Your tax-favored HSA has some federal stipulations such as eligibility guidelines and annual contribution limits.
Are you Eligible?
Must be currently enrolled in an HSA-qualified health plan
May not be enrolled in any other non-HSA qualified health insurance plan*
May not have, or be eligible to use, a general purpose flexible spending account (FSA)**
Cannot be claimed as a dependent on another person’s tax return
May not be enrolled in Medicare, Medicaid or Tricare
Must not have used VA benefits for anything other than preventative services in the past three months unless receiving benefits for a service related injury or illness.
*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.
HDHP Limits
If you choose an HDHP, the following are the minimum deductibles and maximum out of pocket amounts for High Deductible Health Plans for 2019 and 2020. These amounts are determined annually.
Minimum Deductible
Maximum Out-of-Pocket
2020
Individual
$1,400
$6,900
Family
$2,800
$13,800
2019
Individual
$1,350
$6,750
Family
$2,700
$13,500
2020 Minimum Deductible
Individual
$1,400
Family
$2,800
2020 Maximum Out-of-Pocket
Individual
$6,900
Family
$13,800
2019 Minimum Deductible
Individual
$1,350
Family
$2,700
2019 Maximum Out-of-Pocket
Individual
$6,750
Family
$13,500
HSA Contribution Maximums
Contributions are allowed up to the maximum limits determined annually. Here are the maximum annual HSA contribution limits for 2019 and 2020:
2020
Individual (Self Only) Family (Self + at least one other person) Catch-Up (55 years of
age or older)
$3,550 $7,100 $1,000
2019
Individual (Self Only) Family (Self + at least one other person) Catch-Up (55 years of
age or older)
$3,500 $7,000 $1,000
2020
Individual (Self Only)
$3,550
Family (Self + at least one other person)
$7,100
Catch Up (Age 55 or older)
$1,000
2019
Individual (Self Only)
$3,500
Family (Self + at least one other person)
$7,000
Catch Up (Age 55 or older)
$1,000
Distributions
You, or an authorized signer, can make withdrawals (or distributions) for qualified expenses.
Distributions from your HSA can be made by check, debit card, ATM, online bill payment or by in-person request.
Distributions for qualified medical expenses are tax free.
Distributions made for anything other than qualified medical expenses are subject to IRS tax plus a 20% penalty. The penalty is waived if the account owner is 65 or older, or due to death or disability.
Qualified medical expenses for your spouse and your tax dependents may be paid from your HSA, even if those individuals are not covered under your high-deductible health plan (HDHP).
You’re responsible for keeping receipts for all distributions from your HSA. The bank does not monitor how the funds are spent.
Treatment at Death
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.
Further Information
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.
