Health Savings Account (HSA)

  1. Annual contribution limit per calendar year 2010:
    Individual $3,050
    Family $6,150
    55 and older can also make additional $1,000 contribution per year.
  2. Must have a qualified health plan to open. No first dollar benefits (office visit and prescription drug copayments) except preventive care.  Must have deductible of at least or higher:
    Individual: $1,200
    Family: $2,400
  3. Must have account open before you incur medical expense to use money from HSA.
  4. HSA is like an IRA.  There is never a use it or lose it rule.

Best Ways to Benefit From a Health Savings Account

  1. Buy a higher deductible health plan and save money on health insurance premium.
    Formula to use: (Higher Deductible – Lower Deductible),
    (Annual Premium of Lower Deductible – Annual Premium of Higher Deductible)
    Example:$3,000 Deductible - $1,500 Deductible  = $1,500  Risk
    $191.68 - $132.43 = $59.23 X 12 Months = $711 Savings
    Who pays $711 to buy $1,500 worth of insurance? 
  2. Open HSA at a bank or credit union after you have a qualified health insurance plan.
  3. Deduct contributions from paycheck pre-taxed for largest tax savings (Federal Income, Social Security, Medicare, Employer Matching Social Security and Medicare).
    If employer does not allow pre-taxed deduction for HSA from paycheck educate them they could reduce their payroll taxes by 7.65% for every dollar you put into your HSA.
    There are still tax benefits to using an HSA even if not deducted from paycheck.
  4. If you never incur any medical expenses to use money from HSA, after age 65 it works as a traditional IRA.  Money can be withdrawn for non-medical use without penalty.
  5. You do not have to put money into a HSA every paycheck or month.
  6. Fund an HSA before, as or after you incur medical expenses.  Must at least have HSA open!
    Before – Fund HSA directly with payroll deduction.
    As - Make lump sum contribution as or after you incur medical expenses
    After - Take total of medical expenses incurred for current year. Next year deposit money into HSA for expenses incurred the previous year.  You can withdraw money immediately for personal use. 

Read more about Health Savings Accounts:

All about HSAs

Summary of HSAs

2010 Indexed Amounts for HSAs

If you would like more information, please contact us!