Heath Savings Accounts

Heath Savings Accounts – Growing in Popularity

The popularity of Health Savings Accounts, HSAs, has soared over the past 10 years. Designed as a way to help people manage high-deductible health insurance plans, financial experts believe that the attractiveness of these accounts will only continue to grow.

HSA Qualifications

If you are currently enrolled in a high-deductible insurance plan (HDHP), you can qualify for a HSA. By the 2017 definition, the IRS defines a HDHP for an individual as a plan with an out-of-pocket maximum of $6,550 and a minimum deductible of $1,300. For a family, the out-of-pocket maximum is $13,000 and the minimum deductible is $2,600.

How does a HSA Work?

Most health insurance providers offer HSAs. But, if yours doesn’t, you can open an account at most financial institutions.

If you qualify, you can currently contribute up to $3,400 as an individual and $6,750 as a family. Adults over 55 can increase these amounts up to an additional $1,000. If your place of employment offers a HSA, you can set up automatic contributions directly from you payroll.

Using a debit card or checks for this account, you can use these funds for eligible medical expenses. These include deductibles, co-pays, coinsurance and many other qualified medical expenses not covered by your insurance plan. However, you may not pay your medical insurance premiums with HSA funds.

The balance of a HSA, unlike Flexible Spending Accounts, rolls over from year to year. Consequently, you never lose your savings, even if you leave your employer.

Once you’re over the age of 65 and enrolled in Medicare, you can no longer contribute to a HSA. However, you can still use the balance of your savings for out-of-pocket medical expenses. If you use the money for non-medical expenses, you will have to pay income tax on that amount…and a penalty if you’re under 65 years old.

Triple the Tax Benefits

Three tax benefits make HSAs especially appealing. HSA contributions are pre-tax/tax-deductible, just like an IRA. This means your contributions are made before your income is taxed. In addition, you don’t incur taxes on the account’s growth, either. And lastly, the money withdrawn to pay eligible medical expenses is also tax-free.

The Investment Potential of a HSA

HSAs can be invested in mutual funds, stocks and other investment vehicles to generate more money. Financial experts tout the HSA as one of the best tax-free investment accounts out there, especially for those investors that have already maxed out their 401(k) and IRA contributions. The HSA provides yet another place to save in a tax-advantaged way.

For more information and/or to open a Health Savings Account contact or stop by one of our banking locations today.