Now you can save money and control your healthcare costs with a Health Savings Account (HSA).
What is a Health Savings Account (HSA)?
A Health $avings Account is a two part plan:
An HSA is a tax-exempt account with a financial institution (like a bank or an insurance company) that is established for the purpose of paying
medical expenses in conjunction with a high deductible health plan (HDHP). In summary, an HSA allows eligible individuals to save money,
tax-free, for future medical expenses.
.
·
An HSA account that is optional. Contributions to an HSA account are tax-free each year and the money always belongs to you.
Money in the HSA account can be used to satisfy your out-of-pocket expenses for your deductible. The ability to make tax-free
contributions each year has an added benefit that allows many people to view their account accumulation as an additional source of
retirement income. HSA accounts are administered by either a bank or the insurance company (your choice). You normally have an
HSA debit card and/or checkbook for paying medical expenses from the account. Most insurance companies make it extremely simple
to set up the HSA account if you so choose.
They're available now!
They're simple and easy to understand!
They save premiums and reduce taxes!
They offer new savings and investment
opportunities!.
Many quality HSA plans provide preventative &
wellness care to the members, with the
deductible/co-insurance waived for services such
as:
·
Routine Physical Exams
·
Mammography exams
·
Routine Colon tests
·
Routine pelvic exams
·
Routine Pap smear
·
Prostate (PSA) screening
·
Digital rectal exam
·
Immunizations
Health Savings Accounts are available as of January 1, 2004 thanks to an innovative,
permanent federal law designed to make healthcare affordable and allow for
accumulation of tax-free money in the process. The HSA is combined with a qualifying
deductible health insurance plan to provide major medical protection and significant
premium savings.
·
The premium savings on an HSA plan is up to 50% or more versus a typical low
deductible plan.
·
Tax Advantages:
·
Contributions to the HSA are not taxed
·
The earnings on the money in the HSA are not taxed
·
Use of the money is tax-free for qualified health expenses.
The HSA has become popular because the IRS now makes it possible for you to put aside an extra amount of money into your Health
Savings Account (HSA). You are able to deduct this from your income taxes. The money in your HSA is always yours and will accumulate
without having to pay taxes on it as long as used for medical reasons.
As money accumulates in the HSA, you can have your deductible paid from it, therefore eliminating the need to pay your deductible out-of-
pocket, whether it is a small expense or your entire deductible. This can be especially advantageous when a person is hospitalized and not
receiving a paycheck. After the deductible and/or coinsurance is paid, the insurance plan pays 100% of eligible medical expenses.
When you have a high deductible insurance plan without an HSA, you pay your deductible with money you have paid income taxes on.
Everyone wants all the tax deductions possible, and this is one reason why the HSA has been so well received.
HSA Eligible Expenses that can be used to satisfy your deductible
Questions and Answers on the Health Savings Account (HSA)
General Information
Health savings Accounts (HSA's) were signed by the President on December 8, 2003.
What is a Health Savings Account (HSA)?
An HSA is a tax-exempt account with a financial institution (like a bank or an insurance company) that is established for the purpose of paying
medical expenses in conjunction with a high deductible health plan (HDHP). In summary, an HSA allows eligible individuals to save money,
tax-free, for future medical expenses.
What is a High Deductible Health Plan (HDHP)?
A HDHP is a health insurance plan with a minimum deductible of $1,050 (for self-only coverage) or $2,100 (for family coverage). The annual
out-of-pocket (including deductibles and co-pays) cannot exceed $5,250 (for self-only coverage) or $10,500 (for family coverage). HDHPs can
have first dollar coverage or no deductible for preventive care and higher out-of-pocket (co-pays & co-insurance) for non-network services
What are the benefits of an HSA?
An HSA provides several benefits including:
·
Tax-free interest or other earnings on your assets.
·
A tax deduction for the contributions you make. You are eligible for a deduction even if you don't itemize your tax deductions on
Internal Revenue Service (IRS) Form 1040.
·
Opportunity to build funds for your medical care needs. Your contributions remain in your HSA from year-to-year until you use them.
Who is eligible for an HSA?
To be eligible to open an HSA, you must be:
·
An employee (or the spouse of an employee) of an employer who maintains an individual or family high deductible health plan
(HDHP), or
·
A self-employed person (or the spouse of a self-employed person) who maintains an individual or family HDHP.
To receive an HSA deduction on your taxes, you must be an eligible individual on the first day of any given month to receive a deduction for
that month. If another taxpayer is entitled to claim an exemption for you, you cannot claim an HSA deduction. This is true even if the other
person does not actually claim your exemption.
How does an eligible individual establish an HSA?
