HSA Frequently Asked Questions
How does an HSA function?
A high deductible health insurance plan works in tandem with a health savings account opened by the consumer. Money contributed into the HSA is 100% tax deductible. The insurance carrier will pay for any major medical expenses in excess of the deductible. The consumer (you) will use money from your HSA to pay for all the minor expenses each year up to their deductible, such as office visits fees, prescriptions, lab work, etc. There is no "use it or lose it" feature: all the money you don't use is yours to keep and it continues to grow (with interest!) towards your retirement.
Can anyone set up an HSA account?
In order to establish a health savings account, you must first obtain insurance under a qualified high deductible health insurance plan. Once the plan is in place, you may then open a Health Savings Account with a qualified HSA custodian and begin making contributions to it. If your plan is part of an employer-sponsored group health insurance plan, your employer may also choose to make contributions into our HSA.
How much can I contribute to my Health Savings Account annually?
You can contribute up to 100% of the maximum allowable amounts per IRS Guidelines. In 2007, the maximum allowable contribution for an individual is $2850, and for a family, it is $5650. Individuals over age 55 may also contribute additional funds each year as part of their "catch-up" period.
If you establish your high deductible health plan mid-way through a calendar year, the amount that you can contribute for that year is pro-rated. Your insurance broker or financial planner can advise you on HSA rules.
Am I required to contribute a certain amount into my HSA each year?
What you contribute or don't contribute is entirely up to you. Some people will choose to contribute the maximum amount on the first day of the calendar year, and others might set up a monthly deposit from your checking/savings into your HSA account. Still others may choose to only contribute occasionally when they have some extra money to do so. Though you are not required to contribute to your HSA each year, remember that is highly beneficial to contribute due to the tax savings and interest earned.
What if I need to withdraw money for a non-qualified expense?
Money withdrawn for non-medical expenses is subject to ordinary income tax. In addition, funds withdrawn for non-medical expenses prior to age 65 will incur a 10% federal tax penalty.
How can I find a Texas HSA provider?
If you want to establish a qualified high deductible insurance plan and HSA, Consumer Benefits Group is here to help. We are a broker for numerous carriers in Texas, and we'll be happy to help Texas residents search for the right plan as well as find a bank in which to establish their HSA. Contact us at 817-349-4460 for assistance.
Article written by Danielle Kunkle, a licensed Texas insurance agent and Certified Estate Planner in Benbrook, TX. You may contact Danielle directly for more information at 817-249-8600.
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