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The following information is being provided as a courtesy and does not constitute tax advice. We encourage you to speak with your tax advisor before opening a United Health Savings account. For additional information, you may also want to refer to the following IRS publications:
- Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans
- Publication 502: Medical and Dental Expenses
What is a Health Savings Account?
A Health Savings Account, also referred to as a HSA, is a tax-exempt trust or custodial account. Contributions to the account are tax deductible. Distributions are tax free if used for qualified medical expenses. This account must be used in conjunction with a High Deductible Health Plan.
What is a High Deductible Health Plan?
A High Deductible Health Plan (HDHP) has a higher annual deductible than typical health plans and has a maximum limit on the amount of annual deductible and out-of-pocket you must pay for covered expenses. For 2008, the annual deductible for single coverage must be at least $1,100 with a maximum of $5,600 for the deductible and out-of-pocket coverage. For family coverage the annual deductible must be at least $2,200 with a maximum of $11,200 for the deductible and out-of-pocket coverage.
How do I know if I have a HDHP?
Your insurance provider can confirm that your health coverage qualifies as a HDHP.
Am I eligible for a United Health Savings account?
You may be eligible for the United HSA if:
- You have a HDHP
- You have no other health coverage, except certain permitted coverage
- You are not enrolled in Medicare
- You cannot be claimed as a dependant on someone else’s tax return
Refer to the HSA Eligibility Checklist for additional information.
What other types of additional coverage are permitted?
The following coverage is permitted:
- Worker’s Comp, Tort, or property coverage
- Accidents
- Disability
- Dental Care
- Vision Care
- Long-term Care
Other coverage may be permitted. Refer to IRS publication 969 for additional information or contact your tax advisor.
What are the advantages of having a Health Savings Account?
Contributions to a Health savings account are tax deductible and qualified withdrawals are tax-free. In addition, the premiums for a High Deductible Health Plan are typically much lower than health plans with lower deductibles.
How much can I contribute to my United HSA?
Your contribution is limited to the maximum amount permitted by law. For 2008 you can not contribute more than $2,900 if you have single coverage or not more than $5,800 if you have family coverage. If you are age 55 or older, you are eligible to make an additional $900 in contributions.
How often do I have to contribute?
You can contribute as often as you like. We will accept contributions at all United Bank & Trust locations. You can also make your contributions by mail. We accept direct deposits from your employer. We can also make electronic transfers from your checking or savings account at United Bank & Trust or at any other financial institution. If you wish to make your contribution for a previous tax year, you will need to tell us at the time the deposit is made. Direct Deposits and other electronic deposits will always be received for the current tax year.
Can my employer contribute to my United HSA?
Yes, your employer may contribute to your United Health Savings. The total contributions for the year cannot exceed your contribution limit.
What if I do not use all of my contribution in a tax year?
One of the most appealing characteristics of a Health savings account is that you can continue to contribute as long as you remain an eligible individual. The account balance continues to grow tax free and remains tax-free as long as used for qualified medical expenses. An advantage of our United Health Savings account is the ability to transfer accumulated funds to an HSA Certificate of Deposit
Can my spouse and I open a United Health Savings account together?
No, the account must be held in an individual capacity. If you and your spouse are both eligible individuals, you can choose to open two accounts or open one in either name. If you open two accounts, you must decide how to split each year’s contributions. We do allow you to have an authorized signer on the account.
How do I access my United Health Savings account?
The United Health Savings account is just like a checking account. You can write checks, use your debit card, or pay bills online at ubankonline.com. You also can set-up one time and recurring ACH debits to the account.
What is considered a distribution?
Any amounts withdrawn from your account, with the exception of our service charges, will be considered a distribution. You and your tax advisor are responsible for determining if the distribution is for the payment or reimbursement of qualified medical expenses. Qualified medical expenses are explained in IRS Publication 502: Medical and Dental Expenses.
What expenses are considered qualified?
Qualified expenses include those expenses that are applied to the deductible of your High Deductible Health Plan. They also include expenses that may not be covered under your health plan such as: Dental expenses, prescription drugs, and physical therapy. Please review IRS Publication 502: Medical and Dental Expenses for additional information on the types of expenses that may be considered as a qualified expense.
Whose expenses will be considered as qualified?
Generally, the health savings account can be used to pay for expenses you pay for yourself, your spouse or a dependent member of the family. There are different rules for expenses of a dependent with multiple support agreements or for when your filing status is Married filing separately. Consult your tax professional for additional information.
What if I withdraw the funds for non-medical expenses?
If you withdraw funds for a non-medical expense, the amount withdrawn will be taxed as ordinary income. If you are under 65 and you withdraw funds for non-medical expenses, you may have to pay an additional penalty on the amount withdrawn. After the age of 65, you can withdraw unused funds penalty free but they will still be subject to income tax.
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