Any eligible individual can establish an HSA with a qualified HSA trustee or custodian. The process is similar to establishing an IRA with a
qualified IRA trustee or custodian. In other words, no special permission or authorization is necessary from the Internal Revenue Service
(IRS) to establish an HSA. Determine that you are eligible for the HSA and then follow the instructions of the HSA trustee or custodian to open
your account.
Who is a qualified HSA trustee or custodian?
A qualified HSA trustee or custodian is any insurance company or bank (including a similar financial institution) as defined in Internal Revenue
Code section 408(n). In addition, any other persons already approved by the IRS to be trustees or custodians of IRAs are automatically
approved to be HSA trustees or custodians. Persons other than banks, insurance companies, or previously approved IRA trustees or
custodians may request approval to be a trustee or custodian in accordance with the procedures set forth in Treasury Regulation 1.408-2(e)
(relating to IRA non-bank trustees).
CONTRIBUTIONS
How much can I contribute to my HSA?
The maximum annual contribution to your HSA is based on the number of whole months that you have your High Deductible Health Plan
(HDHP) in place. The annual HSA contribution limit is determined by the underlying HDHP.
You can decide how to contribute to your HSA (one-time or multiple times throughout the year) as long as you keep in mind the number of
whole months that you have your HDHP in place and don't exceed the maximum allowable annual contribution. You have until April 15 of the
following year to make a qualified contribution.
For calendar year 2005, the maximum HSA contributions are:
·
For individual coverage, the maximum contribution is $2,900, .
·
For family coverage, the maximum contribution is $5,800
·
In addition to the maximum contribution amount, catch-up contributions may be made by or on behalf of individuals age 55 or older
and younger than 65.
·
In addition to the maximum contribution amount, catch-up contributions may be made by or on behalf of individuals age 55 or older
and younger than 65.
The contribution limits include all contributions made on behalf of the individual (including contributions made by an employee, an employer, a
self-employed person, or a family member). The annual limit is determined by the underlying HDHP.
If an individual has more than one HSA, the annual contribution limit applies to all the HSAs.
* Amount subject to change (annually) based on the Treasury Department/IRS notice.
What if I have made excess contributions to my HSA during the year?
If you have made excess contributions to your HSA, you must generally pay a 6% excise tax on the excess contributions you or your
employer make to your HSA. For a complete explanation, visit www.irs.gov and see IRS Form 5329: Additional Taxes on Qualified Plans
(including IRAs) and Other Tax Favored Accounts, to calculate the excise tax.
If you make excess contributions, you may withdraw some or all of the excess contribution and not pay the excise tax on the amount
withdrawn if you:
·
Withdraw these excess contributions by the due date, including extensions, of your tax return,
·
Withdraw any income earned on the withdrawn contributions and include the earnings in "other income" on your tax return for the year
you withdraw the contributions and earnings, and
·
Do not claim a deduction on your IRS Form 1040 for the amount of the withdrawn contributions.
If your employer makes an excess contribution and the excess was not included in box 1, Form W-2, you must report the excess as "other
income" on your tax return. However, you may withdraw some or all of the excess employer contributions and not pay the excise tax on the
amount withdrawn if you:
·
Withdraw these excess contributions by the due date, including extensions, of your tax return,
·
Withdraw any income earned on the withdrawn contributions and include the earnings in "other income" on your tax return for the year
you withdraw the contributions and earnings, and
·
Do not claim an exclusion from income for the amount of the withdrawn contributions.
What are the "catch-up contributions" for individuals age 55 or older?
For individuals (and their spouses covered under a High Deductible Health Plan) between ages 55 and 65, the HSA contribution limit is
increased by $600 in calendar year 2005. This catch-up amount will increase in $100 increments annually, until it reaches $1,000 in calendar
year 2009.
May an otherwise eligible individual who is eligible for Medicare, but not enrolled in Medicare Part A or Part B, contribute to an
HSA?
Yes, Section 223 (b) 7 of the Internal Revenue Code states that as long as an eligible individual who is not actually enrolled in Medicare Part
A or Part B may contribute until the month that the individual is enrolled in Medicare.
If one or both spouses have family coverage, how is the contribution limit computed?
In the case of individuals who are married, if one spouse has family coverage, both are treated as having family coverage. If one spouse has
family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible.
The contribution limit for the spouses is the lowest deductible amount, divided equally between the spouses unless they agree on a different
division. The family coverage limit is reduced further by any contribution to an existing HSA during the same calendar year.
However, both spouses may make the catch-up contributions for individuals age 55 or over without exceeding the family coverage limit.
DISTRIBUTIONS
How do I make withdrawals (or take distributions) from my HSA?
