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What is a health savings account and how does it work?

An HSA works in conjunction with high deductible health insurance.

Health Savings Account funds can be used to help pay for qualified medical expenses. Withdrawals can be by debit card, checks, in person or reimbursement process. You fully own the HSA, unlike with flexible savings accounts HSA funds carry over from year to year.

Health Savings Account Benefits

Combined with a high deductible health plan (HDHP), an Interra HSA is an excellent tool to save and pay for qualified medical expenses.

  • Deduct qualified contributions from your taxes1.
  • HSAs earn dividends, tax-free.
  • Use your HSA to pay for qualified medical expenses.
  • Unlike a flexible spending account (FSA), HSA funds belong to you and can be carried over, year to year.
  • An HSA is transferable, regardless of where you work.

Combined with a high deductible health plan (HDHP), an Interra HSA may be the health care option of choice for you and your employees.

Health Savings Account Qualifications

There are qualifications for an HSA:

  • You must be covered under a HDHP.
  • You cannot be covered by certain other plans that pay medical expenses.
  • You cannot be enrolled in Medicare.
  • You cannot be claimed as a dependent on another person’s tax return.
  • Some other restrictions may apply given your situation.

Health Savings Account Types

HSAs come in a variety of different account types. Ask an Interra representative which type is best for you:

  • Checking – Easily make qualified purchases from the account with a debit card or by check.
  • Savings – Allowing for a simple health savings option.
  • Certificates – Maximize your savings for long-term or expected future medical expenses.

What is an HSA?

An HSA, or Health Savings Account, is an easy way for you to save money for health care expenses if you are enrolled in a high-deductible health plan. Normally, the money you contribute to an HSA is deposited into your account before taxes, which means the funds deposited into an HSA are not subject to federal income tax.

How do HSA's work?

An HSA works in conjunction with a High Deductible Health Plan. Health Savings Account funds can be used to help pay for qualified medical expenses. Withdrawals can be by debit card, checks, in person or reimbursement process.

What are the advantages of a health savings account?

You fully own the HSA, unlike with flexible savings accounts (FSA) HSA funds carry over from year to year. An HSA also follows you from employer to employer. HSAs are also tax free when used correctly.

Q:

Can the Annual Percentage Yield (APY) change on a Health Savings Account?

A:

Yes, rates on a Health Savings Account may change at Interra Credit Union’s discretion.

Q:

Can I get a printed copy of a check image?

A:

Yes, you can print a copy of a check via Interra Online Banking.

Q:

Will Health Savings Account members receive a 1099 at the end of the year reflecting dividends earned?

A:

Yes, if applicable.

Q:

How can a Health Savings Account be used?

A:

For current details regarding qualified medical expenses related to your HSA, please see Publication 502 on the IRS website.

Q:

What are my responsibilities with an HSA?

A:

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.

Q:

What happens to the money in my HSA if I no longer have or lose my HDHP coverage?

A:

Once the funds are in your HSA, the account can be used to pay for qualified medical expenses tax-free for as long as the account it open, regardless of HDHP coverage. However, you will no longer be able to contribute to the account if you no longer have or lose your HDHP coverage.

Q:

What happens if I don’t use the money in the HSA for qualified medical expenses?

A:

If the money is used for purposes other than qualified medical expenses, the expenses will be taxed and subject to penalty, unless you are disabled or over the age of 65.

Q:

What happens to the money in an HSA after age 65?

A:

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.

Q:

What happens to an HSA at death?

A:

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.

HSA or Traditional Health Plan?
Individual Coverage
Year Max. Monthly Contributions Annual Contributions
2018 $287.50 $3,450
2019 $291.67 $3,500
Family Coverage
Year Max. Monthly Contributions Annual Contributions
2018 $575.00 $6,900
2017 $583.33 $7,000
Over 55 Catch-up Contributions
Year Max. Monthly Contributions Annual Contributions
2018 $83.33 $1,000
2019 $83.33 $1,000

1 Consult your tax professional regarding deductibility and tax requirements.