Distributions from the account to pay for qualified expenses are received income tax free. Funds that are not used in a calendar year roll over to pay for following years’ expenses even if no further contributions are eligible.
Similar in nature to an IRA, an HSA is owned by an individual and therefore is portable. Contributions can be made by employers and/or employees.
Required Insurance
Before a HSA can be set up, an individual must be enrolled in a High Deductible Health Insurance Plan (HDHP), either sponsored by an employer or set up by the individual that meets the following specifications:
Individual
- Minimum Deductible $ 1,200
- Maximum Out-of-Pocket (including deductible) $6050
Family
- Minimum Deductible $ 2,400
- Maximum Out-of-Pocket (including deductible) $12,100
In addition, the HDHP may not provide benefits, with the exception of preventive care (which may include some prescription drug coverage), before the deductible has been met for the year.
Individuals enrolled in health insurance plans that do no meet the above specifications, in addition to enrollment in a HDHP, will be unable to contribute to an HSA. Individuals enrolled in a FSA or HRA or are enrolled in a spouse’s FSA or HRA are also unable to contribute to a HSA.
