HSA – Frequently Asked Questions

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HSA – Frequently Asked Questions

Open an HSA Account

HSA Basics

HSA Eligibility

HSA Contributions

HSA Distributions

Managing your HSA

Accessing your HSA after 65

The HSA Basics

What is a Health Savings Account (“HSA”)?

A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account. You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

What is a “High Deductible Health Plan” (HDHP)?

You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your deductible) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover. For 2018, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,350 (self-only coverage) or $2,700 (family coverage). HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.

How can I get a Health Savings Account?

Consumers can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. Your employer may also set up a plan for employees as well.

Open an HSA Account

How much does an HSA cost?

An HSA is not something you purchase; it’s a savings account into which you can deposit money on a tax-preferred basis. The only product you purchase with an HSA is a High Deductible Health Plan, an inexpensive plan that will cover you should your medical expenses exceed the funds you have in your HSA.

HSA Eligibility

Who is eligible for a HSA?

To be eligible for a Health Savings Account, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance” (see below) and will not jeopardize your eligibility for an HSA.

Can I get a HSA even if I have other insurance that pays medical bills?

You are only allowed to have auto, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.

Does the HDHP have to be in my name to open a HSA?

No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse’s name.

If I’m on Medicare, can I have a HSA?

You are not eligible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare.

I’m active-duty military and have Tricare coverage, can I have a HSA?

At this time, Tricare does not offer an HDHP options so you are not eligible for an HSA.

My employer offers an FSA, can I have both an FSA and a HSA?

You can have both types of accounts, but only under certain circumstances. General Flexible Spending Arrangements (FSAs) will probably make you ineligible for an HSA. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the plan deductible is met) FSA, then you can still be eligible for an HSA.

I don’t have a job, can I get a HSA?

Yes, if you have coverage under an HDHP. You do not have to have earned income from employment – in other words, the money can be from your own personal savings, income from dividends, unemployment or welfare benefits, etc.

Does my income affect whether I can get a HSA?

There are no income limits that affect HSA eligibility. However, if you do not file a federal income tax return, you may not receive all the tax benefits HSAs offer.

Contributing to your HSA

How much can I contribute annually to an HSA?

For 2023, the maximum annual HSA contribution is $4,660 for single coverage and $7,300 for family coverage

How do I open an HSA?

Typically, employees are offered the opportunity to open an HSA account through the HSA provider that is selected by their employer. However, because each account is tied to the individual, you can move your HSA to any provider who offers the solution. Individuals who may get their health insurance through an exchange or marketplace can open an account directly with any HSA providers who allow it.

We’re proud to offer our members a completely FREE HSA account for individuals through our partner Lively. No catches, no gimmicks, no sneaky fees.

Lively shares our values of empowerment, innovation and transparency. Here’s why we think Lively is the best HSA around:

  • They keep it simple. An easy-to-use and intuitive dashboard allows you to snap a pic of a receipt, upload it and they take care of the rest.
  • They make it affordable for those individuals who don’t have big corporate benefits to fall back on.
  • You’ll receive a personalized Lively Mastercard to use for qualified medical expenses.
  • No hidden fees, no minimums, no fine print, no nonsense.

Do my HSA contributions have to be made in equal amounts each month?

No, you can contribute in a lump sum or in any amounts or frequency you wish. However, your account trustee/custodian (bank, credit union, insurer, etc.) can impose minimum deposit and balance requirements.

Can my employer contribute to my HSA?

Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated to determine whether you have contributed the maximum allowed. If your employer contributes some of the money, you can make up the difference.

Do my contributions provide any tax benefits?

Your personal contributions offer you an “above-the-line” deduction. An “above-the-line” deduction allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.

If my employer contributes to my HSA, does that also provide me any tax benefits?

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).

Can I make contributions through my employer on a pre-tax basis?

If your employer offers a salary reduction plan (also known as a Section 125 plan or cafeteria plan), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the “above-the-line” deduction on your personal income taxes.

Does unused money, rolled over from one year to the next, count toward the max contribution level for the new year?

No, the amount in your HSA account does not count towards the maximum contribution level for the current or future years.

If I started my HDHP late in the year is my contribution amount pro-rated?

No, in this case you get special rules. The IRS allows you to contribute all the way up to the 2023 annual maximum limit of $4,660 . However, you have to keep your high deductible health plan (HDHP) coverage for a full 12 months of the year following.

