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HSA

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Health Savings Account (HSA)

Set money aside to pay for qualified medical expenses in a tax deductible account – for people with a high deductible health plan (HDHP).

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax exempt account with a financial institution in which you accumulate savings to pay for current and future medical expenses. The HSA consists of two separate parts:

Contributing to your HSA

Contributions to your HSA are tax deductible and income earned on funds in the HSA grow tax-free (funds grow tax free for qualified medical expenses – if funds are used for expenses that are not qualified medical expenses, penalties and taxes apply).

Contributions can be made to the account during the months the individual is covered under a HDHP. Funds placed in a HSA can roll from year to year and do not need to be used in the year they were contributed to the plan.

Advantages – River Valley Bank HSA

HSA Benefits

Who is eligible?
Any individual covered under a qualified high deductible health plan. Individuals cannot be above Medicare eligibility age or covered under another plan.

When can I set up a HSA?
At the time you enroll in your employer’s HDHP. Then you may open the account at River Valley Bank and choose how much you will contribute to your account.

Contribution source
Both individual and/or employer.

Annual contribution levels
Up to 100% of deductible with a maximum of:

2005
$2,650* for single plan
$5,250* for families

2006
$2,700* for single plan
$5,450* for families

*amount subject to regulatory change

Deductible ranges

2005
$1,000 minimum for single
$2,000 minimum for family

2006
$1,050 minimum for single
$2,100 minimum for family

Maximum annual out-of-pocket
(includes deductible and any expenses incurred once deductible is met)

2005
Maximum = $5,100 for single*
Maximum = $10,200 for family*

2006
Maximum = $5,250 for single*
Maximum = $10,500 for family*

*Maximum out-of-pocket could be higher than maximum contribution

Is there a “catch-up” contribution provision for older workers?
Those over age 55 can contribute an additional $500. Beginning with 2004, this increases $100 per year up to 2009.

Earn interest on HSA account

You can earn interest on your HSA account. Rates vary and are based on the following average balances:

Eligible Expenses

You determine if a particular medical expense is a qualified medical expense that can be reimbursed from your HSA (see information below for assistance). If your HSA is audited by the IRS, they will require proof from you that you used your HSA money to pay for qualified medical expenses.

Withdrawing money from HSA account
There are three ways to withdraw money from your HSA:

Remember, expenditures must be for qualified medical expenses and save receipts.

Portability
The account goes with the individual – if an employee changes employers or leaves the work force, the HSA stays with the individual.

Funds carry over
Funds carry over from year to year – the HSA is not a “use it or loose it” account.

Tax deductible
The funds contributed to a HSA are tax-deductible. Important: If your HSA contributions are made through pretax payroll deductions, you many not claim the contributions as a deduction on your tax return. Similarly, if you itemize deductions on your tax return, you may not claim a deduction for those medical expenses that are reimbursed from your HSA.

Retirement savings
After age 65, the account may also be used as an additional retirement account with ordinary tax laws applying.

What Can I Use My HSA For?
Eligible Medical Expenses

You can use the funds in your HSA to pay for qualified medical expenses, as defined by the IRS, incurred by you, your spouse, and your dependents. Below are lists that can guide you in determining whether an expense is HSA eligible. This list is for reference only. More detailed information can be requested from the IRS by calling 1-800-TAX-FORM.

Deductible Medical Expenses
Non-deductible Medical Expenses
Eligible Over –the-Counter Drugs
Ineligible Over-the-counter
Health insurance may not be purchased with HSA funds, except:

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