Health Savings Accounts (HSAs)

If you have a qualifying high-deductible health plan, simplify your life by opening or moving your HSA to Ideal CU. You’ll earn a competitive yield with no fees and no minimum distribution amount. Interest earned is also tax free. Learn more about HSAs.

Health care can be expensive – we understand. That’s why we created a tax-exempt savings account designed specifically to help you save money for health care expenses.

What is Health Savings Account?

Regain more control of your healthcare dollars with a Health Savings Account.
Simply stated, a Health Savings Account (HSA) is what you get when you combine a high-deductible health insurance plan and a tax-exempt account owned by an individual.  HSAs were created as part of the 2003 Medicare legislation.  They are designed for individuals to use pre-tax dollars to help pay for current and future medical expenses.

Contributing to a Health Savings Account

Contributing to a Health Savings Account is easy – and it comes with some great tax advantages.

Who Can Contribute?
  • Employers and employees can contribute to HSA accounts as long as the account holder meets the requirements for HSA eligibility
  • Family members or any other person can make contributions on behalf of an eligible individual
Tax Advantages:
  • Contributions are 100% tax-deductible
  • Funds grow on a tax-deferred basis and if the funds are used for an eligible medical expense, the funds are tax-free
  • Funds rollover from year to year
  • Funds used after age 65 are tax-free for eligible medical expenses or at your normal tax rate for any other reason
Contributions Are:
  • Tax-deductible for the account holder
  • Owned by the account holder and remain theirs until the funds are used
  • Able to be made at any point during the contribution year, up to the individual's tax deadline (usually April 15, just like IRAs)
  •  Contribution limits for 2014 are $3,300 individual and $6,550 family
  •  Catch-up contributions for those 55 and older are $1,000
Deductible Requirements
 Year 2014Year 2013
 SingleFamilySingleFamily
Minimum Deductible Requirements$1,250$2,500$1,200$2,500
Maximum Out-of-Pocket$6,350$12,700$6,250$12,500
Maximum Contribution$3,300$6,550$3,250$6,450
The deadline for contributions is the same as your tax filing deadline excluding extentions.
For most individuals this is April 15.

Spending your HSA

Spending the money you’ve accumulated in your HSA is as simple as writing a check or swiping your debit card – but to take full advantage of the benefits, there are some things you should know.

HSA funds are payable on demand. There are no restrictions on when or how you may take distributions. However, to fully recognize the tax advantages, funds must be used for qualified medical expenses.

What Happens To Unused HSA Funds?
  • No use it or lose it rules
  • All amounts in the HSA are fully vested
  • Unspent balances in accounts remain in the account until spent
  • Accounts can grow through investment earnings, just like an IRA
  • Same investment options and investment limitations as IRA
  •  Same restrictions on self-dealing as with IRAs
What Happens When I Reach Age 65?

As of age 65, funds can continue to be used for eligible medical expenses tax-free. You may also use the funds for non-eligible expenses and you are only subject to ordinary income tax without any IRS penalty.

Do I Qualify for a Health Savings Account?

Determine if you meet the eligibility requirements to open a Health Savings Account.

Eligibility Requirements:
  • You must be covered by a High Deductible Health Plan (HDHP)
  • You can not be enrolled in Medicare
  • You can not be claimed as a dependent on another person's tax return
  • You can not be covered by any other health insurance that is not an HDHP
Insurance Coverage Exceptions

The following are exceptions, called "permitted insurance" which an individual can have in addition to the HDHP and still qualify for an HSA:

  • Specific disease or illness insurance
  • Accident, disability, dental care, vision care and long-term care insurance
  • Discount card such as a pharmacy card
  • Insurance that provides a fixed payment per day (or other period) for hospitalization
What is a High Deductible Health Plan (HDHP)?

An HDHP is a plan with an annual deductible of at least $1,200 for individual coverage or $2,400 for family coverage with a maximum out-of-pocket expense of $5,950 for individual and $11,900 for family (2010 and 2011 figures).  The guidelines for an HDHP are determined by the Internal Revenue Service each year.
Note: A plan will still qualify as an HDHP even though it may not have a deductible (or has only a small deductible) if it is for preventive care.

Health Savings Account Tax Advantages

Learn about the unique tax benefits a HSA creates for accountholders.

TAX ADVANTAGES:

Contributions are 100% tax-deductible

  • Funds grow on a tax-deferred basis and if the funds are used for an eligible medical expense they are tax-free
  • Funds roll over from year to year, and funds used after age 65 can be used tax-free for eligible medical expenses or at a normal tax rate for any other reason
  • Federally qualified Health Savings Accounts are tax-deductible, tax-deferred and tax-free
    • Tax-deductible: Contributions to your HSA can be deducted from your gross income
    • Tax-deferred: HSA funds grow without being subject to taxes until they are used for non-eligible medical expenses
    • Tax-free: The funds in an HSA are completely tax-free when used for eligible medical expenses
Federal vs. State Tax Benefits

Health Savings Accounts are made available through the federal government on a tax-favored basis. To determine if your state also provides tax benefits for Health Savings Accounts, please contact your state tax resource.

