Health Savings Accounts
During Open Enrollment many people begin to consider a move to a High Deductible Health Plan so they can open and contribute to a Health Savings Account (HSA). Let’s explore what might make an HSA an attractive savings vehicle.
What is an HSA?
An HSA is a tax-advantaged savings account that you own. You are able to set aside pre-tax deductions each pay period and use those funds to help offset the cost of qualified medical, dental, and vision expenses for use now, next year, or even in retirement. Snowflake also makes a contribution to your HSA each pay period. We will contribute up to $1,000 if you are just insuring yourself, or $2,000 if you insure yourself plus one or more dependents.
How much can I contribute?
The IRS limits how much you can contribute to your HSA each year. The limits for 2022 (including Snowflake’s contribution) are:
- $3,650 for individual coverage
- $7,300 for family coverage (you + dependent(s))
- An additional $1,000 contribution is allowed at age 55+
How is a Health Savings Account (HSA) different from a Flexible Spending Account (FSA)?
Unlike a Flexible Spending Account (FSA), the funds in your HSA rollover at the end of each year and you keep the account should you ever change employers. There is no “use-it-or-lose-it” rule with an HSA. This is a bank account in your name, the funds stay with you year-over-year and follow you wherever you go.
What can you spend your HSA money on?
You can use your HSA for a wide variety of expenses, including your annual deductible, coinsurance, prescriptions, as well as vision and dental expenses. Some choose to use their HSA to help offset the cost of reaching the high deductible in their HDHP plan, or to pay for physician office visits, prescriptions drugs, etc. A list of allowed expenses, as well as other benefits of an HSA, can be found here.
To help make using your HSA funds easy, you’ll receive a debit card that you can use at the point of sale, or to pay your healthcare bills online.
What are some HSA Tax Advantages?
HSAs are triple tax-advantaged*:
- You pay NO taxes on any money you deposit into the account through your payroll deductions
- You pay NO taxes on any interest or account growth
- And you pay NO taxes when you withdraw money to pay for a medical expense
*Federally tax-free. AL, CA, and NJ tax HSA contributions. NH and TN tax HSA interest and earnings.
How can I use an HSA in Retirement?
You can also use your HSA in retirement to offset healthcare expenses, including premiums for such things as long-term care and prescription drug plans. The less you use your HSA dollars now, the more you can save for use later when your income is potentially more restricted. Many people use HSAs as part of their long-term financial planning.
Who cannot contribute to an HSA?
- Anyone NOT enrolled on a high deductible health plan
- Anyone with access to a general-purpose healthcare flexible spending account
- Anyone who is claimed as a tax dependent by someone else (e.g. if you are claimed as a tax dependent by your parents, you cannot have an HSA)
- Anyone enrolled in Medicare, Medicaid, or Tricare
- Anyone enrolled in a low-deductible medical plan (e.g. you are insured by your spouse or domestic partner on their low deductible PPO or HMO plan)
Looking for more information?
Please check out the HSA page on our website. You can also talk with your financial advisor to see if an HSA makes sense for your short-term and long-term savings goals.
