An HSA is a tax-free, interest bearing account designed to help individuals pay for qualified medical expenses that they, their spouse, or dependents incur now and in the future. These tax-free dollars can be used at any time for qualified medical expenses.

Well, since you fund the HSA with pre-tax money, you're using tax-free funds for healthcare expenses you'd normally pay for out-of-pocket. Your HSA contributions don't count towards your taxable income for federal taxes. Additionally, they're not taxable in most states.

Yes. In order to open and contribute to an HSA, you must have coverage under an HSA-qualified "high deductible health plan" (HDHP).

An HDHP, also referred to as a "catastrophic" health plan, is an inexpensive health insurance plan that generally doesn't pay for the first several thousand dollars of health care (i.e. your "deductible") but will likely cover you after that. Obviously, your HSA is available to help you pay for the expenses your plan doesn't cover.

For 2008, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,100 (individual/self-coverage) or $2,200 (family coverage). The annual out-of-pocket (including deductibles and co-pays) for 2008 cannot exceed $5,600 (individual/self-coverage) or $11,200(family coverage). HDHPs can have first dollar coverage (no deductible) for preventative care and apply higher out-of-pocket limits (and co-pays & coinsurance) for non-network services.

The health insurance company or plan administrator will provide written documentation verifying it's HSA qualified. The declaration page of the policy or another official communication from the insurance company will include the words "Qualifying High Deductible Health Plan" or a reference to IRC Section 223. If documentation is not available, it is NOT a qualifying plan.

Since HSA qualified health plans have high deductibles, they typically have much lower premiums than traditional health plans. The money you save on premiums can be used to fund your HSA.

Once you have coverage under a qualified high deductible health plan, you can sign up for an HSA through a bank, credit union, insurance company, or other approved financial institutions.

You don't purchase an HSA; it's a savings account into which you can deposit money on a pre-tax basis. The only product you purchase with an HSA is a High Deductible Health Plan.

To be eligible for a Health Savings Account (HSA), an individual:

• Must be covered by an HSA qualified High Deductible Health Plan (HDHP)
• Cannot be covered by other health insurance that is not an HDHP (excluding automobile, dental, vision, disability, and long-term care insurance plans)
• Cannot be on Medicare (age 65 or older)
• Cannot be claimed as a dependent on another person's tax return.

You are only allowed to have the following insurance plans at the same time as an HDHP:

• Automobile
• Dental
• Vision
• Disability
• Long-Term Care

You many also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are permitted, as long as they don't pay significant medical bills.

No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming all eligibility requirements for contributing to an HSA are met). You can be eligible for an HSA even if the health policy is in your spouse's name.

No. You must have coverage under a qualified High Deductible Health Plan in order to open and contribute to an HSA.

You are not eligible for an HSA after you've enrolled in Medicare benefits. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot contribute to an HSA once you enroll in Medicare.

If you have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last three months, you are not eligible for an HSA.

Currently, Tricare does not offer an HDHP option, so you are not eligible for an HSA.

Only under certain circumstances, you can have both types of accounts. General Flexible Spending Accounts (FSAs) requirements will probably make you ineligible for an HSA. However, if your employer offers a "limited purpose" (limited to dental, vision or preventative care) or "post-deductible" (pay for medical expenses after the plan deductible is met) FSA, then you may still be eligible for an HSA.

Only under certain circumstances, you can have both types of accounts. General Health Reimbursement Accounts (HRAs) requirements will probably make you ineligible for an HSA. If your employer offers a "limited purpose" (limited to dental, vision or preventative care) or "post-deductible" (pay for medical expenses after the plan deductible is met) HRA, then you may still be eligible for an HSA. If your employers contributes to an HRA that can only be used when you retire, you can still be eligible for an HSA.

You cannot have an HSA if your spouse's FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met.

Yes, as long as you have coverage under an HDHP. Your HSA can be funded from your own personal savings, income from dividends, unemployment or welfare benefits.

There are no income limits that affect HSA eligibility. However, if you don't file a federal income tax return, you may not receive all the tax benefits associated with an HSA.

No, you cannot open separate accounts for your dependent children, including children who can legally be claimed as a dependent on your tax return.

