HSA - Health Savings Account

A health savings account (HSA) is a tax-advantaged investment account you can contribute to if you have a high-deductible health insurance plan (HDHP).

An HSA can be opened on your behalf by your employer or you can open one on your own and make contributions to it.

There is no requirement to withdraw funds at any point.

Funds can be withdrawn tax-free at any age to cover qualifying medical expenses.

Unused funds, if any, are carried over, without limit, and may be invested. The income within the HSA account is income tax free.

How Does an HSA Work?

Eligibility

You may be eligible to open and contribute to an HSA if you meet the following requirements.

You are enrolled in a High Deductible Health Plan (HDHP) as of the first of the month; and
You have NOT received medical coverage under a non-qualified HDHP (including Medicare Part A or B); and
You are not someone else's legal (tax) dependent

The HSA financial institution may have additional requirements to comply with banking rules, which may delay the date your account is considered ‘open’. Your HSA cannot be used for health care expenses incurred before the date the HSA is opened.

HSA unused funds, if any, are carried over WITHOUT LIMIT and may be invested.

The income from this investment is income tax-free

Examples of Qualified Expenses

Acupuncture
Any expense covered by your health, dental, or vision plan
Artificial limbs, prostheses, orthopedic shoes, dentures or teeth
Car, equipment, home improvements to assist with a disability
Chiropractic care
Contact lenses, cleaning solutions, eyeglasses & laser eye surgery
Diagnostic devices (blood sugar test kits)
Disabled dependent care
Equipment for the hearing impaired
Fertility enhancement or sterilization
Guide dog or assistance animal

Hearing aids & batteries
Home health care
Insurance premiums (if receiving unemployment)
Lead paint removal
Legal fees related to mental illness treatment
Lodging (away from home care) or transportation for medical care
Long-term care premiums, long-term or nursing home care
Over the counter medications
Psychiatric, psychiatrist, or psychologist Care
Special home or school costs for mentally or physically challenged
Stop-smoking programs (physician prescribed)
Therapy
Weight loss programs to treat an existing disease

You cannot replicate the value of pre-taxing payroll deductions outside of work. Below is a good example of how pre-taxing benefits/deferrals from your paycheck are good for your bank account.

Pre-Tax @ Work

Saving money is good - saving tax money is even better. Pre-tax benefits can provide you with tax savings by allowing you to pay for your eligible expenses with tax-free dollars. We offer various ways for you to convert taxable dollars into tax free dollars to help you save money.

The IRS Section 125 refers to these plans as ‘Premium Only’ or ‘Cafeteria Plans’ (which includes Flexible Spending Accounts’ (FSAs). Cynet sponsors a pre-tax plan that allows you to pre-tax the cost/ deferrals for the following benefits by payroll deduction as follows:

Health plan premiums
Dental plan premiums
Vision plan premiums
Health Savings Account deferrals

Contribution Limits

The contribution limit (all sources) is based on your Qualified High Deductible Health (QHDHP or HDHP) plan enrollment and is determined each calendar year by the IRS.

Current HSA contribution limits are (including all sources) are as follow

Your QHDHP Option 3 Health Plan Coverage	2024 Contribution Limits
Employee Only	$4,150
Employee + Dependents	$8,300
Age 55+	Additional $1,000

Contribution Notes

You may not have to be in an HSA all year long to contribute the maximum annually. However, suppose you are not able to contribute (‘HSA-eligible’) as of December 1. In that case, you must pro-rate your annual contribution to reflect the number of months during which you were HSA-eligible as of the first day of the month.

As well, for deductibility purposes, the IRS requires a testing period in which the account holder must maintain HSA eligibility for at least 13 months to receive a full deduction.

Participating employees can set up or change deductions at https://access.paylocity.com. Once your account is set up, you can pay bills with your HSA Debit Card.

For more details, please visit: https://www.irs.gov/publications/p969