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Medicare Supplement Plans - Medigap & Part D |
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Health Savings Account
Health Savings Accounts or HSA Plans for Individuals and Employee Groups HSA Accounts or HSA plans allow you to save money to pay for future medical expenses on an income tax-free basis. Any individual, who has an approved High Deductible Health Plan (HDHP) and who is not covered under another disqualifying health plan, can participate in an HSA. An employer can also offer Health Savings Accounts to his employees and both the employer and employees are allowed to contribute funds to the HSA. If offered in conjunction with a qualified Flexible Spending Account (FSA) commonly referred to as a cafeteria plan, savings in FICA and FUTA taxes as well as income taxes can be achieved. An Insurance Policy and a Special Savings Account A Health Savings Account is really a combination of a health insurance policy meeting minimum US Treasury policy design requirements called a High Deductible Health Plan (HDHP) and a separate custodial savings account for future medical expenses called a Health Savings Account (HSA). Congress created the HSA as a way to cover your future medical expenses, and it is subject to IRS regulations and guidelines. A health insurance company or an insurance plan usually provides the qualified health insurance policy. A licensed HSA administrator and financial services company, such as a bank, usually acts as the custodian and administers the savings account portion of the HSA. Other Types of Supplemental Coverage Are Permitted Along with HSA Accounts You can have a policy covering a specific disease such as cancer, one providing a fixed payment for hospital coverage such as a daily benefit, or you can have one that provides supplemental accident, disability, dental, vision or long-term care benefits. Use of HSA Funds to Pay Medical Expenses Funds in an HSA account can be used to pay both medical expenses incurred in meeting the deductible and any required shared expenses you are responsible for each year tax-free. These funds can also be used to cover qualified medical expenses not covered by the health insurance plan such as vision and dental expenses. See IRC Section 213 - Medical, dental, etc., expenses or IRS Publication 502 "Medical and Dental Expenses" for IRS rules on allowable expenses. Savings Account Money Belongs to You and Can Be Accumulated You own the HSA funds in your account. If you have an HSA as part of an employer sponsored health plan, you still own the funds, including any employer contributions, and can take them with you when you leave or retire. You can carry unused funds over from year to year until retirement, if you wish. Like an IRA, investment earnings accrue tax-free. If you withdraw funds prior to age 65 for non-medical expenses, you will be subject to a 10% income tax penalty in addition to any other income taxes you may owe on the accumulated funds. After age 65 you can continue to use the funds tax-free for medical expenses including premiums on health insurance and Medicare plans, except for Medicare Supplements, or you can withdraw the funds for other purposes subject to normal income taxes without a penalty. The 10% penalty is waived in the case of death or disability.
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