Your tax-favored HSA has some federal stipulations such as eligibility guidelines and annual contribution limits.
*Must not have any other first dollar health insurance coverage before the deductible is met. Preventative care services are not required to be subject to the deductible. Individuals may also carry separate coverage for accidents, disability, dental or vision care and long term care, not subject to the deductible.
**Limited purpose flexible spending accounts are allowed for Vision, Dental or Dependent Care.
If you choose an HDHP, the following are the minimum deductibles and maximum out of pocket amounts for High Deductible Health Plans for 2017 and 2018. These amounts are determined annually.
Contributions are allowed up to the maximum limits determined annually. Here are the maximum annual HSA contribution limits for 2017 and 2018:
Upon death, your HSA account ownership may transfer to your spouse on a tax-free basis, and the account will still be subject to all HSA guidelines and requirements, simply with your spouse as the new owner. If the account is transferred to any other individual than a spouse as the beneficiary, the account will be treated as taxable income.
For further information please refer to IRS Publication 502 for information on Eligible HSA Expenses and IRS Publication 969 for General HSA Information, or consult your tax advisor.
These limits apply even for participants entering the plan mid-year.* Prior year contributions may be made through April 15th of the following year.
An individual age 55 and over may make an additional “catch-up” contribution. A married couple can make two catch-up contributions as long as both spouses are eligible and at least 55 years of age. The catch-up contribution for the spouse must be placed in a separate HSA in their name.
Individuals, family members and employers may make contributions. Contributions from all sources must not exceed that person’s contribution limit for that calendar year. Contributions made by individuals and family members are tax deductible for the account owner even if the account owner does not itemize. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers are allowed to offer HSAs through a cafeteria plan.
Individuals are allowed to make a one-time contribution to an HSA from an IRA or Roth IRA, tax-free. The amount transferred counts as part of that individual’s maximum contribution limit for that calendar year. Both accounts must be in the same person’s name. The transferred amount may be subject to an IRS testing period if the individual does not remain an eligible individual from the month the contribution is made through the last day of the 12th month following that month.
Investment earnings accrue tax-free
*If you make the full-year contribution for a year in which your HDHP takes effect later than January 1st, you may be subject to an IRS Testing Period and could owe tax and a penalty on part of that contribution if you do not remain an eligible individual through December 31st the following year. You may also need to pro-rate your contribution if you drop or reduce the level of your coverage mid-year.