HSA Frequently Asked Questions

Q. What is an HSA?

A.  The Aetna Medical Plans have two parts: A High Deductible Health Plan (HDHP) and the actual Health Savings Account that the plan was named after.

1. An HDHP is a health insurance plan that requires you to pay a deductible before the plan will start paying benefits.
2. Health Savings Accounts give you the ability to use pre-tax dollars to pay for out-of-pocket expenses for the HDHP. Your contributions to the savings account lower your taxable income in the same way your premium contributions do. Health Savings Accounts must be used in conjunction with a HDHP (you are not eligible to open an HSA with Inspira Financial unless you enroll in one of the Aetna Medical Plans).

Q. How does my savings account work?

A. If you elect to enroll in the HSA Plan, Wiss will contribute 50% of your in-network deductible into the account ($1,250 for single coverage and $2,500 for family coverage). This funding from Wiss will be divided up in accordance with your pay periods. You can make contributions to your savings account up to the IRS Maximum through payroll deductions. The IRS maximum contribution and catch-up limits are shown in sidebar table at right.

Q. What expenses can I pay for with my HSA?

A. Your HSA can be used to pay for most “qualified expenses” as defined by IRS Code 213(d), including expenses you incur before you satisfy the deductible and the coinsurance required by your medical plan. Your HSA funds can also be used to pay for dental and vision expenses, COBRA premiums, as well as retiree medical expenses. Your HSA cannot be used to pay for health insurance premiums, unless you are receiving federal unemployment compensation.

For a complete list of IRS-allowable expenses, you can request a copy of IRS Publication 502 by calling 1-800-829-3676, or visit the IRS Web site at www.irs.gov  and click on “Forms and Publications.”

Q. Are my HSA savings FDIC insured?

A. Yes, but only if they are deposited in a bank savings account. Investments in mutual funds are not protected by FDIC insurance.

Q. What happens to any remaining money in my HSA at the end of the year?

A. Unlike Flexible Spending Accounts, there is no “use-it-or-lose-it” rule. The money remains in your account to earn interest and is available for use in subsequent years.

Q. Do I have to fund my HSA every year?

A. You are not required to fund your savings account. However, it is a good idea to contribute to your HSA every year. This will lower your taxes and help you build larger savings for future health care expenses. You can also opt to use any available rollover funds toward covered expenses. Wiss will contribute to your account whether or not you decide to contribute.

Q. What happens if I leave my health plan or job?

A. You own your account, so you keep your HSA, even if you change health plans or jobs. If you are no longer enrolled in a high deductible health plan, you are not eligible to make new contributions to your HSA, but you can continue to withdraw funds for qualified expenses.

Q. Do I have to pay income tax on money in my HSA?

A. Post-tax contributions that you make are deductible on your federal income tax return. Contributions made through payroll deductions are pre-tax and are not included in your taxable income. You pay income tax only if you use funds for non-qualified purposes* or make contributions in excess of your maximum annual limit.

Q. How does the state tax treatment of HSAs differ from federal tax treatment?

A. HSAs (and the legislation that created them) are federal. As a federal program, each state can decide whether to comply with the federal guidelines regarding the tax treatment of HSAs, or establish their own rules. As a result, some income that may be tax-free at the federal level may not be tax-free at the state level.

Nearly all states now conform to the Federal Internal Revenue Code for HSA purposes. However, there are still three states that do not accept or follow the federal tax treatment for HSAs. New Jersey is one of these states where your HSA contributions are exempt from federal income tax but are not exempt from state taxes.

In addition, New Hampshire and Tennessee do not tax income on the state level, but they do tax dividends and interest. Consequently, individuals from these states may have to pay taxes on any interest or dividends earned in their HSA.

IMPORTANT: State tax law is subject to change at any time. This information is provided as a guide only and you should consult with your tax advisor regarding the tax treatment of HSA participation as it relates to your specific situation.

* A 20% penalty is also assessed on non-qualified purchases.