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An HSA is a tax-advantaged account created to pay for qualified medical expenses for those enrolled in a High Deductible Health Plan (HDHP). HSA funds can be applied tax-free to qualified healthcare expenses that are not covered by your HDHP, as determined by your health insurance provider.
The funds in your HSA can used tax-free to pay for qualified medical expenses for you, your spouse and your dependents.
HSAs offer triple tax benefits*
In addition to tax benefits, unused HSA funds roll over and accumulate year to year without limit. After age 65, these funds can be used for qualified medical expenses tax-free or can be withdrawn for non-medical expenses at tax rates similar to an individual retirement account (IRA).
*Contributions are tax-deductible on your Federal tax return. Some states do not recognize HSA contributions as a deduction. Your own HSA contributions are either tax-deductible or pre-tax contributions, if contributions are deducted from payroll. See IRS Publication 969 and consult a qualified tax adviser for advice.
Contact us at (651) 225-2700 or (800) 223-2801 if you have any questions regarding your HSA.
If you have a High Deductible Health Plan (HDHP), you most likely qualify for an HSA. In addition to being enrolled in an HDHP:
A HDHP is a health insurance plan that meets certain deductibles and annual out of-pocket expense requirements. Consult with your health insurance provider to see if you are enrolled in an HDHP.
Your health insurance company can inform you if your plan is HSA-qualified or not. As the consumer, it is your responsibility to verify if your insurance plan is an HSA-qualified health plan.
You will no longer be able to contribute to your HSA, however, you are still able to use your HSA funds tax-free for qualified medical expenses.
You still qualify for an HSA if you choose to have other certain types of insurance. These types of insurances include liabilities incurred under workers’ compensation laws, tort liabilities, property liabilities, insurance for specific diseases and illnesses and insurance for hospitalization. The following types of coverage do not change your eligibility to open an HSA: accidents, disability, dental care, vision care, or long-term care.
No. An HSA is an individual health savings account and belongs solely to the owner. However, you can use your HSA funds to pay for qualified medical expenses for your spouse or dependents.
No. The HDHP policy does not have to be your name, but you must be covered by the HDHP policy and meet the additional requirements to open an HSA. You may still be eligible for an HSA even if the policy is in your spouse’s name.
Anyone can contribute to your HSA, while you are qualified to make contributions. The primary contributors are usually an employer, the account holder, or both. Others, including a spouse or non-family members, can contribute to your qualified account.
Yes, there are annual limits to how much you can contribute to your HSA. Google "HSA Contribution Limits" to find the current year's contribution limits.
No. You can contribute, or others can contribute on your behalf, even if you are retired, have no income, or your contributions are greater than your income.
Yes, yearly contributions must be made by the tax filing deadline, usually April 15 of the upcoming year. It is your responsibility to make final contributions by the correct date.
Yes, you may roll over funds from one HSA to another once every 12 months. Rollover funds do not count toward the annual contribution limit for your HSA. Contact us for assistance in conducting a trustee-to- trustee rollover to avoid or limit triggering penalties and taxes.
Yes, you can make a one (1) time tax-free rollover from your IRA to an HSA once in your lifetime. The amount is limited to the maximum HSA contribution limit for the year minus any contributions you’ve already made for the year.
The IRS states that qualified medical expenses are expenses paid by the account holder for “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Common qualified medical expenses include:
For a complete list of qualified medical expenses, view IRS Publication 502.
Over-the-counter (OTC) drugs are only eligible for payment or reimbursement from an HSA with a doctor’s prescription. Types of OTC drugs not covered without a doctor’s prescription include:
Insulin and prescribed drugs are still eligible for payment or reimbursement from an HSA. Save receipts and doctor’s prescriptions for OTC medicines for tax purposes.
As the owner of the account, you are ultimately responsible for determining whether an expense is a qualified medical expense or not. City & County Credit Union does not determine if an expense qualifies as a tax-free expense. Consult your tax advisor if you have any questions.
For most individuals, health insurance premiums are not a qualified medical expense. Health insurance premiums are considered a qualified expense if they are for:
For individuals over 65, Medicare Parts A, B, and D are considered qualified medical expenses. Medicare supplemental is not considered a qualified expense.
For a complete list of a qualified health insurance premiums, view IRS Publication 502.
Yes, but any HSA funds used to pay for non-qualified medical expenses will require you to pay income tax and a 20% tax penalty on the amount you use.
The 20% penalty does not apply after death, after disability, or if you’ve reached age 65.
Yes, you can pay for qualified medical expenses in the past as long as the expenses were incurred after your HSA was established. Be sure to keep sufficient records to demonstrate that these expenses were not previously paid for by another source or deducted in any previous tax year.
It is ultimately your responsibility to ensure your HSA funds are only used for qualified medical expenses. Please consult IRS Publication 502 for more details or talk with your tax advisor to determine what medical expenses qualify.
You can access your HSA funds with your City & County Credit Union HSA debit card, online bill pay, or transferring funds from your HSA to your personal bank account.
You can find account information by visiting one of our branches, calling Member Connections or viewing your activity within mobile or online banking.
If your card is declined as you are attempting to make a qualified purchase, pay for your expense with another form of payment and reimburse yourself with HSA funds at a later date. For tax purposes, be sure to keep all receipts documenting the purchase and your reimbursement. Contact us if you have any questions or need additional assistance.
You may use another form of payment at the time of purchase and reimburse yourself with HSA dollars once you have funds available in your HSA account. For tax purposes, be sure to keep all receipts documenting the purchase and your reimbursement.
No, you cannot overdraw your HSA. Your card will be declined if you do not have sufficient funds in your HSA at the time of payment for a qualified medical expense.
HSA funds used for qualified medical expenses are not taxed. HSA funds used for non-qualified expenses are subject income tax and a 20% tax penalty. Exceptions to the tax penalty are distributions made after death, disability, or turning 65.
City & County Credit Union provides IRS Form 1099-SA and IRS Form 5498-SA to account holders. IRS Form 1099-SA is mailed at the end of January and reports distribution from HSA account during the previous tax year. IRS Form 5498-SA is mailed in May and records overall contributions for the previous year, which can be completed up until the deadline for filing the federal income tax return for the current year.
Yes. You need to file IRS Form 889-Health Savings Accounts with your federal tax return. This form reports your total deposits and withdrawals from your account. It is not an itemized form. Consult with your tax advisor for specific questions.
You should keep all records and receipts related to qualified medical expenses paid with your City & County Credit Union HSA funds. These records do not need to be submitted to City & County Credit Union but should be kept for tax purposes.
Keeping records of your HSA distributions is important in the case that you are audited by the IRS. If audited, the IRS may ask for receipts and records for qualified medical expenses paid with distributions from your HSA.
If you contribute more than the maximum annual amount to your HSA, the excess contributions aren’t deductible and are generally subject to a 6% excise tax on excess contributions. IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, will determine the excise tax.
You can avoid the 6% excise tax by withdrawing the excess contributions and applicable earnings by the due date of your tax return for the year contributions were made. Ask a tax advisor for more details.
Your HSA belongs to you, the account holder. If you change jobs or health plans, you can choose to keep your HSA at City & County Credit Union or roll it into a new fund at another institution. If you change your health insurance plan, consult with your health insurance provider to determine if you are still eligible to contribute to your HSA.
Your HSA funds are still available for you to use tax-free on qualified medical expenses even if you are no longer eligible to contribute to your HSA, due to changes in your health plan.
If your designated beneficiary:
The remaining funds automatically roll over and are available to use the next year.