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HEALTH SAVINGS ACCOUNTS (HSA)
Consumers Frequently Asked Questions

HSA Basics

1. What is a HSA?

A HSA is a savings product that allows individuals to pay for current and future qualified medical expenses on a tax-free basis.

2. What are the tax advantages of a HSA?

There are several main tax advantages in connection with having a HSA:

3. How can I open a HSA?

Consumers can sign up for HSAs with banks and an employer may also set up a plan for employees, in which case, the employer will generally arrange the HSA for the employee.

4. Who is eligible for a HSA?
5. What is a High Deductible Health Plan (HDHP)?

A HDHP is a health insurance plan with lower premiums and higher deductibles than a traditional health plan. In order to qualify for a HSA covering tax year 2014, your minimum deductible must be at least $1,250 for self-only coverage or $2,500 for family coverage. The annual “out-of-pocket” expenses (including deductibles and co-pays) for 2014 cannot exceed $6,350 for self-only coverage or $12,700 for family coverage. These minimum deductibles and maximum out-of-pocket amounts are subject to change annually by the IRS.

6. Does the HDHP policy have to be in my name to open a HSA?

No. The policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for a HSA as long as you meet the other eligibility requirements for contributions to a HSA. You can still be eligible for a HSA even if the policy is in your spouse’s name.

7. Can couples establish a “joint” HSA and both make contributions to the account, including “catch-up” contributions? Must couples open separate acounts?

“Joint” HSAs are not permitted. Each spouse should consider establishing an account in their own name. This allows both individuals to make catch-up contributions to the account when each spouse is 55 or older. If both husband and wife are eligible to contribute to a HSA, they are both eligible to establish separate HSAs. However, if both spouses want to make “catch-up” contributions when they are age 55 or older, they must establish separate accounts.

8. Does my contribution depend on when I establish my HSA or when my HDHP coverage begins?

Your eligibility to contribute to a HSA is determined by the effective date of your HDHP coverage.

If you are not covered on December 1, your contribution depends on the number of months of HDHP coverage you have during the year (technically, the months where you have HDHP coverage on the first day of the month). If you are covered on December 1, you are treated as an eligible individual for the entire year.

9. How much can I contribute to my HSA each year?

The table below outlines the amounts that may be contributed for 2014:

Health Savings Accounts
Contribution Limits*
Standard Limit Catch-up Contribution Total Contribution Limit if Age 55 or Older for 2014
Self-Only $3,300 $1,000 $4,300
Family $6,550 $1,000 $7,550
HDHP Requirements*
Minimum Annual Deductable
Out-of-Pocket Expense Cap
Self-Only $1,250 $6,350
Family $2,500 $12,700

*go to www.treasury.govThese links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue under Health Savings Account for more information

10. Who can make contributions to my HSA?

Contributions to HSAs can be made by the employer, the individual or both. If contributions are made by the individual, it is an “above-the-line” deduction. If contributions are made by the employer, it is not taxable to the employee (meaning that it is excluded from income). Contributions can also be made by others on behalf of an eligible individual and deducted by the individual. Please note that if contributions come from more than one source, they are aggregated.

11. Do my HSA contributions have to be made in equal amounts each month?

No. You can contribute in a lump sum or in any amount or frequency; however, your bank may impose minimum deposit and balance requirements.

12. Are there deadlines for making HSA contributions?

HSA contributions must be made for a specific year on or before the due date (without extensions) for filing tax returns for that same year. For example, for 2014, contributions must be made on or before April 15, 2015.

13. What happens if I contribute more to my HSA than the maximum allowable amount?

Contributions made by an individual to a HSA are not deductible to the extent that they exceed the maximum limits. Excess contributions by an employer generate taxable income to the employee. In addition, a 6% excise tax is imposed on the excess funds.

The excise tax and any net income attributable to excess contributions are avoided if the excess contributions are paid to the HSA owner prior to the federal income tax deadline for the year at issue.

14. Will my bank notify me if I’ve exceeded my allowable contribution amount?

No. It is your sole responsibility to keep track of the amounts deposited and spent from your account, just like a normal savings or checking account.

15. What can distributions from the HSA be used for?

Distributions can be used for either qualified medical or other expenses. If the amount distributed is used for qualified medical expenses, then the distribution is tax free. A description of qualified HSA expenditures can be found in IRS Publication 502 and is located at the following website: www.irs.gov/pub/irs-pdf/p502.pdfThese links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue . Publication 502 provides a list of examples, but it is not the definitive list.

If the amount distributed is used for expenses other than qualified medical expenses, the amount distributed will be taxed and for individuals who are not disabled or over age 65, subject to a 10% tax penalty.

16. What if I made a distribution for something I thought was a qualified medical expense?

For withdrawals that were made for something you thought were qualified medical expenses, but are not qualified medical expenditures, the distribution can be returned to the HSA if there is clear and convincing evidence that the expenditure was a mistake of fact. Such repayment to the HSA must be made on or before April 15th of the year following when the individual knew, or should have known, the expenditure was a mistake.

17. Who will be the “bookkeeper” for my HSA?

It is your responsibility to keep track of your deposits and expenditures along with medical receipts. If you run out of HSA funds (and therefore need to use your HDHP), you may need to send those receipts to your insurer.

18. Can I borrow against the money in my HSA?

No. You may not borrow against it or pledge the funds in it. For more information on prohibitive activities, see Section 4975 of the Internal Revenue Code.

19. What happens to the money in my HSA after I turn 65?

You can continue your account tax free for out-of-pocket expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.

20. What happens to the money in my HSA when I die?

What happens will depend on how the HSA is designed. If your spouse is designated as the beneficiary by you, your spouse becomes the owner of the HSA when you die. If you provide that the HSA goes to your estate or other entity, the value of the HSA at death is income to the estate or other entity.


Below are some suggested resources for information on the Health Savings Account:

  • Internal Revenue Service.These links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue This website contains information on IRS publications, frequently asked questions, HSA Road Rules for individuals and employers, maximum contribution amounts, etc. Also please see IRS Publication 969
  • The Treasury Department.These links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue Another resource providing the latest legislation on HSAs and information for consumers.
  • Council for Affordable Health Insurance HSA Information Center.These links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue The website provides helpful information about HSAs. CAHI is a Washington, D.C. based think tank.
  • HSA ED.These links are provided as a convenience to you. These links are controlled by third parties and Capitol National Bank does not endorse, approve, certify, or control third party sites. Any transactions engaged in or products purchased on these sites is at your own risk. Go Back Continue A healthcare consulting practice specializing in HSAs and consumer-driven healthcare issues.

NOTE: Information provided above in the Consumer Frequently Asked Questions was gathered from the various resources listed above. You are advised to consult with your tax advisor or insurance company for questions you may have regarding your Health Savings Account.