Requirements

IRS requirements are lengthy and sometimes confusing but we’ll make the details simple and clear

What important features of an HSA do you need to know?

  1. To contribute to a HSA, you must be enrolled in a Qualified High Deductible Health Plan and you cannot have any other health coverage for the first $1,350 of your eligible medical expenses ($2,700 if family coverage) for 2019. For 2020, the minimum deductible that qualifies will be raised to $1,400 for individual and $2,800 for family coverage. See examples of other health coverage and other restrictions below.
  2. Any amounts contributed to an HSA and any earnings accrue tax free as long as they are used for proper medical expenses.
  3. There is no use-it-or-lose-it rule. You do not have to use the money by a specific date.
  4. There is a cap on how much you can contribute for each calendar year. More information below.
  5. An HSA account is a bank account. You will not be allowed to spend (or debit) any more than is in your account.
  6. The HSA account owner will be responsible for maintaining proper supporting documentation for medical expenses. HSA withdrawals can be made for the following:
    -Any qualified medical expenses – See IRS Publication 502, Medication and Dental Expenses. -Currently over-the-counter medications are NOT considered qualified medical expenses unless you have a doctor’s prescription
    -Health care continuation coverage - such as COBRA premiums
    -
    Long-Term Care Premiums – subject to limits based on age and adjusted annually         
    -
    Medicare and other health coverage - but only if you (the account owner) are 65 or over    
  1. You can use the money in this account for your spouse, any tax dependents (including children) up to the age of 26. 
  2. You can withdraw money from your account at any time; however, any withdrawals for non-medical purposes will be subject to Federal and State taxation along with a 20% penalty (if under age 65).

See IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans and this information is also on their website.

Who can open and contribute to a Health Savings Account?

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  1. You must be covered under a high deductible health plan (HDHP) on the first day of the month.
  2. You have no other health coverage
  3. You are not enrolled in Medicare (part A or B) – this excludes many age 65 and older
  4. You cannot be claimed as a dependent on someone else's tax return.

What is considered OTHER HEALTH COVERAGE?

  1. Section 125 Plans –

Participation by the account owner or their spouse in a General Purpose Section 125 Medical Reimbursement Account where they work is considered other health coverage because a Medical Reimbursement Account could possibly cover all or a portion of the account owners required deductible of medical expenses. Participation in a Limited-Purpose Section 125 Medical Reimbursement account is allowed because they just cover dental and vision expenses. In addition, we offer a Medical Reimbursement Account with a spousal exclusion. If your spouse has one of those, you (the account owner) CAN contribute to a HSA since this account will not cover any of your out-of-pocket expenses.

  1. Spouse Health Coverage –

If you are covered under your spouse’s non-high deductible health plan you have other health coverage.

  1. Veterans Benefits –

You may not contribute to an HSA in any given month if you have received veterans’ benefits in the previous 3 months. Indian Health Services generally work the same.

  1. TRICARE is considered other health coverage
  2. Medicaid is considered other health coverage