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Health Savings Accounts
The information provided in this section refers to health savings accounts in general and is designed for all audiences. For specific information on the CU HSA for benefits-eligible employees in the high-deductible health plan, follow the link at the bottom of the page.
What are they?
A health savings account (HSA) is an account that must be paired with a high-deductible health plan and can be used for qualified medical expenses, like a doctor's visit or prescription drugs.
The money you put into an HSA rolls over from year to year. This is unlike a flexible spending account, where the money is sometimes subject to a "use-it-or-lose-it" rule each year.
Many HSAs come with a debit card or checks that you use to access the funds.
HSAs are funded with your pre-tax dollars. That is, you are not subject to income tax on them.
Who can open an HSA?
Health savings accounts go hand-in-hand with high-deductible health plans.
- You can't open an HSA unless you have a qualifying high-deductible plan.
- If you have a qualifying high-deductible plan, you can consider opening an HSA.
What are the rules?
There is a yearly maximum that you can contribute specified by the IRS.
You can't use HSA funds for over-the-counter medications (e.g., aspirin) unless prescribed by a doctor.
How can I fund my HSA?
Many people choose to make monthly contributions. Since high-deductible health plans have lower monthly premiums than traditional insurance, many people choose to take the difference and contribute it to their HSA.
If your employer offers an HSA, you may be able to contribute via a payroll deduction.
If you have an individual retirement account (IRA), you can do a one-time rollover into an HSA, up to the yearly contribution maximum.
How do I open an HSA?
If your employer does not offer an HSA, there are several options. You can
- ask your banking institution if it offers HSAs.
- check with your retirement or other financial services firm to see if it offers HSAs.
- search for an HSA provider online.
What else do I need to know?
It pays to shop around. You'll want to ask about:
- annual (or monthly) fees
- minimum balances
- whether the account is federally insured
- interest rates
- other investment options
HSA accounts held at for-profit institutions generally aren't free. There will usually be a yearly (or monthly) administrative cost associated with the account, just like any other financial account. Credit unions may have lower fees or no fees.
Some accounts require you to carry a minimum balance, or a fee will apply.
If you want to guarantee the value of your account never decreases (other than from your withdrawals), check that it is federally-insured (FDIC or NCUAIF). These types of accounts will typically pay you interest, like other types of savings accounts. It pays to shop around to compare interest rates.
Some HSA providers will allow you to invest the money in mutual funds or other financial instruments. Know that if you invest the money, it could go up in value, or you could lose the money. Such accounts are not federally insured.
Where can I find more information?
The U.S. Department of the Treasury has additional information on HSAs, including yearly contribution limits, links to tax information and a toll-free number you can call with your HSA questions.