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What They Are.
A Health Savings Account is a savings account you can use to cover your healthcare expenses tax free. Health Savings Accounts were created to go hand-in-hand with a qualified high-deductible health care plan so that you can pay less in monthly insurance premiums and put the savings (along with additional funds) in a tax-exempt fund. It's set up very much like an IRA where your contributions are tax deductible but it works like a checking account because the money you contribute is used to pay healthcare expenses. (All expenses must be qualified under Section 213(D) of the Internal Revenue Code.)
Who is Eligible.
Beginning January 1, 2004, everyone under the age of 65 is eligible to establish a Health Savings Account provided they:
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Are covered under a high-deductible health plan, |
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Are not also covered by any other health plan that is not a high-deductible health plan (with certain exceptions for plans providing preventive care and limited types of permitted insurance and permitted coverage), |
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Are not enrolled in Medicare, and |
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cannot be claimed as a dependent on another person's tax return. |
What Qualifies as a High Deductible Health Plan.
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Have an annual deductible of at least $1,100 for single (self-only) coverage or $2,200 for family coverage. These amounts are subject to cost-of-living adjustments. |
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Must limit out-of-pocket expenses (which includes money applied to your deductible and your coinsurance for covered charges) to no more than $5,500 for single coverage and no more than $11,000 for family coverage (also subject to cost-of-living adjustments). |
Who Can Contribute.
If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including nonindividuals) may contribute to your Health Savings Account. (even if you are self-employed or unemployed).
You cannot deduct employer contributions, and these contributions will not count as wages for federal income tax purposes.
How Much To Contribute.
The 2007 maximum contribution is $2,850 for single coverage and $5,650 for family coverage.
In order to take advantage of the full allowable contribution for the current year, you MUST be enrolled in the high deductible health plan for a full year (January 1-December 1).
Additionally, a "catch-up" contribution is available for eligible individuals who are age 55 or older by the end of their taxable year and have not enrolled in Medicare.
| Tax Year |
Catch Up Ammount |
| 2005 |
$600.00 |
| 2006 |
$700.00 |
| 2007 |
$800.00 |
| 2008 |
$900.00 |
| 2009 and after |
$1,000.00 |
When to Contribute
Regular and catch-up Health Savings Accounts contributions can be made at anytime for a taxable year up to and including your federal income tax return due date, excluding extensions, for that taxable year. The due date for most taxpayers is April 15th.
You can withdraw funds tax free only for IRS qualified medical expenses as described in Section 213 (D) of the Internal Revenue Code. Most medical expenses are qualified. For specifics, go online to www.irs.gov.
How to Open an HSA.
Stop by Central Bank's Main Bank downtown and see any of the friendly Customer Service Representatives. They will be happy to help you!
Fees & Requirements.
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NO Minimum Deposit |
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NO Minimum Balance |
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NO monthly fee |
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$15 One-time Set-Up Charge |
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$15 Maintenance Fee every year thereafter |
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Unlimited Transactions |
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Monthly Image Statement |
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Free Online Banking access to account information |
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Free Bankline 24 telephone access to account information |
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$50 Transfer Fee |
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Interest rate tied to our Money Market rate |
Contributions may be made at any Central Bank facility by individual, employer or other family member.
Employees own their accounts, regardless of change of employment. If your new employer does not offer qualified coverage, then you can keep the account open and make withdrawals as is appropriate under the law.
How HSAs are taxed.
Distributions from your HSA used exclusively to pay for qualified medical expenses for you, your spouse, or your dependents are excludable from your gross income. Any other distributions are includable in your gross income and are subject to an additional 10% tax on the amount includable, except in the case of distributions made after your death, your disability, or your attainment of age 65. HSA distributions that are not rolled over will be taxed as income in the year distributed, unless they are used for qualified medical expenses. HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses. The qualified medical expenses must be incurred only after the HSA has been established. However, for calendar year 2004, an HSA established by you on or before April 15, 2005, may pay or reimburse on a tax-free basis an otherwise qualified medical expense if that expense was incurred on or after the later of: (1) January 1, 2004 or (2) the first day of the month that you became eligible for an HSA.
This information is effective for tax-year 2004 and thereafter. It is intended to provide general information concerning federal tax laws governing HSAs. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances. For specific information, you are encouraged to consult your tax or legal professional. The IRS's website, www.irs.gov may also provide helpful information. |
