Health Savings Accounts
Q1. What is a Health Savings Account (HSA)?
HSAs are individual savings accounts designed to pay for qualified medical expenses of a participant (plus spouse and dependents) in a high-deductible health plan. An HSA plan has two components
- A qualified high-deductible health insurance plan
- An individual tax-exempt trust (savings/investments)
The savings account is designed to pay for routine medical expenses/and or provide savings for the future. Money put into the account can be used either during the year or accumulated in the account. Allowable medical expenses are defined by the IRS and are much broader than most insurance carriers (i.e. includes dental, vision).
- HSA premiums are lower than other fully insured plans with copayments.
- By allowing individuals to keep any unused money in the HSA, the government reintroduces the consumer into the health insurance equation; creating an incentive to check bills, compare costs, and evaluate urgency/frequency of appointments.
Q2. Who is eligible for a Health Savings Account?
Members enrolled in the $1,800 Deductible Health Plan may set up an HSA. In addition, individuals cannot be:
- covered by a health plan that is not a qualified high-Deductible Health Plan (dual coverage).
- a dependent on someone else’s tax return.
- entitled to Medicare benefits (age 65 or older).
HSA rules are determined at the federal level. Individuals may be eligible under state guidelines (domestic partners, civil unions, etc.) for qualified health insurance coverage, but not eligible to open the savings account portion of the plan.
Q3. How do I set up an HSA?
As a health plan member enrolled in the $1,800 Deductible Health Plan, you have two options for setting up an HSA.
- You may set up pre-tax payroll contributions up to $3,050 employee only or $6,350 family for FY16 by establishing your HSA with First National Bank in Pierre.
Please contact Gina Schuetzle at firstname.lastname@example.org 605.945.3927 for more information.
Note: This option is not available for Regent employees.
With this option, contributions into your HSA are made after-tax. When you file your taxes, you will receive a tax credit for contributions you make throughout the year.
After establishing your HSA, complete the HSA form and then either print the form and fax to 605.773.6840 or mail to:
500 E Capitol Avenue
Pierre, SD 57501
Q4. Does the State contribute to my HSA?
Yes. As an active employee,
if you enrolled in the $1,800 Deductible Health Plan during FY16 annual enrollment and establish an HSA, the State will contribute $300. You can use this money to pay deductibles and coinsurance under the plan or save it for future use-such as for health care expenses incurred during a future plan year or for retiree medical expenses.
Q5. How do I receive the $300 contribution from the State?
Each year members must submit a Health Savings Account Form or account verification to receive the State contribution. The form may be found by visiting http://www.benefits.sd.gov. click Active Employee, scroll over Forms/Documents, click Forms/Documents, and then click Health Savings Account Form.
Q6. How much can I contribute to my HSA?
Contribution amounts are indexed annually at the Federal level. Maximum contribution amounts from all sources are:
2015 calendar year
- $3,350 (single coverage)
- $6,650 (family coverage)
Q7. Am I able to make "catch-up" contributions to my HSA?
Yes. For individuals age 55 or older, additional "catch-up" contributions of $1,000 are allowed. Contributions must stop once an individual is enrolled in any type of Medicare.
Q8. How do I use the HSA?
You may use your HSA to help fund your deductible. Using your HSA dollars toward your deductible is optional. You can choose to pay your deductible out-of-pocket and save your HSA money for future medical needs.
Q9. Can unused amounts in the Health Savings Account be carried over to the next year?
Yes. You may use your Health Savings Account for future eligible medical expenses if you do not deplete your HSA during the plan year.
Q10. Are there tax advantages for using a Health Savings Account?
Yes. You get triple tax benefits with tax-free growth, tax-free withdrawals, and tax credits to pay for out-of-pocket health care expenses
Q11. Can I take my Health Savings Account balance with me when I leave employment with the State?
Yes. You can take your account balance with you if you leave employment with the State.
Q12. Where can I find more information about HSA’s?
Q13. What types of medical services can be used to reimburse myself?
An HSA lets you set aside money for medical, dental, and vision expenses on a pretax basis. IRS Publication 502 has a checklist of expenses that can be itemized. Most of these expenses qualify for tax-free withdrawal from an HSA, unless the expenses were reimbursed by your health care coverage. One expense that cannot be reimbursed from an HSA is the premium for most health care plans.
To order IRS Publication 502, call 1-800-TAX-FORM or you may view the list by visiting http://www.irs.gov/pub/irs-pdf/p502.pdf.