|
- Money
Management > Health Savings Accounts
> Health Savings Accounts Q and A
Health Savings Accounts Q and A
|
An HSA
(Health Savings Account) is a new health plan that helps
you save for out-of-pocket healthcare expenses. An HSA is
easy to use, plus your contributions are tax deductible.
If you are currently participating in a qualified, high
deductible insurance plan, here's how you can benefit:
· No income
limits
· Tax deductible contributions
· Tax FREE withdrawals for qualified medical expenses
· Maximum contribution of $2,850 for individuals and
$5,650
for families
· Balances carry over to the next calendar year
· Visit ANY Bank Mutual office to sign up. |
 |
1)
Eligibility to establish a Health Savings Account (HSA)
Who
is eligible for Health Savings Accounts?
An
eligible individual (determined on the first day of each month
basis) is an individual who:
-
Is
covered by a High Deductible Health Plan (HDHP).
-
Is
not covered by other health insurance that is not an HDHP
-
Is
not enrolled in Medicare
-
Can't
be claimed as a dependent on someone else's tax return
In
addition, there are no income limits on who may contribute to an
HSA and no requirement of having earned income to contribute to
HSAs. The HSA owner must determine if he or she is
eligible to establish an HSA.
For
any month that an individual meets the criteria for an eligible
individual, he or she may make and/or receive on his or her
behalf an HSA contribution.
Once
contributions are deposited into an HSA, the HSA owner may
continue to maintain the HSA even after the owner ceases to
become an eligible individual for purposes of making
contributions. HSAs are individual accounts that are NOT
forfeitable. HSA owners do not lose their HSA because of a
change in employment, the loss of HDHP coverage, coverage under
a non HDHP, or enrollment in Medicare.
What
is a High Deductible Health Plan (HDHP)?
A
high deductible health plan (HDHP) satisfies both an annual
deductible and an out of pocket expense requirement. For
individual coverage, a health plan must have an individual
deductible of at least $1,100 for 2007. A health plan with
family coverage has an annual deductible of at least $2,200 for
2007, and the out of pocket expense cap does not exceed$11,000
for 2007. Out of pocket expenses include deductibles and
co-payments. Out of pocket expenses do NOT include premiums or
non-covered services within the health plan.
Additional
information may be found at www.hsainsider.com
and www.healthdecisions.org
| Back
to Top |
2)
Contributions
Who
can contribute to my HSA?
Contributions
to HSAs can be made by the employer or the individual, or
both
-
If
made by the employer, it is not taxable to the employee
(excluded from income and wages)
-
If
made by the individual, it is an "above-the-line"
deduction
-
Can
be made by others on behalf of the individual and deducted
by the individual
How
much can I contribute to my HSA each year?
Maximum
amount that can be contributed (and deducted) to an HSA from all
sources = lesser of:
-
HDHP
Deductible amount
or
-
Maximum
specified in law (indexed annually) -
$2,850 (self-only coverage) -
2007 $5,650
(family coverage) - 2007
Does
my contribution depend on when I establish my HSA account or
when my HDHP coverage begins?
Your
eligibility to contribute to an HSA is determined by the
effective date of your HDHP coverage. Your annual contribution
depends on the number of months of HDHP coverage you have during
the year (technically, the months where you have HDHP coverage
on the first day of the month). The amount you can contribute is
not determined by the date you establish your account. However,
medical expenses incurred before the date your HSA is
established cannot be reimbursed from the account.
I'm
over 55 and would like to make catch-up contributions to my HSA,
like I've done with my IRA. Is that possible?
Yes,
individuals 55 and older who are covered by an HDHP can make
additional catch-up contributions each year until they enroll in
Medicare. The additional "catch-up" contributions to
HSAs allowed are as follows:
2007
- $800
2008 - $900
2009 and after - $1,000
I
turned 55 this year. Can I make the full "catch-up"
contribution?
If
you had HDHP coverage for the full year, you can make the full
catch-up contribution regardless of when your 55th birthday
falls during the year. If you did not have HDHP coverage for the
full year, you must pro-rate your "catch-up"
contribution for the number of full months you were
"eligible", i.e. had HDHP coverage.
If
both spouses are 55 and older, can both spouses make
"catch-up" contributions?
