Health Savings Account (HSA) Fact Sheet · Health Savings Account (HSA) – Sample List of Qualified Expenses HSAs are spending accounts established to provide certain individuals

HEALTH SAVINGS ACCOUNTS (HSAs)

“A Simple Solution to a Taxing Problem!”

© Rev. 062019 S.M. Stevens and Associates.LLC. All rights reserved. Use by permission only.

Pa

ge1

Health Savings Account (HSA) Fact Sheet OVERVIEW A Health Savings Account (HSA) is a tax-favored savings account used to pay qualified medical expenses (See pg. 3). The employer and/or employee contribute tax preferred funds to the account, which accumulates, earning tax-free interest, to pay for qualified expenses. Funds used for non-qualified expenses prior to age 65 (unless the account holder is deceased/disabled) are subject to a penalty of 20%, plus income tax. The HSA belongs to the individual employee on whose behalf it is opened, and is portable to the extent an employee changes jobs, becomes unemployed, etc. HSA funds used to pay for eligible medical expenses are not taxed! Employees can make pre-tax or tax deductible HSA contributions, subject to specified maximums (see pg.2). Employer and Employee HSA contributions are exempt from payroll related taxes. Funds remain in the account holder’s control, and NEVER revert to the employer if unused. In order to establish an HSA and take advantage of the tax savings, a qualified high deductible health insurance plan (QHDHP) must be established (Note: additional, non-qualified health insurance coverage, including Medicare, is NOT allowed). The qualified high deductible plan, usually less expensive, and much easier to understand than traditional health plans, acts as a safety net and covers eligible expenses that are beyond the employee's reach. ADVANTAGES

• Favorable tax treatment of HSA contributions [Note: contributions are pre-tax or tax deductible.] • Reduce insurance premiums through the accompanying qualified high-deductible plan. • Tax-free interest on HSAs accumulates over time. • Provides funds to pay for qualified medical expenses (including many expenses not covered by traditional

insurance plans) through the HSA account. • Funds available to pay for COBRA coverage, and in certain cases, individual insurance in between jobs. • Funds can be used to supplement retirement without penalty at age 65. Funds can also be used for items such

as Long Term Care insurance, Medicare Part B and D premium, and many more qualified expenses. • Generally lower health care out of pocket expenses • Personal freedom of choice of healthcare provider with potentially lower non network penalties. HSA CONTRIBUTIONS

• Contributions are limited to a calendar year maximum, as announced by the IRS each year (see other side). • Excess contributions are subject to a 6% excise tax plus ordinary income tax. • Contribution limits may increase each year according to federal law. • Contributions can be made on a pre-tax (generally via payroll) or tax deductible basis. • Account holders age 55 and older are allowed to make “catch up” contributions of $1,000 annually. SUMMARY

An HSA is comprised of two parts, the first of which is a qualified high-deductible health insurance plan (QHDHP) that covers eligible pharmaceutical, medical and hospital expenses. The second part of the HSA allows you to make tax-free contributions to an investment or regular bank account, from which you can withdraw money tax-free to pay for qualified expenses. The money accumulates with tax-free interest until age 65, when you can withdraw it penalty free for any purpose, and only be subject to ordinary income taxes. Funds that are withdrawn and used for qualified expenses are penalty and tax free. HSA plans are personally owned by each participant or employee and thus, go with an individual if they leave one job, whether or not they assume employment elsewhere. To continue funding the account, the participant must stay enrolled in a Qualified High Deductible Health Plan (QHDHP).

For more information, contact: Scott M. Stevens, RHU, CDHC

402.938-5010 (phone) [email protected] (Email)




Pa

ge2

HSA Contribution Limits* and QHDHP Deductibles/Out of Pocket Maximums by Year

Year/Coverage Minimum

Deductible

Maximum Out-of-Pocket

Contribution Limit

Catch-Up Contribution

2010 & 2011

Individual/Family Coverage

$1,200/$2,400

$ 5,950/$11,900

$ 3,050/$6,150

$1,000

2012


$1,200/$2,400

$ 6,050/$12,100

$ 3,100/$6,250

$1,000

2013


$1,250/$2,500

$ 6,250/$12,500

$ 3,250/$6,450

$1,000

2014


$1,250/$2,500

$ 6,350/$12,700

$ 3,300/$6,550

$1,000

2015


$1,300/$2,600

$ 6,450/$12,900

$ 3,350/$6,650

$1,000

2016


$1,300/$2,600

$ 6,550/$13,100

$ 3,350/$6.750

$1,000

2017


$1,300/$2,600

$ 6,550/$13,100

$ 3,400/$6.750

$1,000

2018


$1,350/$2,700

$ 6,650/$13,300

$ 3,450/$6,900**

$1,000

2019


$1,350/$2,700

$ 6,750/$13,500

$ 3,500/$7,000

$1,000

2020


$1,400/$2,800

$ 6,900/$13,800

$ 3,550/$7,100

$1,000

* Federally Qualified HSA: To have a Federally Qualified HSA, you must purchase and maintain a qualified high-deductible insurance policy and cannot be covered by another non-qualified insurance policy. ** Reduced to $6,850 from $6,900 per the Tax Cuts and Jobs Act, then increased back to $6,900, per IR-2018-107)




