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Health Savings Account (HSA)
Frequently Asked Questions


Q:  1. What is a Health Savings Account (HSA)?
Q:  2.What qualifies someone for an HSA account?
Q:  3. What is an HDHP?
Q:  4. Are there other requirements for the HDHP?
Q:  5. What are an HSA Owner’s responsibilities?
Q:  6. Who can contribute to an HSA?
Q:  7. How much can be contributed to an HSA?
Q:  8. If an employer contributes money to their employee’s HSA account, how much additional money can the HSA owner contribute?
Q:  9. What are the federal tax benefits of an HSA?
Q:  10. How are federal tax deductions for HSA contributions claimed?
Q:  11. When is the contribution deadline for funding an HSA?
Q:  12. How are HSA distributions taxed?
Q:  13. How is HSA activity reported?
Q:  14. Can money be transferred or “rolled over” from one HSA account to another?
Q:  15. If the healthcare plan of an HSA owner changes, or he/she is no longer a participant in a HDHP plan; thereby causing him/her to be ineligible for an HSA, can he/she transfer the money from the HSA account to someone else’s account? (e.g. The spouse becomes the primary insurer of a family plan which provides coverage for the HSA account owner.) Additionally, can the HSA owner continue to make contributions to his/her account?
Q:  16. What happens to an HSA account in the event of the owner’s death? Can the funds be paid out or transferred immediately
   
  LINKS FOR ADDITIONAL INFORMATION


1.   What is a Health Savings Account?

A tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of the HSA owner, his/her spouse, and their dependents. Simmons First Health Savings Accounts are custodial accounts.

All Simmons First Health Savings Accounts are interest-bearing checking accounts, designed similar to other interest-bearing accounts with tiered interest rates and no transaction limitations. Funds in the account may be accessed by check, debit card, or ACH. The HSA product provides the customer a monthly statement with images, and has a monthly service charge of $3.00.

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2.  What qualifies someone for an HSA account?

    • The owner of an HSA account must be covered under a high-deductible healthcare plan (HDHP). Qualifications, Out-of-Pocket Expenses, Contribution Limits, and Catch-up Contributions are subject to change annually.
    • The owner of an HSA account cannot be covered by any other healthcare plan that is not an HDHP.
    • The owner of an HSA account must be at least 18 years of age.
    • The owner of an HSA account must discontinue contributions once he/she has enrolled in Medicare.
    • The owner of an HSA account cannot be claimed as a dependent on another person’s tax return.

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 3.  What is an HDHP?

An HDHP (High Deductible Healthcare Plan) is a plan which meets or exceeds the annual deductible requirements established by IRS rules and regulations. Qualifications, Out-of-Pocket Expenses, Contribution Limits, and Catch-up Contributions are subject to change annually.

Minimum HDHP Annual Deductibles
Tax Year Self-Only Coverage Family Coverage
2013
$1,250 $2,500
2014 $1,250 $2,500
2015

Subject to COLAs*

Subject to COLAs*

*Cost of Living Adjustments

 

Maximum Out-of-Pocket Expenses
Tax Year Self-Only Coverage Family Coverage
2013 $6,250 $12,500
2014 $6,350 $12,700
2015 Subject to COLAs* Subject to COLAs*
*Cost of Living Adjustments

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4.  Are there other requirements for the HDHP?

For HSA purposes, the HDHP must limit out-of-pocket expenses. Refer to the above chart for qualification requirements and contribution limits. Qualifications, Out-of-Pocket Expenses, Contribution Limits, and Catch-up Contributions are subject to change annually.

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5.What are an HSA Owner’s responsibilities?

The owner of an HSA account is responsible for determining his/her allowable annual HSA contribution, and whether he/she has qualified medical expenses eligible for reimbursement with non-taxable HSA distributions. This may require guidance from a tax or legal professional. The HSA trustee or custodian is not responsible for the determination of allowable HSA contributions or qualified medical expenses.

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6.  Who can contribute to an HSA?

If an individual meets the eligibility requirements and establishes an HSA account, contributions to the account may be made by the owner of the account, his/her employer, his/her family members, and any other person (including non-individuals). This applies whether the owner is self-employed or unemployed.

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7.  How much can be contributed to an HSA?

    • The maximum annual contribution amount is generally a specified amount determined by the IRS. Qualifications, Out-of-Pocket Expenses, Contribution Limits, and Catch-up Contributions are subject to change annually.
    • Additionally, a “catch-up” contribution is available for an eligible individual who is age 55 or older by the end of his/her taxable year and is not enrolled in Medicare.
Contribution Limits
Tax Year Standard Limit Additional Catch-Up Contribution Amount
  Self-Only Family  

2013

$3,250

$6,450

$1,000

2014

$3,300

$6,550

$1,000

2015

Subject to COLAs*

Subject to COLAs*

$1,000

*Cost of Living Adjustments

NOTE: All deposits/contributions made to an account will be considered current year contributions, unless otherwise specified by the account owner. If the account owner wishes to make a contribution for the previous tax year, or a qualified catch-up contribution, it must be identified as such by the account owner at the time of deposit. This information must be written on the deposit slip and a contribution form should be completed. The contribution form must be signed by the customer and the bank associate, acting as the custodian for the bank.

