Overview | Contributions | Distributions

Overview

To establish a Health Savings Account (HSA), you must be a participant in a Qualified High Deductible Health Plan (HDHP). The HDHP covers medical expenses after you meet your plan deductible. The HSA covers qualified medical expenses before the deductible is met. An HSA plan empowers you to take charge of your health, your money and your future.

Contributions

Maximum Contributions
For 2008, the maximum you may contribute to an HSA is $2,900 for single coverage or $5,800 for family coverage. You have no obligation to make contributions after the HSA is established.

Catch-Up Contributions
In addition to the 2008 HSA contribution limits of $2,900 for individuals and $5,800 for family coverage, if you reached age 55 before the close of a taxable year, you may also contribute an additional amount known as a "catch-up" contribution. The catch-up contribution limit is $900 for 2008, and is scheduled to increase by $100 each year until 2009 when it reaches $1000.

Employer Contributions
Employers may contribute to an employee's HSA, but the employer must make available comparable contributions on behalf of all "comparable participating employees." Contributions are considered comparable if they are the same amount or same percentage of the High-Deductible Health Plan (HDHP) deductible.

Partial Year Contributions
Beginning for contributions made for 2007 and thereafter, if an eligible individual is covered under a HDHP on the last month of the year, the individual is eligible to make the full contribution, depending upon self-only or family coverage. That individual is "deemed" covered under the HDHP for the entire year and thus permits the individual to make the full contribution regardless of the actual number of months they were covered under the HDHP.

That individual must remain covered under the HDHP for the next 12 months; otherwise, the amount in excess of the monthly limitation rule is taxable and subject to a 10% tax unless due to death or disability.

Contribution Deadlines
HSA contributions must be made for a specific year on or before the due date (without extensions) for filing tax returns for that year. So, for 2008, contributions must be made on or before April 15, 2009 to qualify for that tax year.

Distributions

Distributions for Qualified Expenses
Distributions from a HSA are used to pay for qualified medical expenses of the account owner, his or her spouse, or dependents and the distributions are excluded from your gross annual income when filing your tax return.

Distributions not used for Qualified Expenses
Distributions not used for qualified medical expenses are included in your gross annual income and, for applicants under age 65, subject to an additional 10% excise tax.

For Ineligible Individuals
If the Health Savings Account (HSA) beneficiary is no longer "eligible" (e.g., over age 65, entitled to Medicare or no longer enrolled in a High-Deductible Health Plan (HDHP), distributions used to pay qualified medical expense continue to be exempt from your gross annual income.

Determination of Qualified Medical Expense
The person who establishes an HSA determines if the medical expense qualifies and should maintain expense records for verification. The HSA Trustee or Custodian makes no judgments on what may or may not be a qualified medical expense. Employers who make contributions to an employee's HSA cannot make a qualified medical expense determination. Determining qualified medical expense is always the sole accountability of the account owner.

HSA Distributions are Optional
When you incur a qualified medical expense, you are not obligated to pay the expense with available HSA funds.

HSA Distributions after Death: Spouse
If the HSA owner dies, the HSA becomes the property of the designated beneficiary. If the spouse is the beneficiary, the spouse is subject to income tax only on HSA distributions not used for qualified medical expenses.