Yes,
if both spouses are eligible individuals and both spouses have
established an HSA in their name. If only one spouse has an HSA
in their name, only that spouse can make a "catch-up"
contribution.
| Back
to Top |
3.
Using my Health Savings Account
Who
decides whether the money I'm spending from my HSA is for a
"qualified medical expense"?
You
are responsible for that decision, and therefore should
familiarize yourself with what qualified medical expenses are
(as partially defined in IRS Publication 502) and also keep your
receipts in case you need to defend your expenditures or
decisions during an audit.
What
happens if I don't use the money in the HSA for medical
expenses?
If
the money is used for other than qualified medical expenses, the
expenditure will be taxed and, for individuals who are not
disabled or over age 65, subject to a 10% tax penalty.
Are
dental and vision care qualified medical expenses under a Health
Savings Account?
Yes,
as long as these are deductible under the current rules. For
example, cosmetic procedures, like cosmetic dentistry, would not
be considered qualified medical expenses.
Can
I use the money in my HSA to pay for medical care for a family
member?
Yes,
you may withdraw funds to pay for the qualified medical expenses
for yourself, your spouse or a dependent without tax penalty.
This is one of the great advantages of HSAs.
Can
I use my HSA to pay for medical services provided in other
countries?
Yes.
Can
I pay my health insurance premiums with an HSA?
You
can only use your HSA to pay health insurance premiums if you
are collecting Federal or State unemployment benefits, or you
have COBRA continuation coverage through a former employer.
Can
I purchase long-term care insurance with money from my HSA?
Yes,
if you have tax-qualified long-term care insurance. However, the
amount considered a qualified medical expense depends on your
age. See IRS Publication 502 for the amounts deductible by age.
I
have an HSA but no longer have HDHP coverage. Can I still use
the money that is already in the HSA for medical expenses
tax-free?
Once
funds are deposited into the HSA, the account can be used to pay
for qualified medical expenses tax-free, even if you no longer
have HDHP coverage. The funds in your account roll over
automatically each year and remain indefinitely until used.
There is no time limit on using the funds.
What
happens to the money in my HSA if I lose my HDHP coverage?
Funds
deposited into your HSA remain in your account and automatically
roll over from one year to the next. You may continue to use the
HSA funds for qualified medical expenses. You are no longer
eligible to contribute to an HSA for months that you are not an
eligible individual because you are not covered by an HDHP. If
you have coverage by an HDHP for less than a year, the annual
maximum contribution is reduced; if you made a contribution to
your HSA for the year based on a full year's coverage by the
HDHP, you will need to withdraw some of the contribution to
avoid the tax on excess HSA contributions. If you regain HDHP
coverage at a later date, you can begin making contributions to
your HSA again.
Do
unused funds in a Health Savings Account roll over year after
year?
Yes,
the unused balance in a Health Savings Account automatically
rolls over year after year. You won't lose your money if you
don't spend it within the year.
What
happens to the money in a Health Savings Account after I turn
age 65?
You
can continue to use your account tax-free for out-of-pocket
health expenses. When you enroll in Medicare, you can use your
account to pay Medicare premiums, deductibles, co-pays, and
coinsurance under any part of Medicare. If you have retiree
health benefits through your former employer, you can also use
your account to pay for your share of retiree medical insurance
premiums. The one expense you cannot use your account for is to
purchase a Medicare supplemental insurance or "Medigap"
policy.
Once
you turn age 65, you can also use your account to pay for things
other than medical expenses. If used for other expenses, the
amount withdrawn will be taxable as income but will not be
subject to any other penalties. Individuals under age 65 who use
their accounts for non-medical expenses must pay income tax and
a 10% penalty on the amount withdrawn.
Can
I use my HSA to pay for medical expenses incurred before I set
up my account?
No.
You cannot reimburse qualified medical expenses incurred before
your account is established. We recommend you establish your
account as soon as possible.
Who
will be the "bookkeeper" for my HSA?
It
is your responsibility to keep track of your deposits and
expenditures and keep all of your receipts. If you run out of
HSA funds (and therefore need to use your HDHP), you may need to
send those receipts to your insurer.
How
do I use my HSA to pay my physician when I'm at the physician's
office?
