( http://www.irs.gov/pub/irs-pdf/p502.pdf ) and IRS Publication 969, (19 pages) Health Savings Accounts and Other Tax-Favored Health Plans ( http://www.irs.gov/pub/irs-pdf/p969.pdf )

Firms providing Health Savings Accounts
Clicking on their logos will take you off our site to theirs

Phone: 1-800-357-6246
Fax: 1-877-851-5274
Hours: Mon - Fri, 7 a.m. - 9 p.m., CST
For more information call 415.442.6200 or 800.358.8228 (outside CA).
Darrell Perkins
Senior Director, Sales
Northern California
Darrell.Perkins@SterlingHSA.com
Tel: 800.617.4729 ext. 228
Mobile: 408.821.3892
Customer service representatives - available to assist you Monday through Friday, 8:00 a.m. to 7:00 p.m. Eastern time
 
Steve Hansen
1010 W St. Germain St, Suite 150
St. Cloud, MN 56301
Steve.Hansen@hsaresources.com

(866) 757-4727 telephone
(866) 826-0104 fax
 

 

 

  

Disclaimer
Jackie & Jim do not sell HSA Accounts
nor do we receive commissions or finder's fees
 for recommending folks to a particular HSA company.
The links are provided as a convenience to browsers and our clients and
because clients and/or associates
have recommended them to us and our clients.

Notice to those considering a Health Savings Account:
Providing the links to companies offering HSA's does not imply Jackie and/or Jim's endorsement of any one company. We are not in the investment and banking business and are not qualified to render such endorsement. We provide this free listing resource as a convenience to clients and prospects. You may want to contact your own financial, accounting and/or legal advisors for more details.

If you have comments, good or bad, please let us know.

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Jackie and Jim Spahr
call or fax toll free:
1.800.237.0107 fax  1.888.356.5956
Jackie Spahr  Jim Spahr