Solidarity’s Health Savings Account

Use your pre-tax dollars to pay for future medical expenses

A health savings account (HSA) is an account you can use to save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment.

A Health Savings Account (HSA) offers many benefits including tax advantages such as pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. HSAs offer long-term savings by allowing funds to roll over annually and serve as supplementary retirement savings. They provide control and flexibility since the account is owned by the individual, and can be invested for growth. HSAs cover a wide range of medical expenses, encourage cost-conscious healthcare decisions, and offer portability and convenience with adjustable contributions and easy payment options. These features make HSAs a valuable tool for managing both current and future healthcare costs.

2024 Guidelines

Minimum Deductible Amounts

  • $1,600 single plan
  • $3,200 family plan

Maximum out-of-pocket limits

  • $8,050 single plan
  • $16,100 family plan

HSA contribution limits

HSA members can contribute up to the annual maximum amount that is set by the IRS.

  • $4,150 single coverage
  • $8,300 family coverage

Catch-up contributions

Those 55 and older are allowed by the IRS to contribute an extra $1,000 to their annual maximum amount.

  • $5,150 single coverage
  • $9,300 family coverage

Prorated contribution limits

  • The IRS states that contribution limits must be prorated by the number of months one is eligible to contribute to a health savings account. Divide the contribution limit by 12 and contribute that amount.

FSA with grace period terms

  • A health FSA with a grace period may offer a period of up to 2 months and 15 days after the close of a plan year during which members can incur reimbursable expenses.  This 2-month-and-15-day grace period generally disqualifies those from contributing to an HSA until the first calendar month beginning after the grace period ends (e.g., April 1 in the case of a grace period beginning January 1 and ending March 15) unless the health FSA account balance is $0 at the end of the immediately prior plan year (e.g., as of the previous December 31 for a calendar-year plan), in which case such coverage can be disregarded and the individual is HSA-eligible during the grace period.

IRA to HSA rollover

  • HSA owners may make a one-time distribution of money from an IRA into an HSA. An individual may only do this if they are already eligible to have an HSA. Funds can only be rolled over once during a lifetime. The maximum rollover amount is the same as the annual HSA contribution limit for that year.

HSA Eligibility
To contribute to an HSA, you must be enrolled in an HSA-eligible health plan. For 2024, eligibility criteria include: A minimum annual deductible of $1,600 for self-only coverage and $3,200 for family coverage. An out-of-pocket maximum not exceeding $8,050 for self-only coverage and $16,100 for family coverage.
Additionally, you must:
Not be enrolled in any non-HSA-eligible plan, such as a full-purpose health care flexible spending account (FSA). Not be enrolled in Medicare. Not be claimed as a dependent on someone else’s tax return.
Contribution Deadlines
You generally have until the tax filing deadline (usually around April 15) to contribute to an HSA for the previous year.
Partial-Year Enrollment
If you are not enrolled in an HSA-eligible health plan for the entire year, you may only contribute a prorated amount. If covered by December 1, you may contribute the full year’s limit under the “last-month rule,” but you must stay enrolled in an HSA-eligible plan for the following year to avoid taxes and penalties on excess contributions.
Tax Penalties
HSAs offer tax benefits but also have penalties for overcontributions or using funds for ineligible expenses. Excess contributions incur a 6% excise tax each year until corrected. Ineligible expenses under age 65 result in a 20% penalty plus income tax; over age 65, only income tax applies.
Tax Benefits
• Pre-tax Contributions: Contributions to an HSA are made with pre-tax dollars, reducing your taxable income. • Tax-free Growth: The money in the HSA grows tax-free, meaning any interest or investment gains are not subject to taxes. • Tax-free Withdrawals: Withdrawals for qualified medical expenses are also tax-free, providing significant savings.
Long Term Savings
Rollover Funds: Unlike Flexible Spending Accounts (FSAs), the funds in an HSA roll over year to year, so you don't lose unspent money at the end of the year. Retirement Savings: After age 65, HSA funds can be used for non-medical expenses without penalty, though you will have to pay income tax on these withdrawals, similar to a traditional IRA. This feature makes HSAs a supplementary retirement savings vehicle
Control and Flexibility
Ownership: The HSA is owned by the individual, not the employer, which means you can keep it even if you change jobs or retire. Investment Options: Many HSAs offer investment options, allowing you to invest the funds in stocks, bonds, or mutual funds, potentially increasing the value of your account over time.
Coverage for a Wide Range of Medical Expenses:
Qualified Expenses: HSAs can be used to pay for a broad range of qualified medical expenses, including deductibles, copayments, prescriptions, dental and vision care, and some over-the-counter medications. Health Insurance Premiums: In certain situations, such as paying premiums for COBRA continuation coverage, long-term care insurance, or health coverage while receiving unemployment compensation, HSA funds can be used.
Encouragement of Cost-conscious Healthcare Decisions:
Consumer-driven Healthcare: Having an HSA encourages individuals to make more informed and cost-effective healthcare decisions since they are using their own money for medical expenses.
Portability and Convenience:
Portability: As the account owner, you retain your HSA regardless of employment status, providing consistent access to funds. Ease of Use: Many HSA providers offer debit cards or online payment options, making it easy to pay for qualified medical expenses directly from the account.
Contribution Flexibility
Adjustable Contributions: You can adjust your contribution amounts throughout the year, up to the annual limit, providing flexibility to manage your finances based on your current situation.

To open a Health Savings Account (HSA) with Solidarity, stop by one of our office locations or call 765-453-4020.

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