Keeping Track:

Accountholders are responsible for keeping records/receipts for all medical expenses when the HSA has been used. To help, we have several tools available through our online banking program. Get access to:

  • Account activity, as far back as 18 months -- and with electronic statements, you can view the past 7 years worth of statements
  • Images of your checks written
  • Records of your debit card transactions.

Eligible Medical Expenses

HSA funds are payable on demand. There are no restrictions on when or how you may take distributions. However, to fully recognize the tax advantages, funds must be used for qualified medical expenses.

ELIGIBLE MEDICAL EXPENSES FOR 2010

BEGINNING IN 2011, EXCEPT FOR INSULIN, OVER-THE-COUNTER MEDICATION IS NO LONGER AN ELIGIBLE EXPENSE UNLESS IT IS PRESCRIBED BY A PHYSICIAN.
• Abdominal Supports
• Abortion
• Acupuncture
• Air Conditioner*
• Alcoholism Treatment
• Ambulance
• Anesthetist
• Arch Supports
• Artificial Limbs
• Autoette
• Birth Control Pills*
• Blood Tests
• Blood Transfusions
• Braces
• Cardiographs
• Chiropractor
• Christian Science Practitioner
• Contact Lenses
• Contraceptive Devices*
• Convalescent Home*
• Crutches
• Dental Treatment
• Dental X-rays
• Dentures
• Dermatologist
• Diagnostic Fees
• Diathermy
• Drug Addiction Therapy
• Drugs (prescription)
• Elastic Hosiery*
• Eyeglasses
• Fees Paid to Health Institute
   Prescribed by a Doctor
• FICA and FUTA Tax Paid for
  Medical Care Service
• Fluoridation Unit
• Guide Dog
• Gum Treatment
• Gynecologist
• Healing Services
• Hearing Aids and Batteries
• Hospital Bills
• Hydrotherapy
• Insulin Treatment
• Lab Tests
• Lead paint removal
• Legal Fees
• Lodging (away from home for
  outpatient care)
• Metabolism Tests
• Neurologist
• Nursing (including board and meals)
• Obstetrician
• Operating Room Costs
• Ophthalmologist
• Optician
• Optometrist
• Oral Surgery
• Organ Transplant (including
   donor's expenses)
• Orthopedic Shoes
• Orthopedist
• Osteopath
• Oxygen and Oxygen Equipment
• Pediatrician
• Physician
• Physiotherapist
• Podiatrist
• Postnatal Treatments
• Practical Nurse for Medical
  Services
• Prenatal Care
• Prescription Medicines
• Psychiatrist
• Psychoanalyst
• Psychologist
• Psychotherapy
• Radium Therapy
• Registered Nurse
• Special School Costs for the
   Handicapped
• Spinal Fluid Test
• Splints
• Sterilization
• Surgeon
• Telephone or TV Equipment to
   Assist the Hard-of-Hearing
• Therapy Equipment
• Transportation Expenses
  (relative to health care)
• Ultra-Violet Ray Treatment
• Vaccines
• Vasectomy
• Vitamins (if prescribed)
• Wheelchair
• X-rays

ELIGIBLE OVER-THE-COUNTER DRUGS

• Antacids
• Allergy Medications
• Pain Relievers
• Cold Medicine
• Anti-Diarrhea Medicine
• Cough Drops and Throat Lozenges
• Sinus Medications and Nasal
  Sprays
• Nicotine Medications and Nasal
  Sprays
• Pedialyte
• Wart Removal Medication
• Antibiotic Ointments
• Suppositories and Creams for
   Hemorrhoids
• Sleep Aids
• Motion Sickness Pills
• First Aid Creams
• Calamine Lotion

HSA INELIGIBLE MEDICAL EXPENSES

• Toiletries (including toothpaste)
• Acne Treatments
• Lip Balm (including chapstick or
  carmex)
• Cosmetics (including face cream
  and moisturizer)
• Suntan Lotion
• Dietary Supplements
• Fiber Supplements
• Weight Loss Drugs for General
   Well Being
• Herbs
• Vitamins (daily)
• Medicated Shampoos and Soaps

* Conditions apply.
This list is provided with the understanding that Ideal CU is not engaged is rendering tax advice.  Use this list as a quick reference.  If you need additional information, refer to IRS Publication 502 or contact a tax professional.