I have been contributing to an HSA for all of 2019. I had surgery this month, however there is not enough money in my HSA to cover it. I paid a portion of it using my HSA, and the rest out of pocket. There will not be enough money in my HSA to reimburse me for the out of pocket costs until 2017. Would I be able to use 2018 contributions to reimburse myself for medical bills paid in 2019?

If you have used all of your HSA funds in 2019 and have been paying your medical expenses out of pocket, the personal funds used can be reimbursed to your personal checking/savings account in 2019 from your HSA contribution made in 2019.

The 2019 contribution allowances will be as follows:

INDIVIDUAL $4,660 age 55 + = $4,650 including the $1000 catch up contribution

FAMILY $7,300 primary age 55 + = $8,300 including the $1000 catch up contribution

If I’m an employee and have a spouse who is not age 65 but we are covered under my QHDP with family coverage and then I enroll in medicare but keep my QHDP with my employer (I want to coordinate the two plans – medicare and my employer’s plan) I realize that i can not continue to contribute into my QHDP – but can my wife establish a health savings account? And, if so, how much can she contribute?

Yes, if your wife opens an HSA and is not on Medicare, she can contribute to the HSA as long as you are still enrolled in an HSA plan. If she is over 55, she can contribute up to $4,650 in 2023. This includes the $4,660 individual contribution plus the $1,000 catch up contribution.

My qualified HDHP coverage was effective January 1, but I didn’t establish my HSA until June. Can I still make my maximum annual contribution, or is my contribution reduced by the number of months I didn’t have an HSA?

You can still make your maximum annual contribution. Your eligibility to contribute to an HSA is determined by the effective date of your qualified HDHP coverage. Your contribution for any given year depends on your enrollment in HDHP coverage by December 1 of that year and maintaining qualified HDHP coverage for the next 12 full months (13 months total). If you maintain qualified HDHP coverage for less than 12 full months, the maximum is prorated by the number of full months of coverage.

Can I contribute to an HSA and be covered by an HRA and/or FSA?

Under certain circumstances, yes, provided that the HRA and/or FSA do not pay first-dollar for any benefit that is covered by the HDHP. In addition, there are specific rules for how these may be combined; review the basics here, and talk with your Benefits Department or IRS.gov for full information.

Using your HSA

Does an HSA pay for the same things that regular insurance pays for?

HSA funds can pay for any “qualified medical expense”, even if the expense is not covered by your HDHP. For example, most health insurance does not cover the cost of over-the-counter medicines, but HSAs can. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.

How do I know what is included as qualified medical expenses?

Review our List of the Most Common Qualified Medical Expenses. For further information, refer to IRS publication 502 PDF icon.

Who decides whether the money I’m spending from my HSA is for a qualified medical expense?

You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.

What happens if I don’t use the money in the HSA for medical expenses?

If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.

Are dental and vision care qualified medical expenses under a Health Savings Account?

Yes, as long as these are deductible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses but routine dental procedures qualify as eligible hsa expenses.

Can I use the money in my HSA to pay for medical care for a family member?

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty. This is one of the great advantages of HSAs.

Can I use my HSA to pay for medical services provided in other countries?

Yes.

Can I pay my health insurance premiums with an HSA?

You can only use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer.

Can I purchase long-term care insurance with money from my HSA?

Yes, if you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. See IRS Publication 502 for the amounts deductible by age.

I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?

Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

Do unused funds in a Health Savings Account roll over year after year?

Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.

What happens to the money in a Health Savings Account after you turn age 65?

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or a Medigap policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.

Can I use my HSA to pay for medical expenses incurred before I set up my account?

No. You cannot reimburse qualified medical expenses incurred before your account is established. We recommend you establish your account as soon as possible.

How do I use my HSA to pay my physician when I’m at the physician’s office?

If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit. If your physician does not ask for payment at the time of service, the physician will probably submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an “Explanation of Benefits” from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician may then send you a bill for payment.

I understand that the money contributed to this account is before taxes, but is the services and healthcare expenses also tax free?

I would like to roll money from a 401k and 457 account that I had at previous employer into my new HSA as my one time rollover. Do I have to put it into an IRA first? could I even make a quick turn around in that instance?