You can make tax-free withdrawals (also known as distributions) from your HSA to pay for qualified medical expenses at any time during the
year. However, you do not have to make withdrawals from your HSA each year. Your contributions remain in your HSA from year-to-year until
you use them.
If you make withdrawals for non-qualified medical expenses or for other reasons, the amount withdrawn will be subject to income tax and
may be subject to an excise tax as well.
Please keep in mind you should track all of your withdrawals from your HSA so you can supply documentation on your expenditures, if
needed. It is up to you to monitor the deposits and withdrawals made to your HSA.
May eligible individuals use debit, credit or stored-value cards to receive distributions from an HSA for qualified medical
expenses?
Yes. Your My Smart Saver HSA includes a free debit card once you fund your account. This card helps you quickly and easily access the
funds in your HSA.
How are distributions from an HSA taxed?
Distributions from an HSA used exclusively to pay for qualified medical expenses are excludable from gross income. In general, distributions
from an HSA used for qualified medical expenses are excludable from gross income even if the individual is not currently eligible to make
contributions to the HSA.
However, any portion of a distribution not used exclusively to pay for qualified medical expenses must be included in the gross income of the
account beneficiary and is subject to an additional 10% tax, except in the case of distributions made after the account beneficiary's death,
disability, or attainment of age 65.
TAX RELATED QUESTIONS
What is the tax treatment of an eligible individual's HSA contributions?
Contributions made by an eligible individual to an HSA can be deducted from adjusted gross income. The contributions are deductible
whether or not the eligible individual itemizes deductions. However, the individual cannot also deduct the contributions as a medical expense
deduction under section 213 of the Internal Revenue Code.
Is interest earned on my contributions also tax-free?
Yes, as long as you use the funds in your HSA for qualified medical expenses or roll it over from year to year.
What is the tax treatment of contributions made by a family member on behalf of an eligible individual?
Contributions made by a family member on behalf of an eligible individual to an HSA are deductible from the adjusted gross income of the
eligible individual. However, an individual who may be claimed as a dependent on another person’s tax return is not an eligible individual and
may not deduct contributions to an HSA.
What is the tax treatment of employer contributions to an employee’s HSA?
The employee cannot deduct employer contributions on his or her Federal income tax return.
Employer contributions to the employee’s HSA are treated as employer-provided coverage for medical expenses under an accident or health
plan and are excludable from the employee’s gross income. The employer contributions are not subject to withholding from wages for income
tax or subject to the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), or the Railroad Retirement Tax
Act (RRTA).
Contributions to an employee’s HSA through a cafeteria plan are treated as employer contributions and the employee’s income will be
reduced.
What is the tax treatment of an HSA?
An HSA is generally exempt from tax (like an IRA or MSA), unless it has ceased to be an HSA. Account earnings accumulate tax-free as long
as they remain in the HSA.
How do I report distributions on my tax return?
How you report your distributions depends on whether or not you used the distribution for qualified medical expenses.
·
When you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution but you have to
report the distribution on IRS Form 8889. Follow the instructions for the form and attach it to your IRS Form 1040.
·
When you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution and report the
amount on IRS Form 8889. Follow the instructions for the form and attach it to your IRS Form 1040. You must also report and pay an
additional tax on your IRS Form 1040, unless you meet one of the exceptions established by the IRS. You will need to contact the
IRS or your accountant for more information on the exceptions.
Reporting and paying the additional tax. There is a 10% additional tax on the part of your distribution that was not used for a qualified
medical expense. The account owner is required to report the additional tax in the Other Taxes section of your IRS Form 1040.
Exceptions to the additional tax. There is no additional tax if you are disabled, age 65 or older, or die during the year.
Are rollover contributions to HSAs permitted?
Rollover contributions from Medical Savings Accounts (MSAs) and other HSAs into an HSA are permitted. Rollover contributions need not be
in cash. Rollovers are not subject to the annual contribution limits.
You may not roll over amounts from an IRA, from a Health Reimbursement Arrangement (HRA), or from a health Flexible Spending Account
(FSA) into an HSA.
Are health insurance premiums qualified medical expenses?
In most cases, health insurance premiums are not qualified medical expenses. However, the following are exceptions:
·
Premiums for qualified long-term care insurance
·
Premiums for COBRA health care continuation coverage
·
Premiums for health coverage while an individual is receiving unemployment compensation
·
For individuals over age 65, premiums for Medicare Part A or B, a Medicare HMO and the employee share of premiums for employer-
sponsored health insurance, including premiums for employer-sponsored retiree health insurance.
Premiums for Medigap policies are not qualified medical expenses.
How are distributions from an HSA taxed after the account beneficiary is no longer an eligible individual?
