What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a medical savings account that you own! In this guide to health savings accounts, you’ll learn about the basics to see if an HSA is right for you.
If you are enrolled in a High Deductible Health Plan (HDHP), both you and your employer can contribute pre-tax dollars to an HSA that you can use to pay for qualified medical expenses.
What expenses are covered?
You can use your HSA funds to pay for qualified medical expenses like doctor visits, acupuncture, surgery, ER visits, prescription medications, braces, and contact lenses. You can also use your HSA to purchase over-the-counter drugs like diaper rash ointments or antacid relievers with a prescription from your doctor.
Does the money in my HSA ever expire?
No – the money in your HSA never expires. There is no use-it-or-lose-it clause, and unlike HRAs and FSAs, the money in your HSA belongs to you alone. This means you can take your HSA with you if you leave your employer, and any money in the account stays there until you spend it.
How much can I contribute?
The IRS determines how much can be contributed to an HSA during the calendar year. For 2020, the federal contribution limits are:
- Individual: $3,550
- Family: $7,100
Individuals age 55 and over can make an additional “catch-up” contribution of $1,000. Any contributions made by your employer also apply to these limits.
What are some advantages of an HSA?
1. HSA-eligible plans usually have lower premiums than other plan offerings.
2. Unlike an FSA, you do not have to forfeit any money left over in your HSA at the end of the year. Unused funds in an HSA roll over year after year.
3. HSAs have multiple tax advantages, which can help reduce your health care costs:
- Contributions are tax free
- Interest and investment earnings grow tax free
- Payments from your HSA for qualified medical expenses are tax free
For more information (or for an extensive list of what’s covered) reach out to your HSA provider!
Looking for more open enrollment employee resources? Download our Open Enrollment Employee Resource Guide. It shares easy-to-understand insurance guidance that will help employees ace open enrollment year.