The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added section 223 to the Internal Revenue Code to permit eligible individuals to establish health savings accounts (HSAs) for taxable years beginning after December 31, 2003. An HSA allows individuals to pay for qualified health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. An HSA is similar to an Individual Retirement Account (“IRA”). Like an IRA, an HSA is established for the benefit of an individual, is owned by that individual, and is “portable.” Thus, if the individual is an employee who changes employers or leaves employment, the HSA stays with the individual. However, an IRA cannot be used as an HSA nor can you combine an IRA and an HSA in a single account.
The 2021 Annual Maximum HSA Contributions Are:
- Individual/Self – $3,600
- Family – $7,200
The HDHP Deductible is Individual/Self – $1,400 and $2,800/Family
Age 55 + will stay at $1,000 Annual Maximum Catch-Up
The 2020 Annual Maximum HSA Contributions Are:
- Individual/Self – $3,550
- Family – $7,100
The HDHP Minimum Deductible is $1,400 Individual/Self and $2,800 Family
Age 55+ will stay at $1000 Annual Maximum Catch-Up
What is a “high deductible health plan”?
A high deductible health plan is a health insurance plan that has an annual deductible (determined yearly by the Treasury Department).
For 2021, the deductible must be at least: (1) $1,400 for individual (self-only) coverage or (2) $2,800 for family coverage (coverage of more than one individual).
For 2021, the annual out-of-pocket expenses required to be paid under the health plan cannot exceed $7,000 for individual coverage or $14,000 for family coverage.
For 2020, the deductible must be at least: (1) $1,400 for individual (self-only) coverage or (2) $2,800 for family coverage (coverage of more than one individual).
For 2020, the annual out-of-pocket expenses required to be paid under the health plan cannot exceed $6,900 for individual coverage or $13,800 for family coverage.
Out-of-pocket expenses include deductibles, co-payments, and other amounts the participant must pay for covered benefits, but do not include premiums. High deductible health plans can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket expenses (copays & coinsurance) for non-network services. (The dollar amounts described above are subject to annual cost of living adjustments.) Note that health insurance companies designate which among their products are HSA-qualified high deductible plans.
To be eligible for an HSA, you must be covered by a high deductible health plan and you must not be covered by other health insurance. (This restriction does not apply to insurance for specified illness or disease or accident, disability, dental care, vision care, long-term care or hospitalization insurance) In addition, you cannot be enrolled in Medicare nor can you be claimed as a dependent on someone else’s tax return. You are also ineligible for an HSA if, while covered under a high deductible health plan, you are also covered (whether as an individual, spouse, or dependent) under a health plan that is not a high deductible health plan.
An eligible individual may establish and contribute to more than one HSA. However, the rules governing HSAs, such as those setting maximum annual contribution limits, apply no matter how many HSAs are established by an eligible individual. Thus, for example, the account balances of all HSAs established by an individual are aggregated for purposes of applying the maximum annual contribution limit described below.
Yes, HSA contributions can be made from cafeteria plans, provided certain rules are observed. A cafeteria plan, or flexible benefit plan, is an employee benefit plan that permits employees to choose from a variety of benefits, including health insurance on a pre-tax basis. Only “limited purpose” flexible benefit plans can co-exist with HSAs. See information in our FAQs under Healthcare FSA Limited Purpose Provision for more information.
If a high deductible plan is offered as part of a cafeteria plan, it can be used to establish your eligibility for an HSA. (A cafeteria plan or flexible benefit plan is an employee benefit plan that permits employees to choose from a variety of benefits, including health and accident insurance cash, tax advantages and retirement plan contributions.)
If you would like to close a debit card or report a card lost/stolen, log into your account and check the box under Close Debit Card and hit save.
In the event that the card was lost/stolen, please call customer service at 800-617-4729 to order a new card.
It’s a complicated answer. Retirees cannot contribute to HSAs after enrolling in Medicare – but they can still retain and use the funds in HSAs they previously established. If you don’t use the money in your HSA, you retain it. HSAs are also portable – meaning that when you change jobs or health insurers, you bring your HSA with you – even when you enroll in Medicare.
Original Medicare does not cover everything. Many of the gaps left by Medicare are considered qualifying medical expenses under an HSA. These may include:
- Long-term care services
- Long-term care insurance
- Dental care
- Vision care
- Hearing aids
IRS Code Section 152 has a two-prong definition of a dependent – qualifying child and qualifying relative. A qualifying child is any son, daughter, brother, sister, niece, nephew, or grandchild who:
- Will not be age 19 during the year (or 24, if a full-time student). The exception is in the case of a disabled child who is considered as satisfying the age requirement despite their actual age.
- Has the same principal address as the taxpayer for more than half of the year
- Does not provide over half of his/her own support
A qualifying relative is any individual who:
- Is not a qualifying child of any other person
- Has income less than the exemption amount (see your tax advisor for details)
- Receives over half of his or her support from the taxpayer
- If a non-relative, resides with the taxpayer the entire year
While the Patient Protection and Affordable Care Act (PPACA) allows parents to add their adult children (up to age 26) to their health plans, the IRS has not changed its definition of a dependent for health savings accounts. This means that an employee whose 24 year old child is covered on their HSA-qualified high-deductible health plan is not eligible to use HSA funds to pay for medical bills for that 24 year old. Quite simply, if an HSA accountholder can’t claim a child as a dependent on their tax return, then they can’t spend HSA dollars on services provided to that child.
An individual who is covered by such programs may still be eligible to establish an HSA if the programs do not provide significant medical care or medical treatment benefits. Certain screening and preventive care services are disregarded when determining whether a program provides significant medical care or treatment benefits.
A discount cardholder may be eligible to establish an HSA if the individual is covered by a high-deductible health plan and is required to pay health care costs, taking into account the discount, until the high deductible health plan deductible is satisfied.
If you elect to make HSA contributions under a cafeteria plan, you may start or stop the election or increase or decrease the amount of your HSA contribution at any time, as long as the change is effective prospectively.
The CARES Act states that “telehealth and other remote care services” below the deductible will be permitted in an HSA-compatible high deductible health plan (HDHP). This provision is effective immediately and will expire December 31, 2021.
The CARES Act states that consumers can purchase OTC drugs and medicines with funds from their health savings account (HSA), flexible spending accounts (FSA) or health reimbursement arrangement (HRA). Consumers may also receive reimbursement for OTC purchases through those accounts. In addition, menstrual products are now considered a qualified medical expense, meaning consumers can pay for or be reimbursed for these products through an HSA, FSA or HRA. This provision is effective for purchases made after December 31, 2019, and for reimbursements of expenses incurred after December 31, 2019. It does not have an expiration date.
The IRS has issued Notice 2020-15 on March 11, 2020, which allows high-deductible health plans (HDHPs) to cover testing and treatment for COVID-19 without a deductible. In other words, coronavirus testing and treatment are considered qualified medical expenses under an HDHP, and people can use HSA funds to pay for it. Due to the COVID-19 national health emergency, Notice 2020-15 also applies to HDHPs that would otherwise be disqualified under Internal Revenue Code section 223(c)(2)(A). In other words, HDHPs that provide additional health benefits covering coronavirus testing and treatment, and HDHPs with a deductible that falls below the minimum requirement are also subject to the Notice.