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Health Savings Accounts (HSA)

What is a Health Savings Account (HSA)?

  • An HSA is a tax-advantaged savings account tied to a high deductible health insurance plan. The savings account may be used to pay for deductibles, coinsurance and other qualified healthcare expenses (Section 213(d) of the Internal Revenue Code), on a tax-free basis.
  • Unlike other types of health savings vehicles, HSA contributions and earnings carry over from year to year allowing you to build up your savings over time. If not used by age 65 you may also use the funds in your HSA to supplement your retirement income.
  • Unlike most other employer sponsored savings plans, HSAs are portable and remain with you regardless of your employment status. You control your money.

Advantages of an HSA

  • Tax-deductible Contributions: Contributions are tax deductible for individuals, the self-employed and employers.
  • Tax-free: Withdrawals used to pay for qualified healthcare expenses are tax-free.
  • Low Cost: Qualified HSA insurance plans cost less due to the high deductible regulations.
  • Options: You also have the option of selecting from a variety of investment vehicles.

How Do I Qualify for an HSA?

Most Americans qualify for HSAs. If you meet the following criteria, you qualify:
  • You have a qualified high deductible health plan. Your health plan must have a deductible of $1,250 for self-only coverage and $2,500 for family coverage to qualify as a high deductible health plan (HDHP). Your 2013 HDHP must also have a maximum annual out-of-pocket limit of $6,250 for individual plans and $12,500 maximum annual out-of-pocket amount for HDHP family coverage.
  • You have no other health insurance (with a few exceptions: accident only, dread disease, etc.)
  • You are not eligible for Medicare
  • You cannot be claimed as a dependent on someone else's tax return
  • You have gross income

Setting Up Your HSA

  • The election of your HSA trustee (bank or financial institution approved by the IRS) is your choice. To simplify this process you will be provided materials and information from an approved trustee with your policy kit.
  • If you select one of our recommended HSA trustees/custodians, all you need to do is fill out the forms and send them in to the trustee/custodian with a check with your initial deposit and fees.

Funding Your HSA

The maximum annual contribution for HSAs is set by the government and is increased each year to adjust for inflation. See the chart below for individual and family HSA contribution maximum figures for 2013.

Note the "catch-up" contributions for persons over 55 below the chart.

(self-only coverage)
2013 $3,250 $6,450
2012 $3,100 $6,250
2011 $3,050 $6,150
2010 $3,050 $6,150
2009 $3,000 $5,950
2008 $2,900 $5,800
2007 $2,850 $5,650
2006 $,2650* $5,250*
* In 2006 ONLY, the annual contribution could not exceed the health insurance plan deductible. Contributions in subsequent years do not have this limitation.

  • The catch up contribution for individual who are 55 or older remains at $1,000 for 2013 and all years going forward.
  • You, your employer and/or another interested individual can make contributions to your HSA. However, all contributions cannot exceed the annual contribution limit.
  • And partial year that you participate in an HSA, the contribution is prorated for that year based on the effective or cancellation date of your insurance plan. Each month in the plan qualifies you for one twelfth of the total contribution limit.
  • You have until April 15 or the tax-filing deadline to contribute the allowable limit for the previous tax year.
Most HSA administrators permit monthly contributions, single lump sum contributions, or sporadic contributions throughout the year.

Additional Examples of Qualified Tax-Free Medical Expenses

  • Weight Loss Programs
  • Eyeglasses and Contact Lenses
  • Maternity Expenses, Prenatal Care
  • Alcoholism Treatments
  • Dental Treatment/Braces
  • Hearing Aids
  • Long Term Care Insurance
  • Podiatrist, Orthopedist, and Psychiatrist
  • Healthcare Premiums When Unemployed
  • Medical Expenses Not Covered by Your Insurance Policy
  • Health Plan During Any Period of Continuation of Coverage Required Under Any Federal Law

* Annual deductibles and contributions are subject to annual cost of living adjustments as may be required by the Federal Government to coincide with the Consumer Price Index (CPI).

Source: American Select Insurance Management Corporation

American Select Insurance Management Corporation, Empire Insurance Companies, and our partners are not licensed tax advisors. For tax-related questions, please consult your attorney or accountant for advise. This section is for general information and is intended to assist in analyzing needs and reaching an informed conclusion.

Last updated on: 10/13/2015

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