Seven benefits of having a Health Savings Account
There are many options available to help pay for health care costs, but among one of the best options is a health savings account (HSA). In order to qualify to open an HSA, you must be enrolled in a qualifying high-deductible health plan (HDHP) that meets the following minimum annual deductible, maximum annual deductible and other out-of-pocket expenses for HDHPs:
2016 Minimum annual deductible:
Individual coverage - $1,300
Family coverage - $2,600
2016 Maximum annual deductible and other out-of-pocket expenses (does not apply to out-of-network services if the plan uses a network of providers):
Individual coverage - $6,550
Family coverage - $13,100
If you have a qualifying HDHP, below are six benefits of having a HSA:
1. You own the HSA account. Even if your employer contributes to your HSA and you leave the company or retire, the money is yours to take with you.
2. The HSA account balance gets carried over year after year, unlike flexible spending accounts or health reimbursement accounts that must be used within the same year. This is good news because you have the opportunity to grow your account balance each year.
3. You have the flexibility to decide how much money to put into the account. There are limits to how much you can contribute each year, which is set by the Internal Revenue Service. The numbers below are maximum contribution levels from the employer and employee combined:
• Individuals - up to $3,350
• Families - up to $6,750
• HSA holders 55 and older can save an extra $1,000
4. You don't pay taxes on the money you put into your HSA, and you're not taxed on the money as long as it's used for qualified medical expenses.
5. An HSA is a great way to save for health care costs you may encounter down the road, like once you're retired. It's never too early to start saving. If you don't end up needing the money for qualifying health care expenses in the future, you have the following options:
• You can withdraw funds for nonmedical expenses before the age of 65, but you'll have to pay taxes on the money in addition to a 20 percent penalty.
• You can take money out after you turn 65 for nonmedical expenses, but you'll just have to pay taxes on the money but will incur no penalty.
6. Interest accrued in the HSA in tax-free.
7. If you have a HDHP and a HSA, and you switch to a different plan in the future that is not a HDHP, you can still use the money in the account for qualified medical expenses.
If you're in a HDHP, it's worth looking into an HSA for its many benefits. To learn more about reimbursement accounts, visit the Independent Health website. If you're interested in opening an HSA, many local banks, credit unions, insurance companies, and IRS-approved entities are generally the best places to look for an HSA custodian.