Think of a Health Savings Account (HSA) like having a health 401(k) you can dip into now—or, let it build to pay for qualified medical expenses after you retire. This simple tutorial is designed to help you decide whether a Health Savings Account might be a good fit for you (and your family).
6. Think of an HSA like a
“health 401(k)”.
Dip into it now to pay for your qualified
health expenses.
Or, let it build to pay for qualified
health expenses after you retire.
7. A Health Savings Account
is triple tax advantaged.
1.Contributions are not federally taxed;
2.Funds in an HSA grow tax-free; and
3.Funds used to pay for qualified health expenses are
never federally taxed!
8. The list of “qualified medical
expenses” is surprisingly broad.
(Defined by the IRS in Publication 502)
9. It includes copays, coinsurance,
prescriptions, & COBRA premiums.
ACUPUNCTURE
ADDICTION TREATMENT
AMBULANCE
BIRTH CONTROL
CAPITAL EXPENSES (like door ramps)
CHIROPRACTOR
CONTACT LENSES
DENTAL TREATMENT
DISABLED DEPENDENT CARE
EYE EXAM / GLASSES / EYE SURGERY
FERTILITY ENHANCEMENT
HEARING AIDS
HOME TESTS FOR COVID-19
NURSING HOME / SERVICES
PSYCHOLOGIST / PSYCHIATRIC CARE
SPECIAL EDUCATION
…AND SO MUCH MORE!
10. HSA funds can be used on you,
your spouse, and tax
dependents.
Use funds on anyone you claim on your Federal Income Taxes,
even if they are not covered on your health plan!
11. You and/or your employer can
add money.
You can contribute via payroll deduction, or on your own. Your
employer may contribute a defined monthly amount as part of
their benefits offering.
12. There’s a limit to how much can
be contributed each year.
2022 FAMILY MAX
$7,300
2022 INDIVIDUAL MAX
$3,650
($3,600 in 2021)
($7,200 in 2021)
You can contribute an
additional $1,000 if you’re
55 and older.
The total funds put into
your account (by you
and/or your employer)
must not exceed the annual
limit.
The same $1,000 “catch up”
contribution applies!
13. But there’s no time limit for
reimbursing yourself.
As long as you had an HSA when you incurred the qualified
health expense, it makes no difference how much time has
passed.
14. To be eligible, you’ll need a High
Deductible Health Plan (HDHP).
In general, deductibles and premiums are inversely proportional.
High deductible = low monthly premium
Low deductible = high monthly premium
ALSO KNOWN AS A
CONSUMER-DRIVEN
HEALTH PLAN
(CDHP)
15. 2022 INDIVIDUAL
OOP MAX
$7,050
2022 FAMILY
OOP MAX
$14,100
This is how much
money you have to pay
out-of-pocket (OOP)
before your insurance
will start to pay a
portion of costs.
Here’s what a High Deductible
Health Plan looks like.
$1,400
2022 MINIMUM
FAMILY DEDUCTIBLE
$2,800
The out-of-pocket (OOP)
maximum represents
your worst case financial
exposure. If you hit this
number, insurance pays
100% of in-network
expenses for the rest of
the plan year.
Your OOP max may
even be as low as
the minimum
deductible (shown
above) depending
on your plan!
2022 MINIMUM
INDIVIDUAL DEDUCTIBLE
(no changes from 2021)
($7,000 for 2021) ($14,000 for 2021)
Even if your
employer doesn’t
offer an HSA,
assuming you’re
eligible, you can
open one yourself at
your banking
institution.
16. Pairing an HSA with an HDHP
can help you save money.
The idea is that the money you save in health insurance premiums
can go into your HSA instead.
HSA + HDHP = CDHP
(CONSUMER-DRIVEN
HEALTH PLAN)
17. HSAs primarily benefit healthier
people with low medical costs.
One nice thing about HSAs is that, even if something major happens,
the out-of-pocket max limits your financial exposure.
WHICH MEANS NO
CRIPPLING DEBT
18. There are times when an
HSA might not be the best
option.
If you expect high healthcare expenses in the year ahead,
consider whether a low deductible, richer coverage plan
might better meet your needs.
FOR EXAMPLE, IF YOU’RE
PLANNING TO START A FAMILY
(PREGNANCY COSTS CAN BE
IN THE THOUSANDS!)
19. You can’t contribute to an HSA and
have a Health Flexible Spending
Account (FSA) at the same time.
IF YOU’RE MARRIED,
YOUR SPOUSE CAN’T
HAVE A HEALTH FSA
EITHER.
ALSO KNOWN AS A
“GENERAL PURPOSE” OR
“MEDICAL” FSA.
20. You can still have a
Limited-Purpose FSA.
USED FOR DENTAL OR
VISION ONLY
21. You can also still have a
Dependent Care FSA.
USED FOR CHILD OR
ELDER CARE
YOU (AND YOUR
SPOUSE IF FILING
JOINTLY) MUST HAVE
W-2 EARNED INCOME
DURING THE YEAR. SEE
IRS PUBLICATION 503.
22. Your HSA is used like a debit card, so
spending money is easy.
Your HSA vendor should provide you with a card when you
open an account. This spending card works exactly like a
debit card and is linked to the funds in your HSA.
HSA
HSA
23. Use your card to pay for
copays and prescriptions.
AT THE DOCTOR
OR THE PHARMACY
24. Or, pay yourself back from
your HSA account.
Reimbursement is as easy as a bank-to-bank transfer. You can also
retroactively reimburse yourself if you paid for a qualified health
expense but didn’t have money in the HSA account at the time.
25. You don’t have to use your HSA
funds just ‘cuz you’ve got them.
You can choose to pay for your qualified health expenses “on your own” and
let the funds in your account build to 1) use on future expenses, or 2)
reimburse yourself in the future.
REMEMBER, THERE’S NO TIME
LIMIT FOR REIMBURSING
YOURSELF.
26. Even if you no longer have a
high-deductible plan, you can
still use your HSA funds.
But you can’t contribute to your HSA if you’re no
longer on an eligible health plan.
IN THE FUTURE
ON QUALIFIED HEALTH
EXPENSES.
27. You cannot contribute to an HSA if
you’re enrolled in Medicare.
Retirement heads up: if you’re 6+ months beyond your full retirement
age (66) when you apply for Social Security, you’ll get 6 months of “back
pay” in benefits. To avoid penalties on your HSA, stop contributing 6
months before you apply.
ONCE YOU’RE 65 OR OLDER, YOU CAN
USE HSA FUNDS FOR ANY REASON.
TAXES WILL APPLY FOR NON-
QUALIFIED HEALTH EXPENSES, BUT
THERE’S NO LONGER A 20% PENALTY.
REMEMBER—YOU CAN ALWAYS SPEND
YOUR HSA DOLLARS ON QUALIFIED
HEALTH EXPENSES. YOU JUST CAN’T
CONTRIBUTE TO YOUR HSA IF YOUR
PLAN ISN’T ELIGIBLE.
28. Generally, HSAs can give you more
control over your medical spending
IF YOU CAN TAKE
ADVANTAGE
29. Keys to savvy spending
Ask about pricing before agreeing to services.
YOU MAY BE ABLE TO NEGOTIATE BETTER
RATES. SOMETIMES ASKING IS ALL IT TAKES.
Make use of preventive care to stay well. It’s 100%
covered by your health plan.
Consider generic instead of brand name drugs.
EVEN IF YOU HAVEN’T
MET YOUR DEDUCTIBLE.