Job change: Money in the account is the employee's, even if he or she changes jobs.
Pay for eligible expenses: Funds are usable for qualified medical expenses. Using the funds for non-qualified expenses is taxable with a 20 percent penalty (exceptions: beneficiary's death, disability or reaching age 65). Employees are responsible for knowing what constitutes a qualified medical expense. Funds are also usable for qualified medical expenses of a employee's spouse and dependents.
Money rolls over year to year: Money in an HSA is not forfeited at year-end — it continues to earn interest tax-deferred.
Anyone can contribute to an HSA: An employer, employee (even if he or she is no longer with the company and unemployed or self-employed) or any other person can contribute to an HSA.. Contributions (up to maximum yearly allowance) are 100 percent tax-deductible.
Maximum contributions (for 2011): $3,050 for individuals with self-coverage, $6,150 for families; catch-up contributions are available for individuals 55 and older.
The employee is responsible for being aware of contribution limits.
Excess contributions incur an excise tax for each taxable year.
Excess money removed before tax deadline is treated as taxable income but avoids the excise tax.
Reporting: Contributions must be reported on the employee's W-2 Form, and contributions must be comparable for all employees (same dollar amount or percentage of deductible).
Deductible: Once met, the health plan starts paying. No claims are paid until the entire family deductible is satisfied. No fixed-dollar copayments. Preventive care is one exception to these guidelines. (See below.)
Minimum deductible (2011) is $1,200 for individuals and $2,400 for families
Out-of-pocket maximums (2011): $5,950 for individuals and $11,900 for families
Robust incentives: You may contribute funds as an incentive for employees meeting certain criteria such as wellness goals (e.g., completing a smoking cessation program, completing a health assessment).
IRA rollovers: A direct trustee-to-trustee transfer is allowed once per lifetime, limited to the maximum HSA yearly contribution. In addition, the employee must maintain a high-deductible health plan for 13 months after the transfer or incur a tax penalty.
Healthy Blue HSA debit cards: Visa® debit cards are available to employees for qualified medical expenses.
Retirees: After an employee turns 65, the HSA may be used for the following:
Payment of eligible medical expenses until enrolled in Medicare.
Payment of eligible expenses and premiums for Medicare Part A and B, Medicare HMO, retiree premiums and non-medical expenses (which are taxed at normal rate).
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