What is an HSA?
An HSA is a type of savings account that allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. An HSA can be funded with your tax-exempt dollars, by your employer, a family member or anyone else on your behalf.
HSAs are subject to annual contribution limits. Individuals age 55 or older may be eligible to make a catch-up contribution of $1,000.
The 2022 contribution limits are as follows:
- $3,650 for individual coverage
- $7,300 for family coverage
The 2023 contribution limits are as follows:
- $3,850 for individual coverage
- $7,750 for family coverage
HSAs are currently only permitted to be used in conjunction with high deductible health plans (HDHPs).
What is an HDHP?
An HDHP is a plan that has a higher deductible, but typically has lower monthly premiums.
Why should I elect an HSA?
Enrolling in an HSA provides a variety of benefits, which include the following:
1. Cost savings—HSAs serve as a savings account for future medical expenses. Additionally, HSAs provide the following tax benefits:
- HSA contributions are excluded from federal income tax
- Interest earnings are tax-deferred
- Withdrawals for eligible expenses are exempt from federal income tax
Note: Some state tax laws do not provide favorable state tax treatment for HSAs. Therefore, amounts contributed to HSAs and interest earned on HSAs may be included on the employee’s W-2 for state income tax purposes.
2. Long-term financial benefits—Unused funds in an HSA are held in an interest-bearing savings or investment account and roll over from year to year. This enables account holders to save for future medical expenses.
3. More choices—With an HDHP/HSA, you are in control of your health care expenses. You choose when to use your HSA dollars to pay for your health care expenses, or when to save your HSA dollars and pay for health care expenses out of pocket. You decide whether to use your HSA to pay for nonmedical expenses and incur the additional taxes. Additionally, HSAs are portable, meaning you can take your account with you even if you leave the company.
When do I use my HSA?
After visiting a physician, facility or pharmacy, your medical claim will be submitted to your HDHP for payment. Your HSA dollars can be used to pay your out-of-pocket expenses (for example, deductibles and coinsurance) billed by the physician, facility or pharmacy, or you can choose to save your HSA dollars for a future medical expense.
You may also be able to use an HSA debit card to access your HSA funds, if your HSA custodian or trustee allows it.
You may use your HSA for nonmedical expenses. However, HSA dollars that are used for nonmedical expenses are taxable as income to you and are generally subject to an additional 20 percent penalty.
HSA – Health Savings Account Overview
- It saves you money. For individuals with few regular health expenses, paying a traditional health plan premium can feel like throwing money out the window. HDHPs come with much lower premiums than traditional health plans, meaning less money gets deducted from your paychecks. Plus, HSAs are basically “cash” accounts, so you may be able to negotiate pricing on many medical services.
- It’s portable. Even if you change jobs, you get to keep your HSA.
- It’s a tax saver. Contributions to your HSA are made with pre-tax dollars. Since your taxable income is decreased by your contributions, you pay less in taxes.
- It allows for an improved retirement account. Funds roll over at the end of each year and accumulate tax-free, as does the interest on the account. Also, once you reach the age of 55, you are allowed to make additional “catch-up” contributions to your HSA until age 65.
- It puts money in your pocket! You never lose unused HSA funds. They always roll over to the next year.
Can a health savings account (HSA) program save your organization money?
- We have all the information that you need to fully understand this plan option. Our educational materials will help you determine whether an HSA is the right choice for your organization.
Are you worried about legal compliance?
- We can help. We have a wealth of resources that you can use to remain compliant with federal regulations related to high deductible health plans (HDHPs) and HSAs.
Would you like help setting up your HSA program?
- To help you roll out a new HSA to employees, we have a game plan for you to follow, including preparation suggestions, sample announcements, educational materials and communication for you to use during open enrollment.
Green Financial Provides:
- High-Deductible HSA Compatible Plans
- HSA Bank Recommendations
- All Required Documentation
- Individual Counseling
- Employee Communications
HSA HDHP Limits Increase for 2023
Call us: 425-821-1111
We have been helping clients with HSAs since they were first introduced in 2003. We believe in HSAs and 100% of our staff are enrolled in HSA plans! We first enrolled in 2003. We can answer any question.