By: Michelle Herrly, PHR, VP/Human Resource Manager, Fargo, ND
With the new Health Care Reform Act taking place, we’re starting to hear more about Health Savings Accounts (HSAs), but many are still unsure of what an HSA actually is and what the benefits are. We broke down the top 5 things you need to know about HSAs:
1. What is an HSA?
An HSA is an account that is set up like a personal savings account, only the money set aside is used for qualifying medical expenses. The purpose of the HSA is to help defray the out-of-pocket cost until the deductible in your High Deductible Health Plan (HDHP) is met.
2. Is an HSA right for me?
First things first, eligibility: In order to be eligible for an HSA you must be under the age of 65 and enrolled in a HDHP, which generally offers its own benefits. These may include things such as lower premium costs, a one calendar-year deductible per family, and 100% payment of covered expenses after your deductible is met.
3. What are some of the benefits of HSAs?
HSAs offer many benefits to the account holder, including:
- You (not your employer or insurance company) are the owner of the funds in your HSA and you decide how to best utilize those funds for qualifying medical expenditures.
- Your employer may make a matching contribution to your HSA, you own the account and the money is yours even if you change jobs.
- You control your account funds and therefore, you can shop around for the best quality and cost of your health care.
- Contributions to HSAs are generally tax deductible from your gross income, the funds in the account may grow tax deferred, and the account holder is usually not taxed on dollars that are used for qualified medical expenses. Everyone’s tax situation is different and therefore you should consult a tax preparation professional about how an HSA may affect you and your tax liabilities if you have any questions.
- Your HSA dollars remain in your account and roll over from year-to-year (no use it or lose it).
- HSA dollars can be used for a wide variety of medical expenditures, sometimes even including fuel costs and hotel stays where applicable. You should visit http://www.irs.gov/file_source/pub/irs-pdf/p969.pdf for more information on what is considered a qualifying medical expenditure.
- You may be able to use your HSA funds for Medicare premiums and out-of-pocket Medicare expenses.
- After age 65, you may be able to use your HSA dollars for living expenses.
- …And more!
3. Are there any disadvantages of an HSA?
Like any health care option, HSAs have both advantages and disadvantages. As you weigh your options, be sure to keep in mind the following:
- Illnesses can be unpredictable, making it hard to accurately budget for health care expenses.
- Information about the cost and quality of medical care can be difficult to find.
- Some people find it challenging to set aside money to put into their HSAs. The elderly and those more susceptible to illness may not be able to save as much as younger, healthier people.
- Pressure to save money in your HSA might lead you to not seek medical care when you need it.
- If you take money out of your HSA for non-medical expenses, you’ll have to pay taxes on it.
5. How do I get set up with an HSA?
If your employer does not already offer an HSA option for you, you can set one up at First International Bank & Trust. Remember that you must be under age 65 and enrolled in an HDHP. If you have a spouse who uses your insurance as a secondary coverage, he or she must also be enrolled in an HDHP. The HDHP must be your only health insurance – you can’t be covered by any other health insurance excluding dental, vision, disability or long-term care.
Stop in today to set-up an account or give us a call with any questions you have: 800-359-8092.
Michelle has more than 18 years of HR management experience working in both large and small companies across multiple industries. Michelle specializes in employee relations with experience in all areas of HR management including recruiting, benefit administration, employment law, international HR, mergers and acquisitions, compensation planning and project management.
Michelle is a member of the Society for Human Resource Management (SHRM), Fargo-Moorhead Human Resource Association (FMHRA) and Fargo-Moorhead Association for Training and Development (FM-ASTD).
In her spare time, Michelle enjoys spending time with her husband and daughter, scrapbooking, music, reading and traveling.
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