Health Savings Account
1.
What is a Health Savings Account?
A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse, and your dependents. HSAs established at Simmons First will be custodial accounts.
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2.
What are some of the benefits of an HSA?
- Tax Benefits (Consult with your tax or legal professional for guidance.):
- Contributions are fully federal tax deductible. Contributions, other than employer contributions to your HSA, can be deducted from your gross income on your federal tax return, even if you do not itemize deductions. Many states, including Arkansas, allow the deduction from state income taxes.
- Contributions may be made from pre-tax dollars
- Employer contributions to your HSA are not considered wages for federal income tax purposes
- Payouts for qualified medical expenses are tax-free
- Interest and/or dividends are tax-free unless distributed for non-qualified medical expenses
- HSAs can “roll over” from year to year as accumulated tax-free savings
- Substantial savings on health care costs for you and your family by selecting a HDHP. Insurance premiums are usually lowered by 20% - 40% when you change from a low deductible to a high-deductible plan. You can use these savings to fund your HSA. Contact your employer or insurance provider for more information on HDHP offerings.
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3.
What does an HSA cost?
There is no set-up fee associated with a Health Savings Account (HSA) at Simmons First. The minimum balance to open a HSA account is $100.00. There are no transaction limitations and you will have unlimited check writing. There are no monthly balance requirements to avoid a service charge, and the interest earned on your account will be credited monthly. An annual service fee of $35.00 will be assessed the last business day each year.
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4.
Who is eligible to establish an HSA?
Any individual who is covered under a high-deductible health plan (HDHP) is eligible to establish an HSA, provided:
- the individual is not also covered by any other health plan that is not an HDHP (exceptions apply for plans providing certain limited types of coverage);
- the individual is not enrolled in Medicare (generally, has not yet reached age 65);
- the individual is not eligible to be claimed as a dependent on another person’s tax return.
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5.What is considered a “high-deductible health plan" (HDHP)?
Generally, an HDHP is a health plan that satisfies certain requirements with respect to deductibles and out-of-pocket expenses. Specific requirements for self-only coverage and family coverage are reflected in the charts below.
|
Minimum HDHP Annual Deductibles
|
| Tax Year |
Self-Only Coverage |
Family Coverage |
| 2008 |
$1,100 |
$2,200 |
| 2009 |
$1,150 |
$2,300 |
|
Maximum Out-of-Pocket Expenses
|
| Tax Year |
Self-Only Coverage |
Family Coverage |
| 2008 |
$5,600 |
$11,200 |
| 2009 |
$5,800 |
$11,600 |
* Cost-of-Living Adjustments
For the most current information on requirements with respect to deductibles and out-of-pocket expenses see the links at the end of this document. Top
6. What are out-of-pocket expenses?
Under present law, out-of-pocket expenses include deductibles, co-payments, and other amounts (other than premiums) that the individual must pay for covered benefits under the plan.
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7. Who should consider an HSA account?
- Individuals who would prefer, or already have, a high-deductible on their health insurance policy are poised to get immediate benefit from an HSA.
- Self-employed individuals, who don’t presently have insurance coverage, should consider a high-deductible plan that qualifies for an HSA.
- Small business owners thinking about adding health care insurance coverage as a new benefit for their employees should consider a high-deductible plan. HDHPs are usually the least expensive health care benefit available.
- Companies that already offer a health insurance plan, such as a PPO or HMO with a low deductible ($500 or less), may want to consider offering a high-deductible plan which would reduce the premium costs for both the employer and employee.
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8. How much can I contribute to an HSA?
The maximum annual contribution amount is a specified amount (see chart below). Additionally, a “catch-up” contribution is available for eligible individuals who are age 55 or older by the end of their taxable year and have not enrolled in Medicare. Once an individual has enrolled in Medicare, contributions (regular and/or catch-up) to his or her HSA must cease.
| Contribution Limits |
| Tax Year | Standard Limit | Additional Catch-Up Contribution Amount |
| | Self-Only | Family | |
| 2008 | $2,900 | $5,800 | $900 |
| 2009 | $3,000 | $5,950 | $1,000 |
| 2010 | $3,050 | $6,150 | $1,000 |
* Cost-of-Living Adjustments
For the most current information on contribution limits see the links at the end of this document. Top
9. Who can contribute to my HSA?
If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non-individuals) may contribute to your HSA. This is also true if you are self-employed or unemployed. Employer contributions to your HSA are not considered wages for federal income tax purposes.
