As an Employee Benefits Consultant, one of the biggest topics I discuss with my clients is the use of a high deductible plan and Health Savings Accounts (HSA). HSAs are tax-advantaged bank accounts that belong to you, the employee, and help you accumulate funds to pay for qualified medical expenses. There are many misconceptions about HSAs, so I thought I’d debunk a few of them for you today.
Myth #1: HSAs are “use it or lose it.”
Once the contribution is put into your account, it is yours to keep—forever. HSA funds are triple tax free: the money you put in is tax free, the money you take out for qualified expenses is tax free, and the investment gains are tax free. (Many employer HSA funds have investment options.) The funds do not expire after a year or after you leave your employer, which leads to me to my next point.
Myth #2: Your HSA goes away if you leave your job.
All HSAs are portable which means you can take your HSA with you when you leave your employer, for any reason, and you can continue to use the funds you’ve built up in your account.
Myth #3: You can only use the funds on yourself.
You can use the funds in your HSA to cover eligible expenses for your spouse or any dependents you claim on your tax returns.
Myth #4: HSAs can only be used for doctor’s visits.
HSAs are used for “qualified medical expenses.” Qualified medical expenses include, but are not limited to, medical care (deductibles & copays), dental care, vision care (eye exam, glasses, contact lenses), some over-the-counter medications (with a doctor’s prescription), Medicare Part B premiums, COBRA premiums, birth control, breast pumps, and qualified long-term care expenses. For a more complete listing, refer to IRS Publication 969.
Myth #5: There is not a limit on HSA contributions.
There are limits to what you can contribute each year. For 2019, the limits are $3,500 for individual coverage and $7,000 for family coverage. For individuals age 55 and older, you may contribute an additional $1,000 each year.
I hope I have clarified a few key points for you today so you can make a more informed decision about choosing the right plan for your family. If you have any questions, don’t hesitate to contact me at firstname.lastname@example.org or 423-318-5818.
*Strate Insurance Group does not provide tax, legal or accounting advice. This material has been prepared for educational purposes only, and it is not intended to provide, and should not be relied on, for tax, legal or accounting advice. The information provided is based on current tax law.