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Effective January 1, 2011 you may no longer use your HSA to purchase over-the-counter medications without a doctor’s prescription. However, if you get a doctor's prescription for over-the-counter drugs then you can still purchase them using your HSA. The rule against buying over-the-counter drugs with you HSA does not apply to non-drug over-the-counter items such as bandages or contact lenses cleaner and you do not need a doctor’s prescription for diabetic supplies.
The new law does not change the HSA contribution limits. However, new rules on the definition of what is a Qualified Health Plan could change your eligibility to contribute to an HSA in 2014 or later.
No. The new law will limit Flexible Spending Accounts (FSAs) contributions to $2,500 starting in 2013, but that new law does not apply to HSAs.
You can continue to use any amounts in your HSA for eligible medical expenses or save it for later even if you are no longer eligible to contribute more to your HSA. This is important to know in case you do change plans to a non-HSA eligible plan to comply with the new law. The HSA remains one of the best tax favored options available. One good strategy is to accumulate assets now in the HSA to prepare for whatever happens.
The new law is a foundational change to our health care and insurance system and mostly likely will impact everyone. For now; however, the combination of a High Deductible Health Plan and HSA remain very competitive and a good choice for many businesses and consumers.
The account does not ever have to be opened. Employers are under no obligation to provide HSAs to their employees. However, for employees to be able to take advantage of the ability to pay for medical expenses using pretax funds, the account must be established before the expense has been incurred.
No, employers are under no obligation to make any contributions to their employee’s HSAs. Many employers find that making a contribution may help improve employee acceptance of adopting an HSA plan especially if they are transitioning from a more traditional type of health coverage. If an employer elects to contribute to an HSA outside of a cafeteria plan, the contributions must be comparable. We have developed a simple worksheet that helps you evaluate comparability: view our Employer Comparability Worksheet.
Yes. An employer may fully fund the employee’s HSA at the beginning of the year however, HSAs belong to the individual and not the employer and the employer has no further control over the accounts after they have been funded. As a result, many employers elect to fund employees HSAs periodically thoughout the year.
The tax treatment depends on how the business is incorporated. For sole proprietors, partnerships, and S-corporations, contributions to a partner’s HSA will be treated as a distribution to the partner and included in the partner’s income and may be deductible by the partner but not by the business (see IRS Notice 2005-8 for treatment of HSA contributions in exchange for guaranteed payments of services rendered for partners and 2-percent shareholder employees of S-corporations). For larger corporations, employer contributions are treated as employer provided coverage for medical expenses under an accident or health plan.
Yes. Employers may make pre-tax contributions to their employee’s HSAs if they have a cafeteria plan in place that provides for HSA contributions. These contributions are not subject to witholding from wages for income tax or subject to FICA, FUTA or the Railroad Retirement Act.
In general, employer matching contributions would likely violate comparability testing (i.e., they must make comparable contributions for all eligible individuals with comparable coverage during the same period). However, matching contributions through a section 125 cafeteria plan are not subject to comparability testing (but section 125 nondiscrimination rules would apply).
Yes. Under certain limited circumstances it is possible for employees to fund an HSA in addition to a health FSA. Integration of these plans must be carefully constructed so that the benefits being reimbursed under the health FSA are limited to benefits not paid by the high deductible plan. For example, it would be possible to have an vision and dental FSA, as long as the high deductible plan does not cover vision or dental benefits.
No, the employer is not responsible for policing the employee’s HSAs. The individual account holder is responsible for determining that their account funds are being properly used and would be required to provide supporting evidence on the use of their funds if requested under IRS audit.
Employees contributing to an HSA through a cafeteria plan may make adjustments to their contributions at any time, as long as the change only affects future contributions.
Your HSA belongs to you regardless of your employment. If you lose your job and elect to retain your HDHP under COBRA you may even pay the COBRA premiums from your HSA. See our whitepaper for more information.
Some employees object to the switch from traditional health insurance to a combination of a High Deductible Health Plan and HSAs. Read our article on Overcoming Employee Objections to HSAs for some tips on how to address this issue.
Read our article on HSA Programs for Groups: Employer Versus Employee Responsibilities for a complete review of the compliance aspects of HSA programs.
