Health Savings Accounts (HSAs) are linked to high-deductible health insurance plans, yet they offer freedom of choice, as well as the potential for savings for participants. The plans are designed to pay for qualified medical expenses of account holders and their families while offering them some tax advantages. In these high-deductible plans, individuals lock in a lower insurance rate but have to pay more out-of-pocket before the insurance benefits kick in.
Health Savings Accounts allow participants to set aside money for health expenses while earning interest on the money via a variety of investment vehicles within the plan. In calendar year 2016, an individual’s annual limitation on contributions with self-coverage is $3,350, per IRS guidance. For a family, the annual contribution limit is $6,750. Per the IRS, contributions above this level are taxed as gross income. Participants are able to rollover unused funds from year-to-year.
According to the IRS, a health plan that is “high deductible” has an annual deductible of $1,300 for an individual and $2,600 for a family. Out-of-pocket expenses – expenses not including premiums — can’t exceed $6,550 for an individual or $13,100 for a family.
Individuals can use HSA funds on a variety of qualified medical expenses, including prescription drugs, long-term care, preventive dental treatment and treatment of dental disease, operations and annual physical exams, among other costs.
The HSA can be a benefit for firms and workers alike. For employers, the employee HSA deduction can lower their payroll tax burden. For employees, it creates options —and some unique ways to spend their health care dollars.
Talk to a Plexus Groupe professional to find out about HSAs by calling us at 847.307.6100 (Chicago) or 972-770-5010 (Dallas/Oklahoma City), or contact us via the Web at plexusgroupe.com.
Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans. Department of the Treasury. Internal Revenue Service.
Publication 502: Medical and Dental Expenses. Department of the Treasury. Internal Revenue Service.
