EMPLOYERS
Complete Guide to HSAs
Learn about how a Health Savings Account could benefit you and your team.
Why a Health Savings Account?
As medical insurance premiums continue to increase, Health Savings Accounts, also known as HSAs, are increasing in popularity. In order to participate and contribute toward an HSA, you must have an HSA-eligible medical insurance plan. These types of medical plans have a benefit structure that meet criteria outlined by the federal government–so you may need to check with your agent before setting up and contributing to an HSA account for yourself and family.
HSAs are famous for having tax saving benefits, but how could this help you? Keep reading.
Tax Savings & Benefits of an HSA
Health Savings Accounts are tax-deductible savings accounts where you can put aside pre-tax dollars with the intent of using that money for healthcare expenses. Pre-tax dollars are subtracted from your pay before taxes are withheld, so you don’t pay tax on that portion of your income.
In other words, contributing to an HSA is a great way to plan for future medical expenses. Both you and your employer can contribute toward your HSA. Unlike an FSA, if you do not use the funds in this account by the end of the year, you still have access to them; they are yours.
HSAs are known in the investment world as the ‘triple threat’. This is for the reasons that:
- Contributions are tax deductible
- Earnings are tax free
- Withdrawals for qualified medical expenses are tax free
There are several investment vehicles that allow tax-deferred growth, such as an IRA, however, within an HSA, these are completely tax-free.
Who can set up an HSA?
Adults Only
You must be an adult to have an HSA. You can not set up an HSA and contribute to it if you are claimed under another person’s taxes.
No Access to Disqualifying Plans
- If you are enrolled in Medicare, you can not contribute to an HSA, however, you can spend monies from an existing HSA to pay for Part A & B premiums, in addition to qualified expenses. One special note here is that while you can spend your pre-tax dollars towards the Part A & B premiums, you can not use it towards your supplement premiums.
- If you qualify for Medicaid, you can not contribute toward an HSA.
- If you’ve had VA coverage in last 90 days, you can not contribute toward an HSA.
Access to FSA or HRA plans
Other Insurance
If you have a hospital indemnity plan, this could be
There are no income requirements to participate in an HSA.
What are Qualified Medical Expenses?
Here is a partial list of eligible expenses that you can spend your pre-taxable HSA dollars on:
| Acuptuncture | Diagnostic services | Nursing home |
| Alcoholism treatment | Doctor’s fees | Nursing services |
| Ambulance services | Drug addiction treatment | Operations or surgery |
| Artificial limb or prosthesis | Eye glasses (including exam) | Psychiatric care |
| Artificial teeth | Eye surgery (including laser surgery) | Psychologist |
| Birth control pills | Fertility enhancement (including IVF) | Telephone equip. for hearing impaired |
| Braille books/magazines (partial) | Guide dog (for visually impaired | Telephone equip for visually impaired |
| Car adaptions (for disabled-person) | Hearing aids and batteries | Therapy or counseling |
| Chriopractor | Hospital services | Transportation for medical care |
| Christian science practitioners | Insulin | Transplants |
| Contact lenses (including saline & cleaner) | Laboratory fees | Transportation for medical care |
| Crutches | Lactation assistance supplies | Vasectomy |
| Dental treatment (x-rays, filings, extractions, dentures, braces, etc) | Prescription medicines or drugs | Wheelchair |
While there is not a complete list of all HSA-eligible services published by the federal government, you can review a list of “qualified” expenses on the IRS website within the IRS Publication 502. Withdrawals from an HSA are tax-free as long you use the money to pay for qualified medical expenses.
Plan Deductibles
Differences Between HSA & FSA
One difference is that an FSA only allows a small portion of funds to be rolled over from year to year, while an HSA allows all of your contributions to remain.
An FSA can be paired with almost all medical plans and does not have specific IRS pairing.
With FSAs, you must almost predict that year’s expenses, while with an HSA, you can continue to save up for the future.
HSA Contribution Limits
The Internal Revenue Service (IRS) has announced the 2023 inflation-adjusted amounts for Health Savings Accounts (HSAs) as determined under the Internal Revenue Code. So as you plan your budget, keep in mind the power of Health Savings Accounts. An HSA vehicle could be a solid place to build up a stash of money for future expenses.
Annual Contribution Limitation
| 2024 | 2025 | |
|---|---|---|
| Self-Only Contribution Limit | $4,150 | $4,300 |
| Family Contribution Limit | $8,300 | $8,550 |
Age 55 Catch Up Contribution
As with 401k and IRA contributions, you are allowed to contribute an extra amount if you are above a certain age. If you are age 55 or older by the end of the year, you can contribute an additional $1,000 to your HSA. If you are married, and both of you are age 55, each of you can contribute an additional $1,000.
How to Claim Tax Deduction
If you use a tax professional to assist with your taxes, they will know to use IRS Form 5498-SA. This is the form in which you report your contributions, that are then deducted from your income on Form 1040.
Tip
Speak with a Medical Benefits Expert
Our team can help your team save money by setting up an HSA-eligible plan today.