Yes, you are still eligible for an HSA. Your dependent's non-HDHP coverage doesn't affect your eligibility, even if they are covered by your HDHP.

For 2008, if you have single HDHP coverage, you can contribute up to $2,900*, if you have family coverage you can contribute up to $5,800*, no matter what your HDHP deductible is. Before 2006, the contribution could not exceed the deductible of your HDHP.

The following table illustrates how this works:

	HDHP Deductible	Maximum HSA Deposit (2007)
Single Coverage	$1,100	$2,900
	$1,500
	$2,000
	$2,500
	$3,000
Family Coverage	$2,200	$5,800
	$3,000
	$4,000
	$5,000
	$6,000

*2008 amounts, adjusted annually for inflation.

If you are age 55 or older, you can also make additional "catch-up" contributions. The maximum annual catch-up contribution is as follows:

2008 - $900
2009 and after - $1,000

If your employer offers a High Deductible Health Plan, you can make pre-tax contributions through payroll deduction (contributions are made directly from your salary).

If you open your own High Deductible Health Plan and HSA, your contributions will be deductible when you file your income taxes, even if you don't itemize.

The most you can put into your account for 2008 is $2,900 if you have single coverage and $5,800 if you have family coverage. These amounts will be increased for inflation in future years.

Contributions to an HSA can be made by the account holder/employee, their employer, or anyone else. Contributions must be made into an account of an eligible individual.

No, you can contribute to your account in a lump sum or in any amounts or frequency you wish. However, your account trustee/custodian (bank, credit union, insurer, etc.) can impose minimum deposit and balance requirements.

Your eligibility to contribute to an HSA is determined by the effective date of your HDHP coverage. For 2007 and forward, if you are covered on December 1, you are treated as an eligible individual for the entire year. However, if you cease to be an eligible individual during 2008, the excess over the pro-rated contribution is included in incomes and subject to a 10% additional tax. The amount you contribute is not determined by the date you establish your account. However, medical expenses incurred before the date your HSA is establish cannot be reimbursed from the account.

Yes. Contributions to HSAs can be made by you, your employer, or anyone else. All contributions are added together, and cannot exceed the yearly contribution limit - $2,900* for single coverage, $5,800* for family coverage.

*2008 amounts, adjusted annually for inflation.

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).

No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.

Yes, individuals 55 and older who are covered by an HDHP can make additional catch-up contributions each year until they enroll in Medicare. The additional "catch-up" contributions allowed are as follows:

2008 - $900
2009 and after - $1,000

If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must pro-rate your "catch-up" contribution for the number of full months you were "eligible", i.e., had HDHP coverage. However, if you are covered on December 1, you are treated as an eligible individual for the entire year and get the full contribution.

Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a "catch-up" contribution.

Each spouse is eligible to contribute to an HSA in their own name, up to the statutory limit ($2,900 for 2008). (The catch up contributions are in addition to these limits.)

The following examples describe how much can be contributed under varying circumstances. Assume that neither spouse qualifies for "catch-up contributions".

Example 1: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only coverage with a $200 deductible. Wife, who has coverage under a low-deductible plan, is not eligible and cannot contribute to an HSA. Husband may contribute $5,800 to an HSA.

Example 2: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only HDHP coverage with a $2,200 deductible. Both husband and wife are eligible individuals. Husband and wife are treated as having only family coverage. The combined HSA contribution by husband and wife cannot exceed $5,800, to be divided between them by agreement.

Example 3: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has family HDHP coverage with a $3,000 deductible. Both husband and wife are eligible individuals. The maximum combined HSA contribution by husband and wife is $5,800, to be divided between them by agreement.

Example 4: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has family coverage with a $200 deductible. Husband and wife are treated as having family coverage with the lowest annual deductible ($200). Neither husband nor wife is an eligible individual and neither may contribute to an HSA.

Example 5: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also is enrolled in Medicare. Wife is not an eligible individual and cannot contribute to an HSA. Husband may contribute $5,800 to an HSA.

No. Tax filing status does not affect your contribution.

No. Contributions to your HSA won't affect your IRA limits. It's just another tax-deferred way to save for retirement, with the added advantage being that you can withdraw funds tax-free if they are used to pay for qualified medical expenses.

