What is an HSA?
A Health Savings Account (HSA) is a pre-tax savings account for employees with a qualified high deductible health plan. Those enrolled in HSAs can make accumulated tax-free contributions to pay for health insurance costs for themselves and tax dependents— including doctor and hospital visits, co-payments, eyeglasses, prescriptions, certain long-term care insurance premiums and COBRA premiums. They can also contribute to their deductible. Funds within an HSA can rollover from year to year. Unpaid owners are not eligible for HSAs.
How does an HSA differ from an FSA?
Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. There are two key differences for HSAs:
- HSAs are only available to employees enrolled in high-deductible health insurance plans. Conversely, FSAs are available for all plans if you decide to offer them.
- Unlike an FSA, HSA balances can accumulate and roll over from year to year. Employees get to keep their HSA funds, even if they move to a different plan at the end of the year.
What are the caps on the HSA contributions?
There’s a cap from the IRS on maximum contributions an employee can make per calendar year. For 2020, the caps are as follows:
- Individual: $3,550
- Family: $7,100
Participants who are are 55 or above can contribute an extra $1,000 towards those caps. Contributions are deducted from the second paycheck of each month.
What are the fees on an HSA?
Your account will earn annual interest at .05%
If you have a balance below $1,000, you’ll be charged a $3.50 monthly service charge.
When your balance reaches $1,000, you can invest in 26 different low-fee fund options. If you use your HSA to invest in funds, you’ll be charged $2.90 a month.
When will I receive my payment card?
You will receive your payment card within 7-11 days of setting up your account through BenefitWallet.
Is there a deadline for enrollment?
There is no deadline for setting up your HSA account. If you have an HSA-eligible plan, you can get started at any time.
When can an employee change their HSA contribution amounts?
Employees can change their individual HSA contributions at any time.Keep in mind that any changes made will not take effect until the following month.
When an employee is terminated what happens to their HSA?
Terminated employees are no longer able to contribute to their HSA, but employees will always have access to their HSA and can always use any funds in their HSA. Terminated employees will not count toward your monthly HSA cost starting the month following their termination.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.