Health Savings Account (HSA)
A health savings account (HSA) is a tax-exempt trust or custodial bank account that you set up with a qualified HSA trustee (bank) to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
What are the benefits of an HSA?
You may enjoy several benefits from having an HSA:
- You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
- Contributions to your HSA made by your employer may be excluded from your gross income.
- The contributions remain in your account from year to year until you use them.
- The interest or other earnings on the assets in the account are tax free.
- Distributions may be tax free if you use the funds to pay qualified medical expenses.
- An HSA's "portable" so it stays with you if you change employers or leave the work force.
Qualifying for an HSA?
- To be an eligible individual and qualify for an HSA, you must meet the following requirements:
- You must be covered under a high deductible health plan (HDHP) on the first day of the month.
- You have no other first dollar health care coverage except what is permitted under
"other health coverage". Other health care insurance that is permitted includes:
Specific injury or accident insurance, disability, dental care, vision care, or long-term care insurance.
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else's prior year tax return.
- You cannot participate in the HSA if you are a Veteran and have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last 3 months.
When you contribute to an HSA, MSU will help your savings grow faster by contributing dollars too. For 2015, MSU will contribute $350.40 annually for single coverage and $650.40 annually for family coverage when biweekly-paid employees contribute $5 or more per pay period to their account and monthly-paid employees contribute $11 or more per pay period to their account. Murray State University's contribution includes a $15.00 initial set-up fee and a $2.95 monthly fee. Employee contributions can be stopped, started or changed at the beginning of each quarter, provided 15-days advance notice is sent to HR.
All contributions you make to the HSA account are tax-free. Under federal government rules, you can contribute in 2015 up to $3,350 for single coverage, $6,650 for family coverage, plus an additional $1,000 for those 55 years and older in 2015. MSU's contributions count toward the account's annual limit. Partial year tax rules also apply.