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Health Savings Account (HSA) Tips and Benefits

Posted by: Jared Matchette on Thursday, September 12, 2013 at 12:00:00 am

Autumn always represents a time of change in Indiana. Leaves change colors, temperatures cool down, and the humidity finally drops to a tolerable level. For many companies, autumn also brings changes in health insurance. Open enrollment opportunities provide employees the chance to explore new health care options to maximize their benefits and protect against hardship. In addition, changing health care laws have brought the topic of health insurance to the forefront of many consumers’ minds.

One health insurance option that has steadily gained popularity over the years is the Health Savings Account (HSA). In fact, research conducted by wealth and investment management company Devenir showed that HSA numbers across the country reached 9.1 million accounts in July of 2013. Paired with a High Deductible Health Plan (HDHP), the HSA presents a more affordable option for employers and an excellent way for employees to save money for healthcare expenses.

Thinking about opening an HSA? Here are a few tips and benefits:

  • A High Deductible Health Plan is defined by the IRS as having a minimum deductible of $1,250 for singles and $2,500 for families (limits applicable for tax year 2013).
  • Contribution limits are capped at $3,250 for singles or $6,450 for families into your Health Savings Account for tax year 2013. In 2014, these limits increase to $3,300 for singles and $6,550 for families. 
  • HSA owners over the age of 55 are eligible for an additional $1,000 catch-up contribution in 2013.
  • Deductions do not have to be itemized on your federal income taxes to deduct your contributions to an HSA. 
  • HSA funds can be used to pay for qualified medical expenses. (Consult a tax advisor for items considered as qualified medical expenses.)
  • Once the HDHP deductible is met, the health insurance covers medical expenses as defined in the policy.
  • Over time, if medical expenses are low and contributions are made regularly to the HSA, the account can accumulate significant assets that can be used for health care tax free or used for retirement on a tax-deferred basis.
  • HSAs also have an advantage over the Flexible Spending Accounts (FSA) since deposits are not necessarily tied to expenses in a particular plan or calendar year. (No use it or lose it policy.)
  • HSA funds are automatically rolled over for future medical expenses or may be used to reimburse qualified expenses from prior years, as long as the expense was qualified under an HDHP at the time that the expense was incurred.

High Deductible Health Plans and Health Savings Accounts are great options for many consumers, but the choice of health insurance should not be made alone. Excellent resources include your employer’s Human Resources department, an insurance representative, or a professional tax advisor.

 

This blog was brought to you by Jared Matchette, Deposit Product Analyst at MutualBank.

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