Health Savings Accounts

Health Savings Accounts - (HSA) - Do You Need One?

June 2009

Health Savings Accounts (HSA) provide an interesting approach to health care planning. Considered by some to be a type of "medical IRA," the HSA is designed to cover lower-cost routine medical needs. The HSA is used in conjunction with a high-deductible health plan (HDHP), which covers major medical costs. Until an insurance deductible is met, an HSA provides tax-free dollars to be used for eyeglasses, medications, routine doctor visits, lab expenses, etc. The idea is to grow the money in the HSA account so in time it will cover deductibles, while your annual contribution grows tax-deferred through investments. Whether you need an HSA depends largely on what type of insurance, if any, you currently have. Below are the basics regarding Benefits, Qualifying, Contributions and Distributions.

Click HERE to access the rules and regulations from the

Benefits of an HSA

You can claim a tax deduction for contributions you or someone other than your employer makes even if you do not itemize on your tax return.

Contributions to your HSA made by your employer (including those made through a cafeteria plan) may be excluded from your gross income.

Contributions remain in your account from year to year until you use them.

Interest and other earnings on your HSA account are tax free.

Distributions are "tax free", if used to pay qualified medical expenses.

Your HSA is "portable" so it stays with you even if you change employers or leave the work force.

Rollover contributions are not included in your income, are not deductible and do not reduce your contribution limits.

Who Qualifies for an HSA?

An HSA eligible individual must meet the following requirements:

You must be covered under a high deductible health plan (HDHP).

You have no other health coverage, except what is permitted.

You are not enrolled in Medicare.

You cannot be claimed as a dependent on someone else's tax return.

HDHP 2009 - Minimum and Maximum Deductibles and Out of Pocket

Type of Minimum Annual Maximum Annual Deductible and

Coverage Deductible Other Out-of-Pocket Expenses

Self-only $1,150 $5,800

Family $2,300 $11,600

Contributions to an HSA

Any eligible individual, family member, or employer can contribute to your HSA.

The amount that can be contributed depends on the type HDHP coverage you have, your age, the date you become eligible and the date you cease to be an eligible individual.

HDHP 2009 - Maximum Annual Contributions

Type of Maximum Annual Additional Contribution

Coverage Contribution individual age 55 or order

Self-Only $3,000 $1,000

Family $5,950 $1,000

Distributions from an HSA

Generally you will pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for your plan.

Distributions from your HSA are tax-free if used to reimburse you or pay for qualified medical expenses.

Qualified medical expenses are those that would generally qualify for medical and dental deductions. However, even though non-prescription medicines do not qualify for the medical and dental expense deduction, they do qualify as expense for HSA purposes.

Qualified medical expenses can be incurred by:

You or your spouse
All dependents you claim on your tax return
Any person you could have claimed as a dependent on your return except if that person filed a joint return, that person had gross income of $3,500 or more, or if you or your spouse (filing jointly) could be claimed as a dependent on someone else's return.

FNBT Health Savings Accounts

FNBT Bank offers Health Savings account services to both individuals and employer groups. All support and service is provided locally.

For more information, CLICK here

EMAILJoanne Wallace, Sr. Vice President, HSA Specialist