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 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.