Unlike a spouse, a domestic partner's health coverage will typically not affect your ability to contribute to your HSA, even if your domestic partner is covered under your HDHP.

The Treasury nor the IRS have indicated that there's any problem with a an account owner covering a domestic partner under an HDHP and having the domestic partner's medical expenses count toward satisfying the family's HDHP deductible. However, most individual insurance plans will not cover domestic partners, so the two individuals would probably need to get individual policies.

Please note: You may not take a tax-free distribution from your HSA to pay for your domestic partner's expenses, unless your domestic partner is considered to be an eligible dependent under Code section 152.

As defined by IRS Publication 502 Section 213 (d) - a qualified medical expense is one that is primarily for the prevention or alleviation of a physical or mental defect or illness. This includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease that affects any part or function of the body, and amounts paid for prescription drugs (and nonprescription drugs as defined in Revenue Ruling 2003-102). Medical expenses do not include expenses that are merely beneficial to general health, such as vitamins or vacation.

Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract.

Your account trustee/custodian will determine what you need to do, which may include completing and processing appropriate paperwork, and making a minimum deposit.

Insured banks and credit unions are automatically qualified to handle HSAs. Any bank, credit union or any other entity that currently meets the IRS standards for being a trustee or custodian for an IRA or Archer Medical Savings Account (MSA) can be an HSA trustee or custodian. The law also allows insurance companies to be HSA trustees or custodians.

No, you must establish your HSA with an approved institution.

The following qualify as an HSA trustee or custodian:

• Banks
• Credit Unions
• Insurance Companies
• Entities already approved by the IRS to be an IRA or Archer MSA trustee or custodian
• Other entities can apply to the IRS to be approved a non-bank trustee or custodian

No. "Joint" HSA accounts are not permitted. Each spouse should consider establishing an account in their own name. This allows you to both make catch-up contributions when each spouse is 55 or older.

If both husband and wife are eligible to contribute to an HSA, they are both eligible to establish separate HSAs, but are not required too. However, if both spouses want to make "catch-up" contributions when they are age 55+, they must establish separate accounts.

You can open an HSA as early as the effective date of your HDHP coverage. However, if your HDHP coverage begins on any day other than the first of the month, you cannot open your account until the first day of the following month.

You can do the preliminary set-up for your HSA, complete all the paperwork and make a minimum deposit to your account (if required) prior to the effective date of your HDHP coverage. Yet, your account is not officially "established" until your HDHP coverage begins. By completing the necessary steps before your coverage begins ensures that your HSA will be "established" as early as possible. This is especially important when your HDHP coverage is effective on a non-business day.

HSA funds can pay for any "qualified medical expense", even if the expense is not covered by your HDHP. For example, most health insurance does not cover the cost of over-the-counter medicines, but HSAs can. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.

Unfortunately, we cannot provide a definitive list of "qualified medical expenses". A partial list is provided in IRS Publication 502 (available at www.irs.gov). There have been thousands of cases involving the many nuances of what constitutes "medical care" for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for "medical care" is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word "primarily."

You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.

If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.

Yes, as long as these are deductible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.

Yes, you can use funds from your HSA to pay for qualified medical expenses of yourself, your spouse, or your dependents.

Yes.

You can only use your HSA funds to pay for health insurance premiums if one of the two is satisfied:

• You are collecting Federal or State unemployment benefits, or
• You have COBRA continuation coverage through a former employer

Yes, if you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. Refer to IRS Publication 502 for the amounts deductible by age.

Once funds are deposited into the HSA , the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year's coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.

Yes, unused funds in your account automatically roll over year after year. You won't lose your money if you don't spend it within the year.

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, co-pays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or "Medigap" policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.

No. Medical expenses which are incurred before you account is established are ineligible for reimbursement.

It is your (the account holder) responsibility to keep track of HSA deposits and expenditures, and keep all of your receipts. If you run out of HSA funds (and therefore need to use your HDHP), you many need to send those receipts to your insurer.

If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit.

If your physician does not ask for payment at the time of service, the physician will probably submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an "Explanation of Benefits" from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician may then send you a bill for payment.

Some doctors may require you to pay upfront, but most will bill you later. Remember, you are only responsible to pay the discounted amount as determined by your insurance benefit. Do not let the doctor overcharge you at the point of service.

