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  HSA FAQsABOUT HSA SIMULATOR™PRICINGHELP |
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HSA FAQs Answers to Frequently Asked Questions NOTE: Acknowledgement and thanks to the HSA Coalition (www.hsainsider.com) for generously providing the basis for many of the following HSA FAQs.
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1. Customer Service & Support – HSA Simulator™ has highly qualified staff to help you with problems or inquiries. We want to do everything we can to ensure that our service meets your needs and expectations. In the event that you require further customer service, please contact us at the email address and phone number below. All inquiries will receive a response within a 24 hour period.
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2. What is a Health Savings Account (HSA)? A Health Savings Account (HSA) is simply a tax advantaged personal account that is used to fund health care. An HSA allows an individual to make tax free deposits and distributions for qualified health care expenditures. All HSAs must be used in conjunction with a qualified high deductible health insurance plan (HDHP). | Back to Top ^ |
3. How much can I contribute to an HSA? The maximum amount that can be contributed to an HSA is the lesser of:
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4. What is a qualified high deductible health plan (HDHP)? A HDHP is simply a health insurance plan with a large deductible. You must have a qualified high deductible health plan (HDHP) to open or contribute to a Health Savings Account (HSA). A HDHP helps to reduce insurance premiums but still provides protection from unexpected, catastrophic health care expenses. All HDHPs plans must have:
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5. What is the financial benefit of using a HDHP with an HSA? Switching to a high deductible health plan from a low deductible health plan will cut the costs of your health plan substantially. You deposit the savings into the HSA. The fundamental point of the HSA is to use that money on a tax free basis to pay for the expenses below the new, higher deductible. | Back to Top ^ |
6. What types of expenses are allowed when using an HSA? There are a wide range of allowable tax-free HSA expenditures. A description of qualified HSA expenditures can be found in IRS publication 502, and is located on the web at: http://www.irs.gov/pub/irs-pdf/p502.pdf. | Back to Top ^ |
7. What if I spend HSA funds on non-health care-related expenses? If expenditures from the HSA are used for purposes other than qualified health care expenses, then the amount withdrawn is subject to both income tax and a 10% penalty—unless the person who makes such a withdrawal is over age 65. If over age 65, the amount withdrawn for non-medical purposes is subject to normal income tax (it’s treated as retirement income) but is not subject to the 10% penalty. | Back to Top ^ |
8. Who owns the HSA? The money in the HSA is owned by the individual, not by the employer. The money in the HSA goes with the individual when he or she changes jobs, and employees own HSA contributions as soon as they are deposited. | Back to Top ^ |
9. Who controls the funds in the HSA? Individuals are in charge of HSA funds, not an insurance company or other third party administrator. As a result, individuals and their doctors make decisions about how HSA funds are spent and the individual HSA owner is responsible for asking about the cost of health care expenditures. | Back to Top ^ |
10. Do I lose the money in the HSA if I don’t spend it by the end of the year? No, unused funds in an HSA carry over each year and belong to the individual account owner. Unused balances accrue over time and can be invested. | Back to Top ^ |
11. Do I lose the money in the HSA if I change jobs? No, HSAs are completely portable. The individual HSA owner maintains ownership and control regardless of the employment setting. | Back to Top ^ |
12. Who can contribute to the HSA? HSA contributions may be made by an employer, an individual, a combination of both, or by an individual on behalf of another individual. All contributions are aggregated. All contributions are tax advantaged. | Back to Top ^ |
13. How frequently can I contribute to the HSA? You can deposit funds into an HSA in a lump sum or in any amounts or frequency you wish. You can “front load” or fully fund your HSA from day 1 provided you do not exceed the annual maximum contribution. However, if your HDHP coverage is initially effective after January 1st, then total contributions to the HSA must be pro-rated based on the number of months the HDHP is in effect. | Back to Top ^ |
14. Who is eligible to open an HSA? Any person below Medicare eligibility age (65) is eligible for an HSA and any individual or employer—regardless of size—may implement an HSA. | Back to Top ^ |
15. What is the tax treatment of an HSA? Employee contributions to their HSA can be made on an after tax basis and taken as an above-the-line deduction on their tax return (making the contributions tax free), or the employee may make pre-tax contributions through a Section 125 (aka “cafeteria” or “salary reduction” plan). Employer contributions to HSAs are always excluded from employees’ income. Self-employed, partners and S-Corporation shareholders are not generally considered employees and cannot receive pre-tax employer contributions to their HSAs. However, self-employed may take an above-the-line deduction for HSA contribution. | Back to Top ^ |