Transfers from an IRA are allowed from 2007 onward. Only one transfer from an IRA to an HSA is allowed, and the transferred amount cannot exceed the maximum annual contribution to the HSA for the year in which the transfer occurs. All IRA transfers must be in cash to ensure the transfer is coded as a contribution for the year. Transfers are allowed from IRAs and Roth IRAs; transfers are not allowed from a SIMPLE IRA. IRA transfers count against the HSA contribution limit for the year the transfer is made and must be transferred by December 31 of the same year.

For inherited IRA to HSA transfers, after the death of an IRA or Roth IRA owner, a qualified HSA funding distribution may be made from an IRA or Roth IRA maintained for the benefit of an IRA or Roth IRA beneficiary. This distribution will be taken into account in determining whether the required minimum distribution has been satisfied from the IRA.

Please note:

  1. IRA to HSA contributions are not tax deductible as an HSA contribution.
  2. A qualified HSA funding distribution from an IRA enjoys an exception to the normal rule that IRA distributions are subject to tax and possibly a 10% penalty. The law allows for the basis (after-tax dollars) to remain in the IRA to the extent that such amount does not exceed the aggregate amount which would have been so included if there were a total distribution from the IRA or Roth IRA owner’s accounts. Basis is an important, but confusing, tax concept and suggest you consult with a tax adviser.

Can HSA Funds can be used to pay for spouse’s qualified medical expenses if they are under 65 and enrolled in Medicare Part A?

Yes – HSA funds can be used to pay for qualified medical expenses for a spouse who is on Medicare.

Can I roll over or transfer funds from my HSA to a spouse’s HSA?

No. You cannot rollover or transfer an account balance to another person’s HSA. This would result in a taxable distribution (i.e., a distribution that was not used for a qualified medical expense). Rollovers and transfers are only tax free to the extent they go from your existing HSA to another HSA set up in your name.

Managing your HSA

Who has control over the money invested in a Health Savings Account?

The account holder controls all decisions over how the money is invested. You can also choose not to invest your funds.

Can the funds in an HSA be invested?

Yes, you can invest the funds in your HSA. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds, and certificates of deposit.

Will my bank notify me if I’ve exceeded my allowable contribution amount?

No, it is your sole responsibility to keep track of the amounts deposited and spent from your account, just like a normal savings or checking account.

Can I borrow against the money in my HSA

No. You may not borrow against it or pledge the funds in it. For more information on prohibited activities, see Section 4975 of the Internal Revenue Code.

Can I roll the money in a Health Savings Account over into an IRA?

You cannot roll the HSA funds over into an IRA. They will stay in the HSA or be rolled into another HSA.

Can I roll over an IRA, 401(k) or other retirement plan into an HSA?

An individual can now make a one-time, irrevocable transfer from an IRA to an HSA. The transfer does count against the annual contribution maximum and requires the individual to be in an HSA-eligible HDHP for a period of 12 months after this transfer is complete.

What happens to the money in my HSA when I die?

What happens depends on how the HSA is designed. If your spouse is designated as the beneficiary by you, your spouse becomes the owner of the HSA when you die. If you provide that it goes to your estate or other entity, the value of the HSA at death is income to the estate or other entity.

Accessing your HSA Funds after age 65

If I’m on Medicare, can I have a HSA?

You are not eligible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare.

How do I access the funds after I reach age 65?

Once you reach age 65 your funds can be withdrawn at any time and are only subject to ordinary income tax. However, you may avoid any tax by continuing to use the funds for qualified medical expenses.

For those over age 65, you can use your HSA to pay for:

  • Medicare Part A premiums
  • Medicare Part B premiums
  • Medicare Part D (prescription drug plan) premiums and copays
  • Medicare HMO, Medicare Advantage, or Part D plan premiums
  • Employee premiums for employer sponsored health insurance

However, although you can use your HSA to pay for Medicare Advantage plans, you CANNOT use your HSA to pay for Medicare Supplement Plan premiums.

Can I use my HSA funds to pay for Medicare part A or part B premiums after I reach age 65 or do I need to wait until my spouse is also 65?

Yes, when one of you starts receiving and getting billed for Medicare, you can use the HSA to pay those Medicare costs (or reimburse yourself if Medicare is taken directly out of your Social Security Check). Of course, as soon as you hit age 65 and accept Medicare you are no longer eligible to contribute to the HSA (starting in the month of your 65th birthday). An eligible spouse under age 65 can continue to contribute to their HSA and may use that HSA to pay for other spouse’s Medicare part A or part B premiums.