HSAs – Frequently Asked Questions 

• What is a Health Savings Account?
• Am I eligible for a Health Savings Account?
• What features do Interra’s Health Savings Accounts offer?
• What qualifies as a High Deductible Health Plan?
• What are the contribution limits?
• How can a Health Savings Account be used?
• What are my responsibilities with an HSA?
• What happens to the money in my HSA if I no longer have HDHP coverage or I lose HDHP coverage?
• What happens if I don’t use the money in the HSA for medical expenses?
• What happens to the money in a Health Savings Account after age 65?
• What happens to a Health Savings Account at death?

What is a Health Savings Account?
A Health Savings Account is an account to save for future medical expenses.  There are benefits to an HSA, including favorable tax advantages.  Contributions are tax deductible and distributions are tax-free when used for qualified medical expenses.  You must be covered by a High Deductible Health Plan (HDHP) to take advantage of an HSA.  

You own and control your account.  That means you determine how to allocate the funds for your expenses, not a third party or health insurer.  You also determine what types of investments to use to maximize your account.  You do not lose unused funds at the end of the year.

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Am I eligible for an HSA?
Eligibility is determined on the first day of each month, if the accountholder is…

• Covered under an HSA-qualified high deductible health plan (HDHP);
• Not also covered by any other health plan that is not an HDHP, with the exception of specific injury insurance or accident, disability, dental care, vision care, or long-term care insurance
• Not enrolled in Medicare; and
• Not eligible to be claimed as a dependent on another person’s tax return.
• Other unique restrictions may apply.

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What features do Interra’s Health Savings Accounts offer?
No annual fees or administration fees — Flexible account (savings, checking and certificates) are available.

• Competitive rates
• Convenient access to your account funds — free debit card and HSA checks are also available.
• On-site education and enrollment.
• You will receive a regular statement of activity and, for tax purposes, you will receive a year-end summary of your account.
• All HSA funds are insured to $250,000 per account by American Share Insurance.

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What qualifies as a High Deductible Health Plan (HDHP)?
An HDHP is health insurance that does not cover first dollar medical expenses.  To qualify, federal law requires the following insurance deductible minimums:

Year	Individual coverage	Family coverage
2009	$ 1,150	$ 2,300
2010	$ 1,200	$ 2,400

 
In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

Year	Individual coverage	Family coverage
2009	$ 5,800	$11,600
2010	$ 5,950	$11,900

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What are the contribution limits?
Contributions to the HSA can be made by the individual, employer or both.  However, the total contributions are limited annually.  Contributions can be made each year the individual is eligible.  Individuals may contribute up to the amount of the individual’s HDHP deductible, but no more than:

Tax Year	Individual coverage	Family coverage
2009	$ 3,000	$ 5,950
2010	$ 3,050	$ 6,150

Individuals age 55 or older can also make additional “catch-up” contributions.  The maximum annual catch-up contributions are as follows:

Annual contribution	Monthly contributions
$1,000	$   83.33

In order to contribute the full amount for any given year, you must have been enrolled in a qualifying HDHP for the entire year.  If you were not enrolled for any part of the year, your contribution limit is reduced in proportion to the amount of time you were not enrolled in the qualifying HDHP. 

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How can a Health Savings Account be used?
Money in the account can be used tax-free to pay for any “qualified medical expenses” permitted under federal tax law; see IRS Publication 502. Qualified medical expenses are much broader than those covered by most health insurance plans.  In addition to medical expenses, qualified expenses include over-the-counter medications, dental and vision care, and more.

You are responsible for how your money is spent.  You may find it useful to familiarize yourself with what determines qualified medical expenses. 

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What are my responsibilities with an HSA?

• Determine your eligibility for an HSA each year you make a contribution.  (Actual eligibility is determined on the first day of each month.)
• Ensure that the contributions you make are within the limits set forth by the IRS and other tax laws.
• Make sure you understand the tax consequences of any contributions (including rollover contributions) and distributions.
• Keep appropriate records and receipts of your payments for qualified medical expenses.  

If you have questions, consult your tax advisor about eligibility, contributions and distributions. 

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What happens to the money in my HSA if I no longer have HDHP coverage or I lose HDHP coverage?
Once the funds are in your HSA, the account can be used to pay for medical expenses tax-free, even if you no longer have HDHP coverage.  There is no time limit on using the funds.  Keep in mind, though, that you can no longer contribute to the account if you no longer have an HDHP.

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What happens if I don’t use the money in the HSA for medical expenses?
If the money is used for purposes other than qualified medical expenses, the expenses will be taxed and, for individuals who are not disabled or over age 65, subject to penalty.

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What happens to the money in a Health Savings Account after age 65?
You can continue to use your account tax-free for out-of-pocket health expenses.  When you enroll in Medicare, you can use the accumulated funds in your account to pay for Medicare deductibles, co-pays, and coinsurance under any part of Medicare.  If you retain health benefits through your former employer, you can use your account to pay for your share of retiree medical insurance premiums.  The one expense you cannot use your account for is to purchase a Medicare supplemental insurance policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses.  If used for other expenses, the amount withdrawn will be treated as income and subject to income tax, but will not be subject to any other penalties.  

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What happens to a Health Savings Account at death?
For married individuals, the spouse becomes the owner of the account, and can use it as if it were his/her own HSA.  If not married, the account will no longer be treated as an HSA upon death.  The account will pass to a designated beneficiary or become part of the estate.  At that time, it will become subject to any applicable taxes. 

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