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Health Savings Account

What is a Health Savings Account?

The Facts

  • Anyone can open an HSA as long as they are covered by an approved High Deductible Health Plan (HDHP), not covered by another health insurance policy (including Medicare) and can't be claimed as a dependent on someone else's tax return.

Function

  • Contributions to an HSA can be used for qualified medical expenses not covered by the HDHP, which include deductibles and co-pays, and often dental and vision care and medicines as well. Your HSA will provide you with a debit card or checks to access your account. You do not have to use your HSA for medical expenses---you can withdraw funds for any reason, but you will be penalized for doing so.

Features

  • Contributions to an HSA are tax deductible. They are invested as you direct, and the earnings on the investments grow tax-deferred. As long as withdrawals are for qualified medical expenses, they are also not taxed, essentially allowing you to save for health care expenses tax-free. If your employer offers a plan, they may allow you to make contributions on a pretax basis, and they may contribute money to your account. Any employer contributions will count toward your annual maximum.

Benefits

  • The best thing about an HSA is that you control it. You decide how much to contribute, and when. You also earn interest on the funds invested, and you determine how and when the funds are spent. Funds in an HSA roll over from year to year, they don't have to be spent in the year they're contributed. They can accumulate to cover future medical expenses. You can use money in your HSA for any family member, not just yourself, and as long as it is used for qualified medical expenses, it is tax-free.

Considerations

  • You can withdraw money from your HSA at any time, and for any reason, but if you use it for something other than medical expenses the withdrawal will be taxed, and subject to a 10% penalty. If you are over 65 or disabled, the penalty is waived, but the withdrawal is still taxable. There is a maximum annual contribution to an HSA ($3,300 for individual coverage or $6,550 for family, in 2014), which is adjusted each year for inflation. If you are over 55, you can make additional catch-up contributions.

HDHP Minimum Required Deductibles. The 2014 minimum annual deductible for self-only HDHP coverage remains $1,200 and for family HDHP coverage remains $2,400.

To Learn More about Bank of Commerce Health Savings Accounts contact us at (307) 324-2265 or (800) 934-4507.

*All references to tax savings are at a federal level. State taxes vary. Please consult your tax advisor.