How do you know if a Health Savings Account is right for you? A Health Savings Account (HSA) is a tax-exempt trust or custodial account set-up to pay medical bills along with a high-deductible health care plan. A HSA can help you plan and manage your health care costs and give you more control over your health care dollars.
To create an HSA, there must be a written agreement which creates the HSA account and must meet the following requirements:
- The trustee or custodian must be a bank, an insurance company or a non-bank Trustee.
- No part of the HSA funds may be invested in life insurance or may not be used to purchase health insurance.
- The HSA assets cannot be mixed with other assets, they must be kept in a separate fund.
- The account beneficiary’s interest in the HSA cannot be forfeited.
- All contributions to a HSA must be cash or rolled over from another HSA. You cannot make contributions in the form of stock or other property.
- Contributions cannot exceed certain limits for a given calendar year.
An individual must meet specific criteria to be eligible for a HSA. On the first day of each month the individual must be covered under a high-deductible health plan. You cannot be covered by Medicare or covered under more than one high-deductible heath plan. You also cannot be claimed as dependent on another person’s tax return.
A high-deductible plan must meet certain dollar limitations on the annual deductible and maximum limitations on the out-of-pocket expense. Most insurance agents can help you determine if your health insurance policy qualifies as a high-deductible plan.
There are annual contributions and deduction limits for this plan with exceptions for those individuals 55 or older. Limitations and guidelines are also established for spouses who have family coverage. Contributions made by an eligible individual are deductible when determining adjusted gross income. These contributions are deductible whether not the individual can itemize.
Contributions to an HSA can be made for the current year through April 15 of the next year. Excess contribution rules do apply to an HSA. Distributions may be made at any time. A distribution to pay a medical expense not paid or covered by insurance will generally not be included in the beneficiary’s gross income. It is the account holder’s sole responsibility to determine the purpose and tax effect of any distribution.
Martinsburg Bank and Trust is one of the few local banks that can establish a Health Savings Plan. Rules and regulations that govern a HSA can be confusing. If you think you have a high deductible health care plan, ask if you qualify for a Health Savings Plan. Member FDIC
*Insurance products are not insured by the FDIC or any other government agency *are not products of the bank or guaranteed by the bank *may lose value.