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Health Savings Account (HSA)

A Health Savings Account (HSA) is an account that you can put money into to save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment. HSAs were signed into law by President Bush on December 8, 2003.

Who Can Have an HSA?

Any adult can contribute to an HSA if they:

  • Have coverage under an HSA-qualified “high deductible health plan” (HDHP)
  • Have no other first-dollar medical coverage (other types of insurance like specific injury insurance for accident, disability, dental care, vision care, or long-term care insurance are permitted)
  • Are not enrolled in Medicare
  • Cannot be claimed as a dependent on someone else’s tax return

Contributions to your HSA can be made by you, your employer, or both. However, the total contributions are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return.

Contributions to the account must stop once you are enrolled in Medicare. However, you can keep the money in your account and use it to pay for medical expenses tax-free.

Advantages of HSAs

  • Security – Your high deductible insurance and HSA protect you against high or unexpected medical bills
  • Affordability – You should be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible
  • Flexibility – You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:
    • Health insurance or medical expenses if unemployed
    • Medical expenses after retirement (before Medicare)
    • Out-of-pocket expense when covered by Medicare
    • Long-term care expenses and insurance
  • Savings - You can save the money in your account for future medical expenses and grow your account through investment earnings
  • Control – You make all the decisions about:
    • How much money to put into the account
    • Whether to save the account for future expenses or pay current medical expenses
    • Which medical expenses to pay from the account
    • Which company will hold the account
    • Whether to invest any of the money in the account
    • Which investments to make
  • Portability – Accounts are completely portable, meaning you can keep your HSA even if you:
    • Change jobs
    • Change your medical coverage
    • Become unemployed
    • Move to another state
    • Change your marital status
  • Ownership – Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.
  • Tax Savings – An HSA provides you triple tax savings:
    1. tax deductions when you contribute to your account;
    2. tax-free earnings through investment; and,
    3. tax-free withdrawals for qualified medical expenses.

If you would like additional information about Health Savings Accounts, including answers to frequently asked questions, related IRS forms and publications, technical guidance, and links to other helpful web sites visit www.treas.gov.

To open a Health Savings Account (HSA) please stop by any of our locations and speak with one of our Personal Bankers.