Health Savings Account (HSA)

A Health Savings Account (HSA) is a tax-advantaged account designed to help you pay and save for qualified medical expenses. An HSA is paired with a High Deductible Health Plan (HDHP) and offers an alternative to high-premium health plans. Find your simple, straightforward solution for health savings with an HSA.

Triple Tax Benefits

HSAs offer triple tax benefits*

  • Tax-deductible contributions  
  • Interest and investments grow tax-free
  • Pay qualified medical expenses tax-free

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 After age 65, these funds can be used for qualified medical expenses tax-free or can be withdrawn for non-medical expenses at tax rates similar to an individual retirement account (IRA).

Visit any of our locations or call (651) 225-2700 or (800) 223-2801 to see if an HSA is right for you.

*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 contributed pre-tax, if contributions are made by payroll deduction. See IRS Publication 969 and consult a qualified tax adviser for advice.


Frequently Asked Questions

Overview of HSAs

What is a Health Savings Account (HSA)?

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.

Why should I choose a City & County Credit Union HSA? 

HSAs offer triple tax benefits*

  • Tax-deductible contributions
  • Interest and investments grow tax-free
  • Pay qualified medical expenses tax-free

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 After age 65, these funds can be used for qualified medical expenses tax-free or can be withdrawn for non-medical expenses at tax rates similar to an individual retirement account (IRA).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.

Who do I call if I have questions about my City & County Credit Union HSA?

Contact us at (651) 225-2700 or (800) 223-2801 if you have any questions regarding your HSA.

Eligibility

Am I eligible to open an 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:

  • You must have a valid Social Security Number 
  • Your primary residence must be in the U.S.
  • Generally, you can't be covered under another nonHDHP 
  • You cannot be covered by any other health plan, including Medicare
  • You cannot be claimed as a dependent on another’s tax returns

What is a High Deductible Health Plan (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.

How do I know if my HDHP is HSA-qualified?

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.

What happens to my HSA if I am no longer enrolled in a 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.

What other kinds of health coverage can I have and still be eligible to open an HSA?

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.

May a husband and wife have a joint HSA?

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.

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

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.

Contributing to my HSA

Who can contribute to my HSA?

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.

Are there limits to how much I can contribute to my HSA?

Yes, there are annual limits to how much you can contribute to your HSA. Click on the current year on treasury.gov to find the current annual contribution limits.

How do I make contributions?

You can make contributions in the following ways:

  • Payroll deduction with your employer
  • Online contributions from a personal checking account
  • Mobile deposits via our online banking app
  • In-person deposits at one of our Twin Cities Branch locations

Do I need earned income in order to contribute to an HSA?

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.

Is there a deadline for contributions made to an HSA?

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.

Can I rollover or transfer money to my HSA from a previous health savings account?

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.

Can I make a tax-free rollover from my IRA to my HSA account?

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.

Using My HSA

What can I use my HSA funds for without being taxed?

You can use your HSA funds for qualified medical expenses without being taxed. IRS Publication 502 contains a current list of qualified medical expenses.

What are qualified medical expenses?

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:

  • Acupuncture
  • Ambulance services
  • Artificial limb or prosthesis
  • Dental treatment
  • Contact lenses
  • Doctor’s fees
  • Hearing aids and hearing aid batteries
  • Hospital services
  • Laboratory fees
  • Prescription medicine or drugs
  • Nursing home
  • Nursing services
  • X-rays

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:

  • Cold, cough, and flu medications
  • Allergy and sinus medications
  • Pain relief medications
  • Acid controllers
  • Sleep aids and sedatives

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.

Are health insurance premiums considered IRS-qualified medical expenses?

For most individuals, health insurance premiums are not a qualified medical expense. Health insurance premiums are considered a qualified expense if they are for:

  • Qualified long-term care insurance
  • COBRA health care continuation coverage
  • Health care coverage while an individual is receiving unemployment compensation under federal or state law

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.

Can I use my HSA to pay for non-health-related expenses?

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.

Can I use my tax-free HSA savings to pay for – or reimburse myself for – IRS-qualified medical expenses from a previous year?

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.

Who is responsible for making sure HSA funds are only used to pay for IRS-qualified medical expenses?

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.

Accessing & Managing My HSA

How do I access my HSA funds?

You can access your HSA funds with your City & County Credit Union Visa ® debit card, online bill pay, or transferring funds from your HSA to your personal bank account.

Where can I find information on my account activity?

You can find account information by visiting one of our branches, calling our customer service line or on your online eStatements.

What happens if my card is declined when I try to make an HSA-qualified purchase?

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.

I do not have enough funds to pay for all of an HSA-qualified expense. What should I do?

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.

Can I overdraw my HSA?

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.

Taxes & My HSA

Can my HSA funds ever be taxed?

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.

What forms does City & County Credit Union provide?

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.

Are there any special forms I need to submit with my federal tax return?

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.

What records and receipts should I keep?

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.

What happens if I contribute more than the allowed amount?

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.

What happens to my HSA if...

What happens if I change jobs or health plans?

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.

What happens if I die?

If your designated beneficiary:

  • Is your spouse – he or she becomes the owners of your HSA with no tax consequences.
  • Is not your spouse – the HSA will no longer be an HSA on the date of death and the value is taxable to the beneficiary.
  • Is your estate – your final tax return will include the value of your HSA at death.

What happens if I have additional funds in my HSA at the end of the year?

The remaining funds automatically roll over and are available to use the next year.


Savings