16. Who can hold the funds in the HSA and what types of investments are OK? Individual HSA owners decide which company holds the account and what types of investments will be made with the funds in the account. Any investments allowed for IRAs are allowed for HSAs. | Back to Top ^ |
17. What happens to an HSA when I retire? If a beneficiary is no longer an eligible individual (for example, the individual is older than age 65 and entitled to Medicare benefits, or no longer has a HDHP) distributions used exclusively to pay for qualified medical expenses continue to be excludable from the account beneficiaries gross income. Distributions for non-qualified expenses are included as part of gross taxable income, but they are not subject to the 10% penalty. Upon death, any remaining balance in the HSA becomes property of the individual named as beneficiary of the account.| Back to Top ^ |
18. Can I pay for insurance premiums with my HSA? HSA funds may not be used to pay for health insurance premiums unless the individual is receiving federal or state unemployment benefits. HSA funds may be used to pay for COBRA continuation health insurance coverage from a former employer. HSA funds may also be used to pay premiums for qualified long-term care insurance. | Back to Top ^ |
19. Are there income limits associated with HSAs? No, There are no income limits associated HSA. | Back to Top ^ |
20. What happens if I incur a large expense and my deductible is not fully funded? The individual account owner is responsible for all expenses incurred, regardless of the HSA balance at the time the expense is incurred. One way to cover this liability is to purchase (or have an employer purchase) a hospitalization rider that will cover the difference between the account balance and the incurred liability. In the event of a hospitalization, the rider would pay cash to cover the deductible.| Back to Top ^ |
21. Can employers make contributions in different amounts for various employees? Employers must make comparable (the same amount or the same percentage of the deductible) contributions to all employees’ HSAs (unless made through a Section 125 plan). | Back to Top ^ |
22. Are HSA contributions tax deductible if I am not an employee? Self-employed, partners and S-Corporation shareholders are not generally considered employees and cannot receive pre-tax employer contributions to their HSAs. However, self-employed can take an above-the-line deduction for HSA contribution. | Back to Top ^ |
23. Is preventive care covered by my insurance company or by my HSA? Preventive care can have first-dollar coverage, and co-pays are allowed to apply to preventive care. Preventive care examples include: periodic health evaluations like annual physicals, screening services like mammograms, routine prenatal and well-child care, child and adult immunizations, tobacco cessation programs, and obesity and weight loss programs. | Back to Top ^ |
24. Are prescription drugs covered by my insurance company or by my HSA? In many instances, prescription drugs will be paid for from funds in the HSA. However, prescription drugs taken to prevent the onset of a condition for which a person has developed risk factors—like cholesterol-lowering medication—can be considered for preventive care. Also, until January 2006, you can have an HSA qualified plan that pays for prescription drugs below the deductible, as long as the prescription drug coverage is a separate plan or rider. | Back to Top ^ |
25. Can I have another health insurance plan that reimburses me for the high deductible expenses? You cannot be covered by any other health insurance that reimburses you for health expenses unless it is another HSA qualified HDHP. | Back to Top ^ |
26. Are individuals approaching retirement age allowed to make larger contributions to the HSA? Yes, individuals age 55 and older can make catch-up contributions until they enroll in Medicare. | Back to Top ^ |
27. Can employers require “vesting” schedules or place other restrictions on the use of HSA funds? No, Employers may not place restrictions on the use of funds in employees’ HSAs. | Back to Top ^ |
28. What type of recordkeeping is required for HSAs? It is important for HSA owners to keep receipts of expenditures from their accounts.| Back to Top ^ |
29. Who or what is a qualified HSA trustee or custodian? Any insurance company or bank (including other similar financial institutions) can be an HSA trustee or custodian.| Back to Top ^ |
30. Does the HSA have to be opened at the same institution that provides the high deductible health plan? No, the HSA may be established through a qualified trustee or custodian who is different from the HDHP provider.| Back to Top ^ |
31. Must employers who make contributions to an employee’s HSA determine whether HSA distributions are used exclusively for qualified medical expenses? No, individuals who establish HSAs are required to make the determination and should maintain records of their medical expenses.| Back to Top ^ |
32. Are HSAs subject to COBRA continuation coverage? No, they are not.| Back to Top ^ |
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