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11 Cards in this Set

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  • Back
What is a health savings account (HSA)?
An HSA is a tax-exempt trust or custodial account established for the benefit of an individual (not limited to employees) covered under a high-deductible health plan.
Who can contribute to an HSA?
Contributions can be made by the employer, employee or a family member (subject to gift tax.)
Are contributions to the HSA considered income? Are they taxable?
Contributions are deductible if made by the employee and are excludable from income and wages for employment tax purposes, if made by the employer.
Are contributions limited or restricted?
Contributions are limited to the amount of the high deductible health plans’ annual deductible, subject to a cap of $2,600 for individuals and $5,150 for families. These limits are indexed for inflation in future years.
Are distributions from the HSA taxable?
Distributions for qualified medical expenses are tax-free. Non-qualified withdrawals are taxable as income and are also subject to a 10% penalty, with exceptions to the penalty for Medicare eligibles, disability or death.
Does the money in an HSA earn interest?
Yes, HSAs can earn interest and earnings are tax-free.
What are the 7 most significant features of an HSA?
- HSA is owned by the employee (not the employer) and is portable, meaning it is not forfeited on termination;
- HSA ownership can be transferred to the spouse tax-free upon death of the account owner;
- There is no “use it or lose it” provision, funds can be rolled over from year to year;
- HSAs are open to everyone covered by a high deductible insurance plan, who is not simultaneously enrolled in another plan that provides the same benefits as provided by the high deductible plan;
- Contributions can be made by both employer and employee;
- Employer contributions are not subject to income tax;
- Employee contributions are tax deductible.
What can HSAs be used to pay for?
HSAs can be used to pay for qualified medical expenses, as defined under IRS Code 213(d). They may also be used to pay for long-term care insurance premiums, COBRA coverage, health insurance premiums while an individual is receiving Federal unemployment compensation and for Medicare eligible individuals for the purchase of any health insurance other than a medigap policy.
What’s an MSA? Does the HSA replace it? Does it replace an FSA?
An MSA is a Medical Savings Account, commonly referred to as an “Archer MSA.” It is similar to an HSA, but is limited to employees of small employers or self-employed individuals. HSAs will replace MSAs, which can no longer be established as of December 31, 2003. HSAs do not replace FSAs.
Can an FSA be offered alongside an HSA?
At this time, it appears that only a dependent care flexible spending account can be offered alongside an HSA. We will be asking for additional Treasury Department guidance on this question.
Can a carve-out prescription drug plan be offered alongside an HSA or does the prescription benefit have to apply to the deductible?
At this time, the Treasury guidance specifically identifies some allowed exceptions to the deductible requirement, including preventive care, dental and vision, but not pharmacy. As we interpret the guidance, prescriptions could not be carved out from the deductible. However, you could have a stand-alone RX plan with its own deductible.