If
you are still covered by your HDHP and have not met your policy
deductible, you will be responsible for 100% of the amount
agreed to be paid by your insurance policy to the physician. You
can pay with a Bank Mutual HSA check or Bank Mutual CheckCard.
If
your physician does not ask for payment at the time of service,
the physician will probably submit a claim to your insurance
company, and the insurance company will apply any discounts
based on their contract with the physician. You should then
receive an "Explanation of Benefits" from your
insurance plan stating how much the negotiated payment amount
is, and that you are responsible for 100% of this negotiated
amount. If you have not already made any payment to the
physician for the services provided, the physician may then send
you a bill for payment.
| Back
to Top |
4. How
can I set up an HSA at Bank Mutual and what type of account is
my HSA?
Our
knowledgeable and friendly bank office managers and personal
bankers will be glad to help you establish your HSA. Simply stop
in any of our 78
convenient locations or call 800-261-6888
for the office nearest you.
Your
HSA will be held in a custodial account with Bank Mutual. The
account functions like a checking account, and is subject to all
of the rules of a checking account.
Will
my HSA earn interest?
Yes,
you will earn interest on your HSA balance. Rates are variable
and may be changed at Bank Mutual's discretion; you will be
informed of your current interest rate when you open your HSA.
After that, rates can be obtained by contacting Bank Mutual.
What
tax statements will I receive from the bank?
Bank
Mutual is required to issue two types of tax statements to you
and the IRS: a 1099-SA and a 5498-SA.
1099-SA:
This document lists your total distributions from your HSA for
the year. You will receive this statement by January 31 for the
previous tax year. You should ensure that you have receipts for
eligible expenses equal to the amount of the distributions on
the 1099-SA to avoid having to pay taxes and penalties on your
distributions.
5498-SA:
This document lists your total contributions for the year, any
rollover HSA contributions, and the fair market value of your
HSA as of December 31. You will receive this statement by May 31
for the previous tax year. This document is issued later because
the IRS requires the bank to list all contributions for the
previous tax year, which can be made as late as April 15 of the
following calendar year. You should verify that the amounts
reported on the 5498 match your contribution records and your
IRS form 8889, if filed.
Will
I receive a bank statement for my HSA?
Yes.
Bank Mutual will send you a regular monthly statement of
deposits and withdrawals.
Can
my account ever become overdrawn?
It
is possible to overdraw your account. Your balance is usually
verified before transactions occur, but you can write a check
that could overdraw the balance.
Would
you pay the checks if there isn't enough money on deposit?
Unlike
a Flexible Spending account, you must have funds on deposit
before paying for qualified medical expenses. The IRS does not
allow you to spend funds that have not been deposited, so the
bank is unable to pay the checks and they would be returned.
Overdraft protection is not permitted on a HSA and the overdraft
fees shown on the Schedule of Fees would apply.
Can
I get my canceled checks back?
Checks
are not returned with this account. We will be utilizing Check
Safekeeping.
At
this time the State of Wisconsin has not signed into law the HSA
deduction. As a result, if an individual living in the State of
Wisconsin opens an HSA today, they will only get a deduction
from their federal income tax and not the State. Instructions
written by the Wisconsin Department of Revenue state:
For
Wisconsin tax purposes, federal provisions relating to Health
Savings Accounts do not apply. For example:
1)
A deduction is not allowed for the amount paid to Health Savings
Account
2) Earnings on a Health Savings Account are subject to Wisconsin
income tax
3) Amounts distributed from the HSA are NOT subject to Wisconsin
income
tax
4) Rollovers from Archer Medical Accounts result in a taxable
transaction
5) Amounts contributed by an employer (or contributed pre tax
for federal
purposes by an employee) are taxable wages to
the employee.
How
can I learn more about HSAs?
Stop
in any of Bank Mutual's 78
convenient locations and speak with a friendly,
knowledgeable bank office manager or personal banker. Or,
contact Bank Mutual at 1-800-261-6888, option 2 for the
location near you.
Additional
resources
Visit www.treas.gov
and click on Health Savings Accounts
Specific
questions can be emailed to HSAInfo@do.treas.gov
All accounts are FDIC
insured.
Bank Mutual Deposit Account Rules |
