All you need to know about health savings accounts

1. “HSA 101” Q & A Document Part I
Questions and Answers on the Basics of an HSA
Question: What is a Health Savings Account (HSA)?
Answer: It is a tax-exempt trust or custodial account established exclusively for the
purpose of paying qualified medical expenses of the account beneficiary who, for the
months for which contributions are made to an HSA, is covered under a qualified high
deductible health plan (QHDHP).
Question: What is a qualified medical expense?
Answer: They are expenses paid by the account beneficiary, his or her spouse or
dependents for medical care. Qualified medical expenses include prescription drugs.
(See the listing on Section 213 (d) of the internal Revenue Code for more details)
Question: Who is eligible for an HSA?
Answer: Any individual who for a given month is covered under a QHDHP on the first
day of such month, who is also not covered by any other health plan that is not a
QHDHP, who is not entitled to benefits under Medicare, and who may not be claimed as
a dependent on another person’s tax return.
Question: What is a Qualified High Deductible Health Plan (QHDHP)?
Answer: It is a health plan that satisfies certain requirements with respect to
deductibles and out of pocket expenses. For 2009 a QHDHP HSA a minimum annual
deductible of $1,150 and a maximum annual out of pocket expenses of $5,800. For
family coverage the minimum annual deductible is $2,300 and the maximum annual out
of pocket expenses is $11,600.
Question: What applies to the out of pocket expenses on the QHDHP?
Answer: Deductibles, Co-payments, and Coinsurance.
Meridian Insurance Group, LLC.
Charles G. Stout, RHU, LUTCF
301 Yamato Road • Suite 3150 • Boca Raton, FL 33431 •
561-994-2210 Ext. 17
1/08

2. Question: Can I rollover my IRA to my HSA?
Answer: Yes but you cannot exceed the annual maximum contribution for that year into
your HSA.
Question: In what form can my contribution be made?
Answer: Cash.
Question: If I am an employer, can I contribute different amount to different
classes of employees?
Answer: Yes. You may make greater contributions outside of a Section 125 for non-
highly compensated employees.
Question: When can I contribute to my account?
Answer: Contributions can be made at any time during the contribution year until the
tax return due date of April 15th.
Question: What is the maximum I can contribute to my HSA?
Answer: For 2009, the limit is $3,000 for single coverage and $5,950 for family
coverage. Amounts transferred from an IRA plus any additional employer contributions
will be applied against the annual contribution limit.
Question: Do I have to use a broker to set up my HSA?
Answer: No. You may open an account with any financial institution which offers
health savings accounts. Most health plans have partnered with a financial institution for
ease of administration.
Question: How do I withdraw funds to pay for my services if I have set up my
account with a bank or other financial institution?
Answer: Typically you can withdraw funds via debit card, checkbook, or withdrawal
forms from your HSA.
Question: How will my insurance carrier know my deductible HSA been met?
Meridian Insurance Group, LLC.
Charles G. Stout, RHU, LUTCF
301 Yamato Road • Suite 3150 • Boca Raton, FL 33431 •
561-994-2210 Ext. 17
1/08

3. Answer: You will need to save your receipts as proof you have met your deductible.
Question: If I do not use all of my funds in the HSA for the calendar year, do I lose
my money?
Answer: No, your funds will remain in the account until they are used. (Rollover
feature)
Question: Can I use the money in my account for expenses other than medical
care?
Answer: Yes, however if you are not Medicare eligible the money will be treated as
taxable income and you will incur a 10% tax penalty. If you are Medicare eligible the
income will be treated as taxable income without a penalty.
Question: If I quit my job or move to another state do I lose my HSA?
Answer: No, your HSA is portable.
Question: Who do I contact to answer questions about the balance of my HSA?
Answer: You contact the financial institute who holds the HSA.
Question: What are the benefits of signing up for an HSA?
Answer: HSAs encourage tax-exempt savings for future medical costs. HSAs are
owned by the individual not an employer. The individual makes all the decisions
regarding the HSA.
Question: Do I have to use my funds from the HSA to pay for medical services if I
have not met my deductible?
Answer: No, you can choose to pay for the services out of your pocket and save the
funds in the HSA for future medical expenses.
Question: What resources are available to me to learn more about the tax
treatment of my HSA?
Meridian Insurance Group, LLC.
Charles G. Stout, RHU, LUTCF
301 Yamato Road • Suite 3150 • Boca Raton, FL 33431 •
561-994-2210 Ext. 17
1/08

4. Answer: Treasury Assistance is available to you. You can access the web site at
www.treas.gov. There is also a voice mailbox at 202-622-4HSA. The e-mail address is
HSAInfo@do.treas.gov. You can also contact the IRS.
Meridian Insurance Group, LLC.
Charles G. Stout, RHU, LUTCF
301 Yamato Road • Suite 3150 • Boca Raton, FL 33431 •
561-994-2210 Ext. 17
1/08