HSA Summary

Understanding Your HSA.

Health Savings Accounts (HSAs) are essentially tax-deductible IRA-type trust accounts you can use to pay for qualified medical, dental and vision expenses. An HSA combines high-deductible health insurance with a tax-favored savings account. Money in the savings account helps you pay the deductible as well as other out of pocket expenses. Once the deductible is met, the insurance starts paying. Money left in the savings account receives tax-free earnings and is yours to keep.

Because HSAs include both a health-insurance and a savings feature, they are a good way to save money on your current medical expenses and to save for future medical expenses, or even for retirement.

You own your HSA account. You decide how much to contribute, how much to save (subject to IRS guidelines), how much to use for medical expenses, and which expenses to pay from your account. Even if you change jobs or move to another state, your HSA is still your own, and you continue to keep it as you grow older.

In addition, unlike some other types of accounts, your HSA dollars will roll over at the end of the year. Unspent balances remain in your account and earn interest tax-free until you use them. This contributes to building a consumerism-mentality and encourages consumers to spend their dollars wisely.

HSA General Guidelines

An HSA-qualified high deductible health plan, (HDHP) must meet the following federal law requirements.

Self-Only HDHP Coverage -
For self-only HDHP coverage to qualify for HSA eligibility: (1) the plan must have a deductible of at least $1,100 (as indexed for inflation) and (2) the sum of the plan's annual deductible and other annual out-of-pocket expenses the insured is required to pay (including copays and co-insurance) cannot exceed $5,600.

Family HDHP Coverage -
For family HDHP coverage to qualify for HSA eligibility: (1) the plan must have a deductible of at least $2,200 (as indexed for inflation) and (2) the sum of the plan's annual deductible and other annual out-of-pocket expenses cannot exceed $11,200.

In general, the deductible must apply to all medical expenses covered by the plan; however, plans can pay for "preventative care" services, such as routine pre-natal, immunizations and mammograms at 100 percent.

Contributions to your HSA

As long as you are enrolled in an HSA-qualified HDHP, you are eligible to make contributions to your HSA. If you drop your HDHP coverage, you may no longer make contributions; however, you are still able to access the funds in your account for medical expenses at no penalty.

For 2008, the maximum amount that may be deposited is $2,900 for self-only coverage or $5,800 for family coverage. These amounts are adjusted annually for inflation. Contributions can be made as late as April 15th of the following year.

Who Can Have an HSA?

Any adult can contribute to an HSA is he or she:

• Has coverage under an HSA-qualified "high deductible health plan" (HDHP)
• Has no other first-dollar medical coverage, including FSAs (other types of insurance, such as specific injury or accident, disability, dental care, vision care, or long-term care are permitted)
• Is not enrolled in Medicare
• Is not claimed as a dependent on someone else's tax return
• Is not covered by TRICARE

Why High Deductible Health Insurance?

To get the benefits of an HSA, the law requires that the savings account be combined with a qualified high deductible health plan (HDHP). An HDHP costs less than traditional health plans with $250 or $500 deductible coverage, because the insurance company doesn't have to process and pay claims for routine, low-dollar medical care.

"Catch-up" Contributions

Individuals age 55 and older can make additional "catch-up" contributions. The maximum catch-up contributions are listed below.

Year	Maximum Allowable Catch-up Contribution
2005	$600
2006	$700
2007	$800
2008	$900
2009 & after	$1000

Using Your HSA

Distribution from your account is tax-free if you use the money to pay for any "qualified" medical expense (as permitted under Section 213(d) of the Internal Revenue Code). You can use the money to pay medical expenses for yourself, your spouse and your dependent children - even if they are not covered by your HDHP.

Many HSA plans provide you with a debit card to pay for expenses, so you have easy access to your HSA account.

"Qualified" Medical Expenses

Section 213(d) defines medical care broadly to include dental expenses, vision care expenses, over-the-counter drugs, alternative care, and traditional medical expenses. Consult IRS Code Section 125 for a complete list of eligible expenses. Remember only those expenses eligible under the HDHP will help satisfy your deductible.

You cannot use the money to pay for medical insurance premiums, except under certain circumstances, including individual medical insurance and COBRA.

If you are under age 65 and use your money for any other non-medical expense, there is an additional 10 percent tax in addition to the regular income taxes.

Your HSA at Retirement

After you turn age 65, or if you become disabled, the 10 percent tax penalty no longer applies and you can withdraw your money from your account for any expense and pay normal income tax at that time with no penalty.