Anyone, individuals, employees and employers, can open an HSA but you must have a corresponding high deductible health policy. More technically, an HSA can be established for any individual that meets all of the following:
For more information please see our Eligibility & Contribution Worksheet
No, everyone is eligible.
You may, but in order to qualify for an HSA you must be an eligible individual (see above) and have a qualified high deductible policy (an HDHP). A qualified HDHP is one that has specified minimum limits for the annual deductible and maximum limits for out-of-pocket expenses. Specifically, for individual coverage the HDHP must have an annual deductible of at least $1,300 and require that annual out-of-pocket expenses (includes co-payments and deductibles but not insurance premiums) paid not exceed $6,550. For family coverage the limits are an annual deductible of not less than $2,600 and require that out-of-pocket expenses not exceed $13,100. These are 2016 limits.
If your spouse has an individual policy and no other insurance and you are otherwise qualified (see above), you are eligible to have an HSA. However, if your spouse participates in an FSA you would not be eligible for an HSA if your spouse can use the FSA for your general health expenses. This is because you are not eligible for an HSA if you are covered by “other insurance”. Even though you are not covered by your spouse’s health insurance, the IRS has determined that your spouse’s FSA is considered “other insurance” thus rendering you ineligible for an HSA. An exception to this rule exists for limited purpose FSAs (those that cover vision and dental expenses only) and you would be eligible for an HSA if your spouse had a limited purpose FSA.
To open your HSA with HSA Resources simply complete an application.
No. The HSA can be set-up with any qualified trustee or custodian. Many people are choosing to open their HSAs with a provider that is different from their insurance company to take advantage of lower fees and establish independence in the event that they change insurance providers.
An HSA is a trust or custodial account that can hold many different types of assets; including, both FDIC insured investments and others. If your money in your HSA is placed into an FDIC insured deposit account, an FDIC checking account for instance, then it will enjoy FDIC insurance.
Before you can open a Health Savings Account with HSA Resources you must first be insured with a High Deductible Health Plan (HDHP).
Generally, no. As long as your spouse’s non-HDHP does not cover you, you remain an eligible individual and can participate in an HSA. If your spouse had a family non-HDHP and you were not exempted from that coverage then you would not be an eligible individual and would not be able to participate in an HSA. However, if, for example, your spouse had a family non-HDHP to cover himself and your two children only, then you would still be eligible to open an HSA.
Yes. The HSA belongs to the individual not the employer and any eligible individual may open an HSA. As long as you are covered under a High Deductible Health Plan (HDHP) you may open and contribute to an HSA.
Yes. You may both open an HSA however, the total amount that may be contributed to your HSAs is still the contribution limit (see Contribution Limits below).
Your HSA belongs to you regardless of your employment. If you lose your job and elect to retain your HDHP under COBRA you may even pay the COBRA premiums from your HSA.
Any eligible individual may contribute to an HSA. For an HSA established on behalf of an employee both the employee and the employer may make contributions. Additionally, family members may make contributions on behalf of other family members as long as the other family member is an eligible individual (i.e., has a qualified HDHP and is not otherwise insured).
The guidelines for contribution maximums are shown below:
|Tax Year||HDHP Coverage||Contribution Limit||Catch-Up Contribution Limit||Total Contribution Limit|
|2017 and later||Self-Only||$3,350*||$1,000||$4,350*|
|*Subject to annual cost-of-living adjustments, if any.|
Contribution guidelines will be adjusted annually to account for CPI fluctuations.
Eligible individuals with self-only coverage may contribute up to $3,300 (2014), $3,350 (2015) and those with family coverage may contribute up to $6,550 (2014), $6,650 (2015). Caution: if this is your first year of HSA eligibility the amounts above may be reduced if you fail to meet a testing period. If you are an existing HSA owner, the amounts above may be reduced if you fail to maintain your eligibility for the full tax year.
No, if you have single coverage you are limited to the individual HSA contribution limit. You may use your HSA funds to pay for the qualified medical expenses of family members (see Distributions, question 6) however, the amount you may contribute to your HSA is limited by the level of your insurance coverage.
You can fund your account over time or all at once. Also, one of the large benefits for employees is that contributions are tax free; individuals’ contributions are made on a pre-tax basis, employer contributions are deductible as employer provided coverage for medical expenses and contributions on behalf of another family member are deductible (regardless of whether the person contributing itemizes their taxes).
