What is an HSA?
A Health Savings Account (HSA) is a tax advantaged savings account for current and/or future medical expenses. In 2004, Congress created the HSA as a tool to address the continually growing cost of healthcare and increase the efficiency of the healthcare system. Coupled with a high-deductible health plan, HSAs offer consumers a way to have more control over their healthcare choices and costs while simultaneously saving for future health expenses.
An HSA is an individual account that is controlled by the account holder. Primary tax advantages are that the HSA holder can:
- Contribute "pre-tax" money up to the annual contribution limit. The cash and assets stay in the account and grow without tax until distribution by the account holder.
- Distribute money tax free for Qualified Medical Expenses (QME) at any time after the HSA is open (as long as the QME occurred after the HSA was open).
What is a High Deductible Health Plan (HDHP)?
A High Deductible Health Plan (HDHP) is health insurance that has lower premiums but a higher deductible. An HDHP pays for catastrophic medical expenses and qualifies consumers to set aside tax-free funds in an HSA. HDHPs are an alternative to the plans offered by HMOs and PPOs that feature low deductibles but charge high premiums.
In 2015 and 2016 HDHPs must have a deductible of at least $1,300 for self coverage and $2,600 for family coverage. 2015 Maximums for deductible and out-of-pocket expenses are $6,450 ($6,550 for 2016) for self coverage and $12,900 ($13,100 for 2016) for family.
Out-of-pocket expenses for HDHPs include money paid to satisfy the deductible, co-payments, and other expenses. These are all costs that the HSA may be used to cover.
An HDHP may provide preventive care benefits without a deductible or with a deductible below the minimum annual deductible. Preventive care includes periodic health evaluations, immunizations, and more.
What are the benefits of An HSA?
- An HSA is an individual account. Once established, it is controlled by the account holder regardless of changing employers or health coverage.
- Tax-free distributions to reimburse QMEs (Qualified Medical Expenses) can be made at any time as long as the QMEs occur after the HSA is open. QMEs include: chiropractic care, dental care, corrective eye surgery, homeopathy and many others.
- HDHP and HSA plans offer lower premiums than other health plans because deductibles are high.
- Those with an HDHP and HSA who already spend little on healthcare annually may experience net savings.
- HDHP holders are covered for major medical events and emergencies.
- HSA investments grow tax deferred.
- Anyone can contribute money to your HSA.
- Contributions to HSAs do not count toward your annual IRA contribution limit.
- The HSA can be used to invest in a wide variety of assets including real estate, precious metals, public and private stock, notes, and more.
- Once the account holder has reached age 65, HSA funds can be distributed for non-QME, subject to tax but no penalty.
- No Required Minimum Distributions (RMD) like you would have with a traditional IRA
It's easy to invest for retirement with an HSA
- Open an HSA with New Direction IRA
- Put money in that HSA by making a contribution, transferring from other HSAs or MSAs, or doing a one time direct transfer from an IRA (limited to the annual contribution amount) .
- Direct your HSA to open a brokerage account, buy real estate, precious metals, private equity, loans, and more.
|Exceptions to HSA Rule Limiting Other Health Insurance
You can have additional insurance that provides benefits only for the following items.
- Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property.
- A specific disease or illness.
- A fixed amount per day (or other period) of hospitalization.
You can also have coverage (whether provided through insurance or otherwise) for the following items.
- Dental care.
- Vision care.
- Long-term care.
For more detailed information, feel free to contact us or visit IRS.gov.