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General
Health Savings Accounts (HSAs) help individuals save for qualified medical and retiree health expenses on a tax-free basis.
Eligibility
Individuals under the age of 65 are eligible to contribute to an HSA if they have a qualified health plan.
- For self-only policies, a qualified health plan must have a minimum deductible of $1,100 with a $5,600 cap on out-of-pocket expenses (indexed annually). The out-of-pocket maximum of $5,600 includes the deductible.
- For family policies, a qualified health plan must have a minimum deductible of $2,200 with a $11,200 cap on out-of-pocket expenses (indexed annually). The out-of-pocket maximum of $11,200 includes the deductible.
Contributions
Contributions are allowed up to the maximum annual contribution limit of $2,900 for self-only policies and $5,800 for family policies (indexed annually)
Individuals age 55-65 may make additional "catch-up" contributions of up to $900 in 2008. A married couple can make two catch-up contributions as long as both spouses are at least 55 and have separate savings accounts. Catch-up contributions will help individuals accumulate assets for retiree health expenses.
Contributions may be made by individuals, family members and employers.
- Contributions made by individuals and family members are tax-deductible (for the account beneficiary) even if the account beneficiary does not itemize. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers will be allowed to offer HSAs through a cafeteria plan.
- A one-time rollover from an IRA and/or FSA is permitted until 2012.
Investment earnings accrue tax-free.
Fund Distribution
HSA distributions are tax-free if they are used to pay for qualified medical expenses,
such as:
- Amounts paid for the diagnostic, cure, mitigation, treatment or prevention of disease,
- Prescription drugs,
- Qualified long-term care services and long-term care insurance,
- Continuation coverage required by Federal law (i.e., COBRA),
- Health insurance for the unemployed,
- Medicare expenses (but not Medigap), and
- Retiree health expenses for individuals age 65 and older.
Distributions made for any other purpose are subject to income tax and a 10% penalty.
The 10% penalty is waived in the case of death or disability. The 10% penalty is also waived for distributions made by inidividuals age 65 or older.
Treatment or Death
Upon death, HSA ownership may transfer to the spouse on a tax-free basis.
Effective Date
January 1, 2008
Bill Brunk at 513.759.7644, or e-mail bbrunk@firstsourcebenefits.com.
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