The federal government states that money in an HSA can only be used for yourself, your spouse, and your tax dependents. However, if your domestic partner meets the IRS qualifications to be considered a tax dependent, you can legally use your HSA funds for his or her medical expenses. If they do not meet the IRS qualifications of a tax dependent, you can not use your HSA funds for their medical expenses.

You may:

1. Make payment arrangements with your provider (payment plan)
2. Pay for it out of pocket (and then reimburse yourself later out of your HSA account)
3. Apply for a loan/credit line through the bank that holds your HSA at the time you first enroll.

The account holder controls all decisions over how the money is invested. You can also choose not to invest your funds.

Yes, funds in your HSA can be invested. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds, and certificates of deposit.

No, it is the account holder's sole responsibility to keep track of the amounts deposited and spent from their account, just like a normal savings or checking account.

No, you many not borrow against it, or pledge the funds in it. For more information regarding prohibited activities refer to Section 4975 of the IRS Code.

No, you cannot rolls funds in an HSA account into an IRA. They will stay in the HSA or be rolled into another HSA.

You cannot directly roll funds in an IRA, 401(k) or other retirement plan into an HSA. You can withdraw funds from one of these accounts, pay applicable taxes (and penalties) on the amount you withdraw, and then use the remaining funds to make a contribution to your HSA. However, the amount you contribute to your HSA is still limited by the annual contribution limits.

Yes, if you do so within 60 days of withdrawing the funds from the Archer MSA.

It depends on how the HSA is designed. If your spouse is designated as the beneficiary by you, your spouse becomes the owner of the HSA when you die. If you provide that it goes to your estate or other entity, the value of the HSA at death is income to the estate or other entity.

YES! For the following reasons:

• You may need to prove to the IRS that distributions from your HSA were for qualified medical expenses.
• You may be required by your insurance company to prove that your HDHP deductible was met
• Not all medical expenses paid out of the HSA have to be charted against the deductible (e.g. dental care, vision care)
• What should you do if you mistakenly take money out of your HSA for a medical expense that is ineligible? (response provided by IRS.gov "All about HSAs ppt.)

Unlike many other tax breaks, there aren't any income limits. Individuals under age 65 who buy a qualified high deductible health plan can open an HSA and fund it to allowable limits.

Security - your High Deductible Health Plan and HSA protect you against high or unexpected medical bills.

Flexibility - You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:

• Health insurance or medical expenses if unemployed
• Medical expenses after retirement (before Medicare)
• Out-of-Pocket expenses when covered by Medicare
• Long-term care expenses and insurance

Savings - You can save the money in your account for future medical expenses and grow your account through investment earnings.

Control - You make all the decisions about:

• How much money to put into the account
• Whether to save the account for future expenses or pay current medical expenses
• Which medical expenses to pay from the account
• Which company will hold the account
• Whether to invest any of the money in the account
• Which investments to make

Portability - Accounts are completely portable, meaning you can keep your HSA even if you:

• Change jobs
• Change your medical coverage
• Become unemployed
• Move to another state
• Change your marital status

Ownership - Funds remain in the account from year to year, just like an IRA. There are no "use it or lose it" rules for HSAs.

Tax Savings - An HSA provides you triple tax savings:

1. tax deductions when you contribute to your account;
2. tax-free earnings through investment; and,
3. tax-free withdrawals for qualified medical expenses

Distributions from an HSA used exclusively for qualified medical expenses are excludable from gross income and not taxed.

Distributions that are not used to pay for qualified medical expenses must be reported when filing taxes, and are subject to an additional 10% tax.*

*Except in the case of distributions made after the account holder's death, disability, or attaining age 65.

Your personal contributions offer you an "above- the-line" deduction. An "above-the-line" deduction allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).

If your employer offers a "salary reduction" plan (also known as a "Section 125 plan" or "cafeteria plan'), you (the employee) can make contributions to your HSA on a pre-tax basis. If you can do so, you cannot also take the "above-the-line" deduction on your personal income taxes.

You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.

Yes, you are still eligible for an HSA. Your dependent's non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP. You can contribute up to the statutory limit ($5,800) to your HSA.