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10. What is the contribution deadline for funding an HSA?
The deadline for regular and catch-up HSA contributions is your federal income tax return due date, excluding extensions, for that taxable year. The due date for most taxpayers is April 15. The bank will consider all contributions to be “current year” contributions and will report all deposits as current year contributions on form 5498-SA. It is the sole responsibility of the customer to inform the bank if a contribution is for the prior tax year.
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11. How do I make distributions from my HSA?
As with any other checking account, distributions from your HSA may be made by check, debit card, ACH, automatic bill payment or funds transfer. The bank will consider all distributions to be “current year” distributions and will report any withdrawals as current year distributions on form 1099-SA. It is the sole responsibility of the customer to inform IRS if a distribution is for prior year qualified medical expenses.
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12. What happens to my HSA if I change jobs?
Even if you change jobs, your HSA funds go with you. You own your account.
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13. What happens if my insurance plan changes?
If you make a change to your insurance plan, and you are no longer covered by a high-deductible plan, you cannot continue to make contributions. However, the money in your HSA is yours. You own the account, and you may continue your account at Simmons First. Should you choose to rollover or transfer your HSA and wish to avoid a tax penalty, the rollover or transfer must be to another qualifying HSA account. In order to avoid taxes and possible penalties, any rollover, unlike transfers, must be completed within 60 calendar days, and rollovers are limited to one in a twelve-month period. Each twelve-month period begins the day after a distribution.
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14. What happens to my HSA at age 65?
After age 65, you may make withdrawals from your HSA for any reason without the federal tax penalty of 10%. Money you withdraw and use for non-qualifying expenses is taxed at the normal rate for investment income, and money used for qualifying medical expenses is entirely tax-free.
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15. What happens to my HSA in the event of my death?
In the event of death, and your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA. If your beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death. For non-spouse beneficiaries, the fair market value of your HSA is included as income for the recipient in the tax year of your death. If your beneficiary is your estate, the fair market value of the HSA as of the date of your death is included as income on your final income tax return.
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16. What are the responsibilities of an HSA owner?
Each year, you are responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with non-taxable HSA distributions. Your HSA custodian/trustee (Simmons First) is not responsible for the determination of your allowable HSA contributions or whether you have qualified medical expenses. Determining your eligibility to establish an HSA and determining your allowable contributions and distributions may require the guidance of a tax or legal professional.
Also, you are required to file IRS Form 8889 as part of your annual federal income tax return to report your HSA contribution and/or distribution activity. Form 8889 filing is required only during a tax year when you have contribution and/or distribution activity. Save your supporting documentation (e.g. medical receipts, employer contributions, etc.) when you withdraw funds. The IRS may require you to provide documentation for your withdrawals. Non-qualified medical expense distributions are includable in the owner’s taxable gross income and are subject to an additional 10% tax. The 10% additional tax does not apply in the event of death, disability, or attaining age 65.
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17. What health care expenses qualify for HSA funds?
Dollars put into an HSA account can be used for any medical expense that qualifies as a “medical expense” as defined in U. S. tax code (Publication 502). Many health care expenses not usually covered under a standard health insurance policy may qualify and can be paid for with HSA funds. For example:
- Dental and Optical care, including glasses, contact lenses, & laser surgery
- Self-pay for COBRA health care continuation when you leave a job
- Long-term care insurance coverage for family members
- Fertility treatments, birth control prescriptions & well-baby care
- Physical therapy, chiropractic care, psychoanalysis, & acupuncture
- Medicare Part A or Part B and Medicare HMO insurance premiums
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18. How is HSA activity reported to the IRS?
Each year, your HSA custodian/trustee reports to the IRS on IRS Form 5498-SA the contributions made to your HSA. Also, any HSA distributions you take will be reported by your HSA custodian/trustee on IRS Form 1099-SA.
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| LINKS FOR ADDITIONAL INFORMATION |
IRS Publication 969 - Guidelines on Health Savings AccountsIRS Publication 502 – Qualified Medical & Dental ExpensesU.S. Dept. of the Treasury – HSA FAQsFORMS: