FAQ: Savings > Health Savings Account

• Who can have an HSA?

  To be eligible to open and contribute to an HSA you must:

  • Have coverage under an HSA-qualified HDHP;
  • Not be covered by any other health plan unless it is also a qualified HDHP;*
  • Not be covered by a general purpose health care Flexible Spending Account (FSA) or a general purpose Health Reimbursement Arrangement (HRA);
  • Not be enrolled for benefits under Medicare (generally not yet age 65);
  • Not be eligible to be claimed as a dependant on another person’s tax return;
  • Not be a recipient of VA benefits within the past 90 days;
  • Not be covered under TRICARE for retired military personnel.

  *Other types of insurance like specific injury insurance or accident, disability, dental care, vision care, or long-term care insurance are permitted.

• What are the tax benefits of an HSA?

  An HSA provides significant tax benefits:

  • HSA contributions are tax-free up to the maximum allowable amount.
  • Dividends earned are tax-free.
  • If used for qualified medical expenses, withdrawals are tax-free.
  • After age 65, HSA assets may be used to pay for non-qualifying expenses, however the amount withdrawn will be taxable as income. Prior to age 65, HSA assets used for non-qualifying expenses will be subject to ordinary income tax, plus a 10% penalty.

  Consult your tax advisor for details.

• What are qualified medical expenses?

  In order for HSA assets to retain their tax-free status, they may only be withdrawn and used for certain “qualified medical expenses” permitted under federal tax law. These expenses include:

  • Most medical care and services, including doctor visits, prescriptions, over-the-counter drugs, transportation to get to medical care, and dental and vision care;
  • Long-term care insurance;
  • Healthcare coverage when unemployed and collecting unemployment compensation;
  • Certain continuation-of-benefit healthcare coverage;
  • Certain health insurance after age 65.