Quick Answers to 10 Top HSA Questions
April 5, 2018
The popularity of Health Savings Accounts (HSA) continues to soar, according to a report by Devenir. That means there are a lot of participants who are new to this type of account. So, if you have questions, you’re probably not alone. Below, we’ve provided answers to common questions.
How does an HSA work and what are the tax advantages?
An HSA is an individually-owned account that has a triple-tax advantage for you. Your contributions, withdrawals for eligible expenses and earnings on interest or investments are all tax-free.
What is the HSA contribution limit?
The 2020 contribution limits, as determined by the IRS, are $3,550 for self and $7,100 for family.
What can I buy with my HSA?
Qualified expenses are determined by the IRS and include a wide variety of products and services, including prescription medication, copays and lab fees. To find out if an expense is eligible, check out our interactive eligible expense list.
When can I make contribution changes?
You can change the amount you contribute to your account at any time during the plan year.
Can I have a Flexible Spending Account (FSA) at the same time?
You can enroll in certain types of FSA while you’re enrolled in a Health Savings Account, including a Limited Purpose FSA and a Dependent Care FSA. A Limited FSA covers eligible vision, dental and preventive expenses, while a Dependent Care FSA covers daycare expenses for children under age 13 or a disabled spouse/dependent. However, you can’t enroll in a Health Savings Account and a Medical FSA at the same time.
What's the difference between these two types of accounts?
Both accounts can help you save on eligible expenses, but they’re very different. The biggest difference? An FSA is governed by the use-it-or-lose-it rule, which means FSA funds must be spent by the end of the plan year. HSA rollover rules are different. All Health Savings Account funds can roll over from year to year.
How do catch-up contributions work?
If you’re at least 55 years old, you can contribute an additional $1,000 to your account. That means someone age 55 or older can set aside as much as $4,550 for self or $8,100 for family in 2020.
How does the account work when I enroll in Medicare?
Once you enroll in Medicare, you can no longer contribute to a Health Savings Account. However, you’ll still be able to spend your existing funds while on Medicare.
How can I grow my funds?
Investing Health Savings Account funds has become a staple in retirement planning. Its funds can be invested, like you would with 401(k) or IRA funds. Earnings from investments are not taxed.
How does having an account impact my tax filing?
Your W-2 shows pre-tax payroll contributions made to your account (a 5498-SA shows all contributions). A 1099-SA shows any distributions from the account. For tips on filing taxes related to your account, check out our blog post.
Are you looking for more tools and resources? Check out our employee resource center.
The blog post was updated in January 2020.