Pa

ge3

Health Savings Account (HSA) – Sample List of Qualified Expenses

HSAs are spending accounts established to provide certain individuals with a means to pay for qualified healthcare expenses. Additionally, HSA funds can be used to pay for certain insurance premiums, and at some point, can be used for non-medical expenses, without incurring penalties (i.e., attainment of age 65 and death of the HSA account holder). Qualified healthcare expenses are defined under Section 213(d) of the IRS Code, which also includes those expenses eligible for reimbursement under HSAs, Flexible Spending Accounts (FSA), and certain Healthcare Reimbursement Arrangements (HRA). Non-qualified expenses reimbursed by HSA funds are subject to a 20% penalty plus ordinary income tax. Listed below are some examples of both qualified and non-qualified healthcare expenses. For a complete list of eligible expenses, please refer to IRS Publication 502 - “Medical and Dental Expenses”, Catalog Number 15002Q. The publication is available at the IRS web site, which is www.irs.gov. You can also obtain more information by calling 800-TAX-FORM (800-829-3676).

Sample Qualified Expenses

Sample Non-Qualified Expenses

♦ Acupuncture ♦ Alcoholism treatment ♦ Ambulance ♦ Artificial limbs or prostheses ♦ Artificial teeth ♦ Birth control pills (by prescription) ♦ Braces ♦ Breast reconstruction surgery ♦ Car (special hand controls or equipment to

accommodate a disabled person) ♦ Chiropractor ♦ Christian Science practitioner ♦ Contact lenses and cleaning solutions ♦ Crutches ♦ Dental treatment ♦ Dentures ♦ Dermatologist ♦ Diagnostic devices (blood sugar test kit) ♦ Drug addiction treatment ♦ Eyeglasses ♦ Fertility enhancement ♦ Guide dog or assistance animal ♦ Hearing aids and batteries ♦ Home care ♦ Home improvements to accommodate a

disabled person ♦ Hospital services ♦ Lab fees ♦ Laser eye surgery ♦ Lead paint removal ♦ Lodging (away from home for prescribed

outpatient care) ♦ Long term care services ♦ Nursing home ♦ Nursing services (including board and meals)

♦ Ophthalmologist/Optician

♦ Babysitting and childcare for a healthy baby

♦ Bottled water ♦ Cosmetic surgery and procedures

(unless for deformity) ♦ Cosmetics, hygiene products, etc. ♦ Diaper Service ♦ Domestic help ♦ Electrolysis or hair removal ♦ Funeral, cremation or burial

expenses ♦ Hair transplant ♦ Health club membership ♦ Illegal operations or treatments ♦ Maternity clothes ♦ Nutritional supplements ♦ Premiums for most insurance

coverage (premium for qualified Long Term Care and in certain circumstances, Medical Insurance are permissible)

♦ Nonprescription medications (effective 1/1/2011)

__________________________________

This list contains examples only, and is not intended to provide an all-inclusive list. S.M. Stevens and Associates, LLC and its affiliates are not engaged in providing tax or legal advice. Please consult a tax or legal professional if such advice is needed.

♦ Organ transplant (including donor expenses)

♦ Osteopath ♦ Oxygen and oxygen

equipment ♦ Physician services ♦ Podiatrist ♦ Premiums for qualified Long

Term Care insurance, and in some cases, health insurance

♦ Prescription medications ♦ Psychiatric care ♦ Psychiatrist/Psychologist ♦ Special home for the

mentally handicapped ♦ Special school costs for the

handicapped ♦ Sterilization ♦ Surgery ♦ Stop-smoking programs

(physician prescribed) ♦ Telephone or TV equipment

to assist the hearing impaired ♦ Therapy ♦ Transportation (primarily for

and essential to medical care)

♦ Vasectomy ♦ Weight loss programs to

treat an existing disease ♦ Wheelchair ♦ X-rays

Documents

Health Savings Account (HSA) Fact Sheet · Health Savings Account (HSA) – Sample List of Qualified Expenses HSAs are spending accounts established to provide certain individuals