A simple method to do this is to simply write a check to HSA Resources and send it to HSA Resources, 1010 West St. Germain Street, Suite 150, St. Cloud, MN 56301 along with a HSA Contribution form. This form tells us the tax year of the contribution (remember, between January 1 and April 15, you can make a current or prior tax year contribution). We also need to know the type of your contribution (regular or rollover) and we need your account number. If you prefer, you can write these three pieces of information on the check or separate letter instead of using the HSA Contribution form. If you want to make the contribution electronically via ACH either as a one-time or monthly contribution the HSA Contribution form will help you do that as well.
Eligible individuals who are over age 55 but under age 65 are allowed to make additional “catch-up” contributions to their HSAs. The catch-up contribution for 2011 is $1,000.
Yes; however, the catch-up amount cannot be combined and put into one HSA: each spouse must open an HSA and put the catch-up amount into his/her own respective HSA.
Yes. You may fully fund your HSA up to the contribution limit (please see our Eligibility & Contribution Worksheet.)
As long as you have not enrolled in Medicare Part A or B you are an eligible individual and may contribute to your HSA. Once you enroll in Medicare you may no longer contribute to your HSA. For most individuals this means you will no longer be eligible when you turn 65. You lose eligibility as of the first day of the month you turn 65. For example, if you turn 65 on July 21, you are no longer eligible for an HSA as of July 1. Your maximum contribution for that year would be 6/12 (you were eligible the first six months of the year) times the applicable federal limit (remember to include the catch-up amount in the federal limit).
If this is your first year of coverage under a HDHP and you start mid-year, you can contribute up to the full applicable federal limit; including a full catch-up amount if between ages 55–65, so long as you start your HDHP coverage no later than December 1 of that year. In this case; however, you will be subject to a testing period. The testing period requires that you maintain HSA eligibility for a period beginning on December 1 of the year you started and ending on December 31 of the next year. See our HSA Testing Period Worksheet for details.
If this is not your first year of the HSA and you stop your HSA eligibility mid-year, you are only allowed to contribute 1/12 of the applicable federal limit times the number of months you were eligible. please see our Eligibility & Contribution Worksheet.
You can make your HSA contribution until your tax filing due date (April 15 of the year following the tax year for most people).
You can make an HSA contribution even if you are no longer eligible if you are making it for a period when you were eligible. For example, assume you were eligible all of 2010 but you never opened or funded an HSA. Starting in 2011, you are no longer eligible. You can still make an HSA contribution in 2011 for 2010 (because you were eligible in 2010). Be careful as to how much you can contribute in a situation like this — (please see our Eligibility & Contribution Worksheet.)
In general you can use your HSA funds to pay for any qualified medical expense. Qualified medical expenses are a defined term created by the IRS and include: medical care, prescription drugs, and payment for long term care. View a more detailed list of qualified expenses.
Note: the qualified expenses must be incurred after the HSA has been established.
Expenses paid by the account beneficiary for medical care are covered. These expenses include:
View a more detailed list of qualified expenses. Generally, health insurance premiums are not qualified medical expenses however, in certain circumstances they can be qualified (e.g., certain amounts of Long Term Care Insurance or Medicare part A or part B for qualified individuals).
Yes, however, if the funds are withdrawn for any expense other than a qualified medical expense, the IRS will impose a 20% penalty tax. After you reach age 65 you can withdraw the funds without penalty but the amounts withdrawn will be taxable as ordinary income.
You can invest the funds in bank accounts, money markets, mutual funds and stocks. You may not invest in collectibles, art, automobiles or real estate. As the initial funds in your HSA may need to be used to for medical expenses we recommend you maintain a small balance in your checking account and consider more liquid investments until you have a good estimate of your needs.
Yes, the individual who establishes the HSA is required to maintain a record of the expenses sufficient to demonstrate that the distributions were for qualified medical expenses.
Yes, you may use your HSA to pay for the qualified medical expenses of any of your dependents so long as their expense is not otherwise reimbursed, see our Distribution Worksheet for more details.
You have your entire lifetime to reimburse yourself. As long as you had your HSA established at the time the expense was incurred, you save the receipt and it was not otherwise reimbursed, you can reimburse yourself for the expense from your HSA even years later.
Generally, you cannot treat insurance premiums as qualified medical expenses unless the premiums are for:
Note also that items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. For item (4), if you, the account beneficiary, are not 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not qualified medical expenses.
