Health Savings Accounts (HSAs) Designed to assist consumers who have a high-deductible health care plan and to secure dollars for use in paying qualified medical expenses. The Health Savings Account (HSA) is a versatile savings account designed to assist consumers who have a high-deductible health care plan and to secure dollars for use in paying qualified medical expenses. The HSA focuses on both near and long term accumulation of dollars to pay for immediate expenses, but future expenses later in life. HSA owners can take advantage of the Triple Tax Benefit of the HSA. Eligibility information and contribution limits can be found on the IRS.gov website. Triple Tax Benefit1 By opening an HSA and establishing Day 12, it allows the HSA owner to benefit from Tax deferred contributions made directly and/or through payroll deduction, reducing overall taxable income for the year the contribution is made. Earnings on the contributions grow tax-deferred. Distributions on qualified medical expenses incurred after Day 1 shift both contributions and earnings to a tax-exempt basis. The key benefit of the HSA is that unlike a flexible savings account (FSA) offered through many employer benefit plans, unused contributions can be carried over year after year and do not face the “use-it-or lose-it” rule. Multiple Contribution Options Employer: An employer has the option to make a contribution on behalf of their employees. Employer contributions can provide a jump start for offsetting annual deductibles and building success in using the HSA. Employee Payroll Contribution: Employers may provide the ability for employees to defer payroll dollars to an HSA. These contributions are tax-deferred for the employee and assist in developing a consistent accumulation of HSA dollars for future use against health care expenses. Direct Contribution: HSA owners also have the ability to make HSA contributions directly to their HSA outside of payroll contributions. These contributions are tax deductible and provide a key flexible method for setting additional dollars aside to cover medical expenses at any point in the future. The HSA can benefit from any combination of these contribution types in a given tax year as long as the aggregate total from all three types does not exceed the Self-Only or Family contribution limits based on the type of high deductible health plan (HDHP) the HSA owner is covered by. Using Your HSA Dollars Accumulated HSA dollars can be used on a tax-exempt basis to cover any qualified medical expense for the HSA owner, their spouses and dependents. Payments for qualified medical expenses can also cover those same individuals even if they are not covered by the HDHP plan of the HSA owner. After Age 65 After age 65, the list of qualified medical expenses increases to include such items as long-term care expenses, payment of Medicare premiums and others. In addition, HSA owners can also take a distribution for non-medical expenses. These expenses result in the amount withdrawn to be included in taxable income (similar to a Traditional IRA), but do not face an IRS penalty.3 Expense Reimbursement for Out-Of-Pocket Payments after Day 1 One of the key benefits of the HSA is the ability to reimburse yourself for the expenses from the HSA at any time in future and still qualify for tax-exempt withdrawals. Once the HSA is established, an HSA owner may elect to pay qualified medical expenses directly (out-of-pocket) in order to save HSA dollars for larger future needs. These reimbursements can be for any expenses incurred after Day 1 and paid out-of-pocket and can accumulate over time. Make sure to save your receipts as evidence of direct payment. Learn More About HSAs The HSA is a key tool to help cover medical expenses (including vision and dental) for you and your family. Lisa Wolff Senior Vice President, Director Premier and Private Client Services 913.998.7044 Get VCard Read Bio Lisa Wolff Senior Vice President, Director Premier and Private Client Services Lisa Wolff is passionate about the Private Client experience. She is dedicated to building a true partnership with her clients by understanding their individual needs and providing proactive solutions. Lisa has been with NBH Bank since January 2018 and is responsible for the coordination of the Bank’s Private Client experience that serves high-net-worth clients. Lisa has more than 10 years of experience in banking and financial services with national firms such as US Bank and CBIZ Financial Services, serving many roles in private and personal banking, commercial lending, sales, marketing and management. She is involved in organizations throughout the community such as United Way, Samaritan’s Purse and Shelter KC. 1Please consult your tax professional. 2Day 1 – Day 1 is defined as the first day when the first HSA is established. Medical expenses may only be qualified if they occur after Day 1 and meet the IRS definition of a qualified medical expense (See IRS Publication 502). 3HSA distributions taken before age 65 and used for non-qualified medical expenses are included as ordinary income and subject to a 20% IRS penalty for the amount of the distribution.
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