Distributions used exclusively to pay for qualified medical expenses continue to be excludable from the account beneficiary’s gross income
even if the account beneficiary is no longer an eligible individual (e.g., the individual is over age 65 and entitled to Medicare benefits, or no
longer has an HDHP).
What happens upon the death of the HSA holder?
You should specify a beneficiary when you open your HSA. What happens to the HSA upon the death of the HSA holder depends on who is
designated as the beneficiary.
·
Spouse is the designated beneficiary. If the spouse is the designated beneficiary of the HSA, it will be treated as the spouse's HSA
after the death of the account holder.
·
Spouse is not the designated beneficiary. If someone other than the spouse is the designated beneficiary of the HSA, on the date of
death: The account stops being an HSA, and the fair market value of the HSA becomes taxable to the designated beneficiary.
·
No designated beneficiary. If there is no named beneficiary, the fair market value of the HSA will be included on the final income tax
return after the account holder’s death.
Where do I locate the Internal Revenue Service (IRS) forms and publications?
For the most up-to-date IRS forms and publications visit www.irs.gov. Listed below are the links for the documents that we have mentioned in
our website.
Your HSA account maintains features of both a savings and checking account. In order to offer you easy withdrawal through debit cards and
checks while maintaining legal regulations, your HSA can't be strictly a savings or checking account.
Does my card act like a credit card?
Your card is strictly a Debit Card. You must have sufficient funds in your account to use your Debit Card. If you use your HSA account when
you do not have funds, you will be charged overdraft fees just as if you had bounced a check.
An eligible medical expense is defined as those expenses paid for care as described in Section 213(d) of the Internal Revenue Code. Below
is a list...deductible medical expenses...which may help determine whether an expense is eligible for HSA reimbursement. Theis list is
intended to serve as a quick reference and are provided with the understanding that we are notengaged in rendering tax advice. For more
information, please refer to IRS publication 502 titled "Medical and Dental Expenses", Catalog Number 15002Q. Publications can be ordered
from the IRS by calling 1-800-TAX-FORM (1-800-829-3676). If tax advice is required, seek the services of a competent professional.
Checklist of Deductible Medical Expenses
· Abdominal supports
· Abortion
· Acupuncture
· Air conditioner (when necessary for relief
from an allergy or for relief from difficulty in
breathing
· Alcoholism treatment
· Ambulance
· Anesthetist
· Arch supports
· Artificial limbs
· Autoette (when used for relief of
sickness/disability)
· Birth control pills (by prescription)
· Blood tests
· Blood transfusion
· Braces
· Cardiographs
· Chiropractor
· Christian Science Practitioner
· Contact lenses
· Contraceptive devices (by prescription)
· Convalescent home (for medical treatment
only)
· Crutches
· Dental treatment
· Dental x-rays
· Dentures
· Dermatologists
· Diagnostic fees
· Diathermy
· Drug addiction therapy drugs (prescription)
· Elastic hosiery (prescription)
· Eyeglasses
· Fees paid to health institute
prescribed by a doctor
· FICA and FUTA tax paid for
medical care service
· Fluoridation unit
· Guide dog
· Gum treatment
· Gynecologist
· Healing services
· Hearing aids & batteries
· Hospital bills
· Hydrotherapy
· Insulin treatments
· Lab tests
· Lead paint removal
· Legal fees
· Lodging (away from home for
outpatient care)
· Metabolism tests
· Neurologists
· Nursing (including board & meals)
· Obstetrician
· Operating room costs
· Ophthalmologist
· Optician
· Optometrist
· Oral surgery
· Organ transplant (including donor's
expenses)
· Orthopedic shoes
· Orthopedist
· Osteopath
. Over the counter drugs
· Oxygen & oxygen equipment
· Pediatrician
· Physician
· Physiotherapist
· Podiatrist
· Postnatal treatments
· Practical nurse for medical services
· Prenatal care
· Prescription medicines
· Psychiatrist
· Psychoanalyst
· Psychologist
· Psychotherapy
· Radium therapy
· Registered nurse
· Special school costs for the handicapped
· Spinal fluid test
· Splints
· Sterilization
· Surgeon
· Telephone or TV equipment to assist the hard
of hearing
· Therapy equipment
· Transportation expenses (relative to health
care)
· Ultra-violet ray treatment
· Vaccines
· Vasectomy
· Vitamins (if prescribed)
· Wheelchair
· X-rays
Give us a call for a personalized, no-obligation spreadsheet listing plan benefits and premiums from many top
insurance companies doing business in Louisiana. Let us help you find insurance coverage that best fits all your
requirements within a reasonable premium range.
(225) 612-4589
Fill In Our Online Form For More Information
or you can most certainly give us a call:
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6369 Catina Street New Orleans, LA 70124
225-612-4589
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Health Savings Account
