Banking Log In
Health Savings Account Guidelines
A Health Savings Account (HSA) can be established in conjunction with a qualified High Deductible Health Plan (HDHP) to help individuals save for qualified medical and retiree health expenses on a taxfree basis.
Individuals with no other first-dollar medical coverage are eligible to contribute to an HSA if they have a qualified health plan. Your insurance professional will help you determine whether your plan is an HSA qualified plan. The amounts listed below are indexed annually.
- For self-only policies in 2012, a qualified health plan must have a minimum deductible of $1,200 with a $6,050 cap on out-of-pocket expenses.
- For self-only policies in 2013, a qualified health plan must have a minimum deductible of $1,250 with a $6,250 cap on out-of-pocket expenses.
- For family policies in 2012, a qualified health plan must have a minimum deductible of $2,400 with an $12,100 cap on out-of-pocket expenses.
- For family policies in 2013, a qualified health plan must have a minimum deductible of $2,500 with an $12,500 cap on out-of-pocket expenses.
- “No other first dollar medical coverage” means that individuals cannot contribute to an HSA if they have dual coverage under another non-HDHP medical plan, including Medicare or a spouse’s non-HDHP plan or general purpose FSA. Use of VA benefits may also make an individual ineligible for the HSA.
Preventative care services are not required to be subject to the deductible. Individuals may also carry separate coverage for accidents, disability, dental care, vision care, and long term care, not subject to the deductible.
Contributions are allowed up to the maximum statutory limit and are indexed annually. For 2012, the maximum annual contribution is $3,100 for self-only policies and $6,250 for family policies. The maximum annual contribution for 2013 is $3,250 for self-only policies and $6,450 for family policies. These limits apply even for participants entering the plan mid-year*. Prior year contributions may be made through April 15 of the following year.
Individuals age 55 and over may make an additional “catch up” contribution of up to $1,000 in 2012 and in 2013. A married couple can make two catch-up contributions as long as both spouses are at least 55. The catch-up contribution for the other spouse must be placed in a separate HSA. Catch-up contributions will help individuals accumulate assets for retiree health expenses.
Individuals, family members, and employers may make contributions.
- Contributions made by individuals and family members are tax deductible (for the account beneficiary) even if the account beneficiary does not itemize. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers are allowed to offer HSAs through a cafeteria plan.
Individuals are allowed to make a one-time contribution to an HSA from an IRA or Roth IRA, tax-free. The maximum contribution for an IRA to HSA transfer is equal to the maximum annual HSA contribution. Both accounts must be in the same person's name. You may be subject to an IRS testing period if you do not remain an eligible individual from the month the contribution is made through the last day of the 12th month following that month.
Investment earnings accrue tax-free.
*If you make the full-year contribution for a year in which your HDHP takes effect later than Jan. 1, you may be subject to an IRS Testing Period and could owe tax and a penalty on part of that contribution if you do not remain an eligible individual through 12/31 of the following year. You may also need to pro-rate your contribution if you drop or reduce the level of your coverage mid-year.
HSA distributions are tax-free if they are used to pay for qualified medical expenses, such as:
- Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease
- Qualified long-term care services and long-term care insurance
- Continuation of coverage required by Federal law (i.e., COBRA)
- Health insurance for the unemployed
- Medicare expenses (but not Medigap)
- Retiree health expenses for individuals age 65 and over
Distributions made for any other purpose are subject to income tax and a 20% penalty. The 20% penalty is waived in the case of death or disability. The 20% penalty is also waived for distributions made by individuals age 65 and over.
Treatment at Death
Upon death, HSA ownership may transfer to the spouse on a tax-free basis, or to another named beneficiary as estate income.
*The hypertext links or pointers displayed on this site are for the convenience of our customers and go to information created and maintained by other public and private organizations. Tower Bank does not control or guarantee the accuracy, relevance, timeliness, or completeness of this outside information. Further the inclusion of links or pointers to particular items in hypertext is not intended to reflect their importance nor is it intended to endorse any views expressed or products or services offered on these outside sites or the organizations sponsoring the sites.