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HSA Contribution FAQ’s

Q. Who may contribute to an HSA? A. Individuals, employers and their employees.

Q. How is money contributed to the HSA? A. Contributions may be made in one lump sum or in regular installments by either the employer, the employee or both.

Q. How much can be contributed per year? A.

The following apply to an HSA in 2010:

  • The maximum contribution for a single person is $3,050.
  • The maximum contribution for a family is $6,150.
  • Limits are indexed for inflation so they will change annually on January 1st each year.
  • Individuals 55 and older who are covered by an HDHP can make additional catch-up contributions of $1,000 each year until they enroll in Medicare.
  • The minimum deductible for an individual is $1,200, for a family, it’s $2,400.
  • The maximum out-of-pocket for an individual plan is $5,950, for a family, it’s $11,900.

Q. Is the catch-up contribution allowed for both the account holder and spouse? A. Yes, both can make catch-up contributions.

Q. What happens if more money is contributed than allowed? A. To avoid a tax penalty, a refund of excess contributions plus interest must be requested through the HSA administrator. These excess funds must be taken out of the HSA by the date taxes are due or by April 15th of the following year, whichever comes first. It is the responsibility of the account holder to not exceed the maximum allowed.

Q. What happens to the HSA balance at the end of the year? A. Unspent HSA funds roll over each year and belong to the employee. There is no “use it or lose it” provision with HSAs. These funds can continue to be used for qualified medical expenses, along with any new contributions.

Q. What is the tax treatment of HSA contributions? A. Employer contributions made to an HSA are tax deductible. Employee contributions made to an HSA are tax deductible. The contributions are deductible whether or not the eligible individual itemizes deductions. HSA contributions may not, however, also be deducted as medical expenses.

Q. Are rollover contributions to HSAs permitted? A. Rollover contributions from a Medical Savings Account (MSA) and other HSAs are permitted. Rollover contributions need not be in cash. Rollovers are not subject to the annual contribution limits. Rollovers from an IRA, a Health Reimbursement Arrangement (HRA), or a Flexible Spending Account (FSA) are not permitted.

Q. If a person incurs an expense which exceeds the amount currently in the account, can the person withdraw the full amount of the expense like with a Flexible Spending Account? A. No, the maximum a person can withdraw is the amount currently in the account. After additional deposits are made to the HSA, the person may then make more withdrawals to reimburse him/herself or pay the balance of the bill.

Q. Are HSA accumulations tax-free or tax-deferred? A. HSA accumulations are tax-free if used to pay for qualified medical expenses. Accumulations are tax-deferred if they are held in the account until the age of 65 and then used for purposes other than qualified medical expenses.

Q. If a person’s family is not covered under the person’s qualified HDHP, can the person still use his or her HSA funds to pay their qualified expenses? A. Yes, the person may use HSA funds to pay the qualified expenses of the dependents listed (claimed) on income taxes. This has been verified by the Treasury Department.

Q. How are wellness benefits handled under an HSA plan? A. There is no legal requirement for an HDHP to provide benefits for preventive care or to cover these services before the minimum deductible is reached. Many plans will continue to provide certain wellness benefits subject to deductible and coinsurance of the plan.

Q. How are prescription drug benefits handled under an HSA plan? A. Prescription drugs are subject to the medical plan’s deductible and coinsurance. Under the HSA legislation, individuals with an HDHP are not allowed to have prescription drug coverage that has no deductible or has a deductible that is lower than the minimum deductible required for an HDHP.