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8.  If an employer contributes money to their employee’s HSA account, how much additional money can the HSA owner contribute?

The total annual contributions to an HSA account are limited to the amount established by IRS annually. The employee (HSA owner) can only contribute the difference between the amount contributed by his/her employer and the IRS approved annual contribution amount. The combined contribution limit to an HSA from all sources (the account owner, a family member, an employer, or any other person, including non-individuals) cannot exceed the maximum allowable amount.

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9.  What are the federal tax benefits of an HSA?

Contributions to an HSA are fully deductible, the earnings grow tax deferred, and distributions for qualified medical expenses are tax free. The HSA owner should consult with his/her tax or legal professional for guidance.

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10.  How are federal tax deductions for HSA contributions claimed?

    • An HSA owner may deduct contributions made by anyone other than his/her employer, as long as the total contributions do not exceed the maximum allowable annual contribution amount.
    • Employer contributions are not considered wages for federal income tax purposes.

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11.  When is the contribution deadline for funding an HSA?

The deadline for regular and catch-up contributions is the HSA owner’s Federal Income Tax Return due date, excluding extensions, for each taxable year. The due date for most taxpayers is generally April 15th each year.

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12.  How are HSA distributions taxed?

    • HSA distributions used exclusively to pay for or reimburse qualified medical expenses incurred by the HSA owner, his/her spouse, or his/her dependents are not included in gross income.
    • All other distributions are included in income unless transferred or “rolled over” to another HSA. Distributions not used to pay for or to reimburse qualified medical expenses, or not transferred or not “rolled over” from to another HSA will be subject to income tax and may be subject to an additional 20% tax unless the distributions occur after death, disability, or attainment of age 65 by the owner of the HSA.
    • HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses.
    • For HSA purposes, expenses incurred before an HSA is established are not qualified medical expenses.
    • Non-prescription medicines (other than insulin) purchased in tax years after December 31, 2010, are not considered qualified medical expenses.

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13.  How is HSA activity reported?

    • Each year, the HSA custodian/trustee reports to the IRS all contributions and distributions made to and from an individual’s HSA account. Contributions are reported on IRS Form 5498-SA, and distributions are reported on Form 1099-SA.
    • In addition, each HSA owner is required to file IRS form 8899, Health Savings Accounts, as part of his/her Federal Income Tax Return to report HSA contribution and distribution activity.

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14.  Can money be transferred or “rolled over” from one HSA account to another?

    • Yes. Transfers must be identified and coded correctly to ensure the transfer does not appear on Form 1099-SA as a regular distribution. (An HSA owner cannot “roll over” or transfer his/her HSA assets to any non-HSA plan.)
    • Additionally, a transfer into a Simmons First HSA account must be identified and coded correctly to ensure it is not included in Form 5498-SA as a normal annual contribution; otherwise it would affect the amount the HSA owner could contribute in the year the transfer was completed.

 

15.  If the healthcare plan of an HSA owner changes, or he/she is no longer a participant in a HDHP plan; thereby causing him/her to be ineligible for an HSA, can he/she transfer the money from the HSA account to someone else’s account? (e.g. The spouse becomes the primary insurer of a family plan which provides coverage for the HSA account owner.) Additionally, can the HSA owner continue to make contributions to his/her account?

    • No, funds in the existing HSA account cannot be transferred to someone else’s account; however, the funds can continue to be used for qualified medical expenses until depleted.
    • No, the HSA owner can no longer make contributions to his/her HSA account.

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16.  What happens to an HSA account in the event of the owner’s death? Can the funds be paid out or transferred immediately?

The funds are either transferred to the new HSA owner or distributed to the beneficiary.

    1. If the death beneficiary of an HSA account is a spouse, the inherited HSA becomes the spouse’s HSA as of the date of the owner’s death. The funds should be transferred into the spouse’s existing HSA, or into a new HSA in the spouse’s name (NOT titled as a Beneficiary HSA in his/her name.) Any distributions after death used for the deceased or surviving spouse’s qualified medical expenses are non-taxable. Distributions used for reasons other than qualified medical expenses are subject to federal income tax and the 20% penalty tax.
    2. If the beneficiary is not a spouse, the HSA ceases to be an HSA as of the date of the owner’s death. The balance is distributed as a death distribution to the listed beneficiary, who is responsible for federal income tax on the fair market value of the account balance as of the date of the death of the owner. The taxable amount may be reduced by amounts used for the deceased’s qualified medical expense within one year of the HSA owner’s death.
    3. If the death beneficiary is the HSA owner’s estate, the HSA is no longer an HSA as of the owner’s date of death, and the funds will be distributed to the estate’s executor/administrator. Fair market value of the HSA as of the date of the owner’s death should be included as income on the deceased HSA owners final income tax return.
Yes, once the bank has proper notice (death certificate) the HSA owner is deceased, funds can be disbursed to the beneficiary.

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LINKS FOR ADDITIONAL INFORMATION


IRS Publication 969 - Guidelines on Health Savings Accounts
IRS Publication 502 – Qualified Medical & Dental Expenses
U.S. Dept. of the Treasury – HSA FAQs

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