Health SAVINGS ACCOUNT
A Health Savings Account is a tax advantaged account that allows employees covered under HSA eligible high-deductible health plans (HDHPs) to save for medical expenses not paid for by the health insurance. Contributions can be made by either the employee or the employer, but are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified out-of-pocket medical expenses, such as the deductible. After age 65 funds can be used tax-free to pay for qualified expenses, including Medicare Supplement Premiums. Funds can also be withdrawn at ordinary income tax rates, similar to a 401k or IRA.
Annual Contribution Limitation – For Calendar year 2020 under IRS 223(b)(2)(A) individuals with self-only coverage under a HDHP is $3,550 and family coverage under a HDHP is $7,100.
High Deductible Health Plan – For calendar year 2020, a “high deductible health plan” is defined under IRS 223(c)(2)(A) as a health plan with an annual deductible that is at least $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,900 for self-only coverage or $13,800 for family coverage.
HSA Catch-up Contributions (age 55 or older) for 2020 is $1,000.