Questions and Answers about Heath Savings Accounts (HSA):

Q: What is a Health Savings Account?
A: Health Savings Accounts(HSA) is a tax-advantage account that participants can use to pay for qualified health expenses they incur while covered by a high deductible health plan. HSA dollars, contributed by the employee, employer or another qualified party, accumulate over time with interest tax-deferred, and also can be used to pay for non-health expenses on a taxable basis plus an excise tax.

Q: Who is eligible to participate in a Health Savings Account?
A: An eligible individual is one who:
- Is an active employee covered by a high-deductible health plan
- Is not covered by any other medical plan that is not a high deductible (e.g., on a spouse’s plan)
- Is not entitled to benefits under Medicare
- May not be claimed as a dependent on another person’s tax return

Q: Who can contribute to a Health Savings Account?
A: Eligible employees or employers can contribute to a Health Savings Account. In addition, family members can make contributions to a Health Savings Account; however, that account must be established by an individual and funded according to IRS rules. When an employer contributes to the Health Savings Account, the funded amount is excluded from the employee’s gross income. As a result, contributions are not subject to withholding from wages for income tax, FICA tax, State and Local Taxes, Federal Unemployment Tax or the Railroad Retirement Tax. Contributions to an employee’s Health Savings Account through a cafeteria plan are treated as employer contributions. The employee cannot deduct employer contributions on his/her federal income tax return as Health Savings Account contributions or as medical expense deductions under IRS Code Sections 213 (d).

Q: How much can be contributed to the Health Savings Account?
A: Employers, employees and/or their family members can contribute tax-deductible funds each year up to the amount of the high-deductible health plan policy’s annual deductible. However, this amount cannot exceed $2,600 for individuals and $5150.00 for families. If the full amount has not been funded in the calendar year, additional contributions can be deposited through the April 15th tax deadline.

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