Yes, HSA distributions used to pay for Long Term Care Insurance premiums qualify as a tax-free, penalty-free distribution; however, the amount is limited. The amount allowed is based on age and adjusted for inflation each year. See Revenue Code 213(d)(10).
Yes. If an account beneficiary has attained age 65, premiums for Medicare Part D for the account beneficiary, the account beneficiary's spouse, or the account beneficiary's dependents are qualified medical expenses. See also Notice 2004-2 [DOC], Q&A-27, and Notice 2004-50, Q&A-4 and Q&A-45, regarding Medicare Parts A and B.
Yes, an MSA can be rolled over into an HSA. The process is very simple and straightforward. Simply complete an MSA Rollover Application and submit it to HSA Resources.
No, there are no limits and the entire balance can be carried over from year to year.
For individuals age 55 to 65 the HSA contribution limit has been increased by $1,000 for contribution year 2011.
Yes, the law allows a one-time transfer of IRA assets to fund an HSA. The amount transferred may not exceed the amount of one year’s contribution and individuals must be otherwise eligible to open an HSA. Transfers are not taxable as IRA distributions however; amounts transferred into an HSA from an IRA are not deductible. See our IRA to HSA Worksheet for details.
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 premiums for Medicare Part A or B, Medicare HMO and employee premiums for employer sponsored health insurance can be paid from an HSA.
You can use your HSA to pay for health insurance premiums of your spouse or dependents in the case when your spouse or your dependent are: (1) receiving health care continuation coverage through COBRA, or (2) are receiving unemployment compensation through a federal or state program. If you are not age 65, you generally cannot use your HSA to pay for the Medicare premiums of your spouse who is over 65.
If you do not already have a Falcon National Bank MasterCard™ you may add one by completing Section 1 of our Account Application. Please be sure to check the Debit Card box in the right hand corner and note on the form that you are an existing customer requesting a Falcon National Bank MasterCard™. Fax the completed form back to us at (320) 223-6310.
If you would like to add a Falcon National Bank MasterCard™ for another individual on your account, just complete Section 5 of our Account Application. Please be sure to include the name and account number of the existing account holder at the top of the page. Additional cards are $15 per card issued.
Yes; however, in order to be eligible for tax-free treatment you must use the funds received for an eligible medical expense or use the cash to reimburse yourself for previously made medical expenses.
You can use any Money Pass® ATM. Some ATMs charge a surcharge and others do not. Find a Money Pass® ATM that does not charge a surcharge.
To order an additional box of checks all you need to do is send an email to our customer service department. Please be sure to include your name and number of boxes of checks. Each box is $8 and contains 40 checks.
To reset your please contact a customer service representative at (866) 757-4727 x1 who will be happy to reset your password. Once you are signed in to online banking, you can sign up for self-reset to change your password on your own in the future (look for the “options” tab and then “password reset question”).
Yes. Get the details on telephone banking. To access telephone banking call 866.757.4727, extension 5.
If you did not check the box for a debit card on your application one would not have been ordered. Please call us at (866) 757-4727 x1 to get a card ordered for you.
For security purposes, your card must be activated from the number that you provided on your application, please confirm that you are calling from the number you provided. If you are still having difficulties contact a customer service representative. Note: your card may still be used to purchase items without being activated however, you will not be able to make cash withdrawals until it has been activated.
Debit card. This card is attached to a deposit checking account and not to a credit account and may be used anywhere MasterCard is accepted. You may also make cash withdrawals from cash machines using your Falcon National Bank MasterCard™, the maximum withdrawal is $200/day.
Please contact a customer representative at (866) 757-4727 x1. the cost is $10 per additional card issued.
There is an automatic limit of $1,000 per day placed on Falcon National Bank MasterCard™ transactions. If you would like to use your card for a transaction that will exceed that amount please contact customer representative at (866) 757-4727 x1 and they will modify your limit.
Banking law prevents us from opening a full HSA for customers that do not pass a review on ChexSystems®. In these situations, we will open an HSA savings account and typically provide an ATM card. The ATM card provides a method to pay or reimburse for eligible medical expenses. Alternatively, customers can provide a completed Distribution Form and will send a check. We can generally covert these savings accounts into full HSA checking accounts after a period of six months or one year.