Health Savings Accounts (HSAs)
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1.
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Health savings accounts (HSAs) are tax-exempt accounts where funds grow to pay
for medical expenses. They were created to help give control back to consumers
and lower healthcare costs.
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2.
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There are two parts to an HSA: |
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| An HSA is your account. If you switch jobs, the HSA goes with you. Your money rolls over every year. There is no "use it or lose it" requirement.
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3.
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High Deductible Health Plans. In order to open an HSA, you must have a
qualified High Deductible Health Plan. The IRS determines the guidelines
for qualified HDHPs. The current IRS guidelines are:
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IRS Requirements for 2010
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Single Plan
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Family Plan
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Minimum Deductible
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$1,200.00
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$2,400.00
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Maximum Out-of-Pocket
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$5,950.00
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$11,900.00
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4. Contributions. When you have a qualifying HDHP, the following contribution guidelines apply.
- Anyone can contribute to your HSA.
- Your contributions are tax deductible.
- If your employer contributes to your HSA, that contribution is done on a pre-tax basis.
- Any pay-roll deductions made through Section 125 for your HSA are also on a pre-tax basis.
Contributions:
- You may contribute the annual maximum amount as determined by the IRS, regardless of your plan’s deductible. The maximum for 2010 is $3,050 for individuals and $6,150 for families.
- You may contribute the annual maximum amount determined by the IRS, regardless of when your coverage begins, if you maintain coverage for the 12 month period beyond the calendar year in which you first became eligible.
- Example: if you have individual coverage that begins in November 2010, you may still contribute $3,050 for 2010 when you maintain coverage through the end of 2010.
- Your employer may roll over funds from your HRA or FSA account once, according to the legislative provisions.
5. Distributions. Here are some key points about distributions:
- You can use your money tax-free at any time for eligible medical expenses.
- When you turn 65, you can use the money for non-eligible medical expenses. The money is subject to income tax, and there are no IRS penalties.
- If you are under age 65 and use your money for non-eligible medical expenses, you will be subject to income tax and a 10% tax penalty.
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