Monday, May 2, 2016

Common F.A.Q.’s About HSA's

It is safe to say that the age of the small deductible low-cost healthcare insurance plans are long gone. With the rise in premiums many companies and individuals are moving towards offering high deductible health plans (HDHP) in order to reduce their premium costs. A popular “incentive” offers to individuals opting for the HDHP are the health saving’s accounts (HSA). A HSA is a tax-advantaged medical savings account available in the United States who are enrolled in a HDHP. The funds contributed to an account are not subject to federal income tax at the time of deposit. The concept is that if you have to pay more out-of-pocket medical expenses due to HDHP, the HSA account can offer an easier way to adjust to those costs.

With more and more Americans moving towards HDHP and HSA’s every year there have been several misconceptions and questions that often arise regarding the accounts.

1. What are the benefits of HSA’s?

HSA’s allow individuals to make contributions to the account tax-free. The contributions made into the account remain there until you or an authorized party makes distribution of the funds. Interest or earnings on the account are tax-free also. HSA’s are portable, meaning that even in you leave your HDHP or your employer, you can take the account and the funds in it with you.

2. Can I move my HSA to another financial institution?

The good news is yea, any contributions that you or your employer has made into an HSA belong to you. That means that you control where the funds reside, as long as it is with an institution that handles HSA funds. According tot he U.S. Treasury Department, you have the power to move your HSA dollars to another HSA provider that offers lower fees or better service if you wish. That includes moving it to the company where you have a brokerage or investment account, if that company manages HSA.

3. Do I lose my funds that are remaining at the end of the plan year?

The funds contributed to your HSA can rollover into the next plan year. Earnings on the account are not considered income with held in the HSA. However, all withdrawals from the account must be for qualified medical expenses only. Every plan has different regulations regarding this and your plan administrator should provide you with guidelines regarding your specific plan.

4. Is there a penalty for using HSA funds for non-qualified expenses?

Yes, there is an additional 20% tax not he part of any distributions not used for qualified medical expenses. You will also need to calculate your tax payment on specific forms with your federal tax return. So make sure you know what expenses are allowed to avoid this step tax penalty.

According to, your records must show:

a. the distributions were exclusively to pay or reimburse qualified medical expenses

b. the qualified medical expenses have not been previously paid by individual or the insurance company

c. the medical expenses had not been taken as an itemized deduction in any tax year.

It is recommended to make yourself fully aware of all regulations regarding your specific HSA account. As always, urBook$ wishes to provide you with information that eases your expense as a business owner and individual. Contact urBook$ today to begin experiencing the urBook$ difference with your bookkeeping, bill pay and payroll.