Savings Accounts

You are eligible to establish an HSA in any month if you:

• Are covered by a High Deductible Health Plan (HDHP) on the first day of the month
• Are not enrolled in Medicare
• Are not covered under another insurance plan that is not an HDHP
• Are not claimed as a dependent on another individual's tax return

What is a High Deductible Health Plan (HDHP)?

A High Deductible Health Plan (HDHP) is a less expensive health insurance plan that generally doesn't pay for the first several thousand dollars of health care expenses (i.e., your deductible) but will generally cover you after that. The Treasury Department and IRS set minimum deductible amounts for HDHPs. For more details on these deductible amounts, contact your insurance agent or tax professional. The deductible amounts are also available at www.treas.gov.

What are the tax benefits and regulations?

Contributions to the HSAs are tax deductible at the federal level. Money that is withdrawn to pay for qualified medical expenses is not subject to tax or penalty. In addition, earnings on your funds in your HSA are also tax-free, as long as they are used to pay for qualified medical expenses. Consult your tax advisor for details.

The Treasury Department and IRS set guidelines on annual contribution levels for HSAs along with minimum deductible amounts and maximum amounts for out-of-pocket spending on HSA-qualified HDHPs.

If your employer offers a cafeteria plan, you can contribute to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you do so, you cannot additionally take the "above the line" deduction on your personal income taxes.**

How much can I contribute to my HSA?

The maximum contribution is the allowable amount set up by the IRS. If you are age 55 or older, you may also make additional "catch-up" contributions. Contributions to HSAs can be made in a lump sum or in any amount or frequency you wish. For more information, see IRS regulations for current contribution limits at www.irs.gov.

What is the deadline for making HSA contributions?

Contributions to an HSA must be made by April 15th or the tax deadline following the year for which the contributions are made.

Does my contribution depend on when I establish my HSA account or when my HDHP coverage begins?

Your eligibility to contribute to an HSA is determined by the effective date of your HDHP coverage. Your annual contribution depends on your HDHP coverage. For 2007 and forward, if you are covered on December 1, you are treated as an eligible individual for the entire year. However - if you cease to be an eligible individual during the year, the excess over the prorated contribution is included in income and subject to a 10 percent penalty tax. The amount you can contribute is not determined by the date you establish your account. However, medical expenses incurred before the date your HSA is established cannot be reimbursed from the account.

Are there any fees associated with the HSA?

No monthly maintenance fee is charged if a $500 minimum balance is maintained. If the account balance falls below the minimum, a monthly maintenance fee is assessed.†

Can both my spouse and I open an HSA?

If each spouse has a self-only High Deductible Health Plan (HDHP), then each spouse is eligible to contribute to an HSA in his/her own name. However, each spouse's contribution cannot exceed the contribution limits for individuals. If both spouses are covered by a HDHP (including the case where both individuals are covered by the same family plan), and neither spouse has insurance that is not a HDHP, both spouses may be eligible for their own HSA. The maximum that can be contributed between the two is one Family Plan amount. If both spouses are over age 55 and eligible to make a "catch-up" contribution, each spouse must make that contribution to their own HSA.

How can I use my HSA to pay my medical expenses?

First Interstate's HSA Debit Card can be used anywhere Mastercard® is accepted to pay qualified medical expenses. So, as long as you have the necessary funds in your account, you can make quick and easy payments at your doctor's office or at the pharmacy when you pick up your prescription. If you are paying bills from home or your physician or pharmacy does not accept Mastercard, simply use our convenient HSA checks to make your payments.

How can I track my expenditures?

You will receive monthly statements detailing transactions made during the previous month, and an annual Fair Market Value statement showing all transactions for the year. You can also view your transactions 24 hours a day, seven days a week on Online Banking.

What are qualified medical expenses?

HSA funds can pay for any qualified medical expense, even if the expense is not covered by your HDHP. However, except for insulin, you cannot include in your medical expenses amounts you pay for a drug that is not prescribed. See IRS guidelines for details.

To be a qualified expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. Your health plan administrator or insurance company should be able to provide you with a list of qualified medical expenses covered under your health plan. In addition, the Federal Government provides information on "qualified medical expenses" in IRS Pub 502. This publication is available at your local IRS office or at www.irs.gov.

Who decides whether the money I'm spending from my HSA is for a qualified medical expense?

Your HSA account belongs to you, not to your employer or your insurance company. Therefore, you are responsible for deciding whether the money you are spending is for a qualified medical expense. You should familiarize yourself with what qualifies as a medical expense and keep your receipts in case you need to support your expenditures or decisions during an IRS audit.

What if I don't use my HSA for medical expenses?

If the money is used for purposes other than a qualified medical expense, the expenditure will be taxable as income. Individuals who are not disabled or over age 65 will also be subject to a 20% penalty. If you are over 65, the amount withdrawn will be taxable as income but will not be subject to any other penalties.**

**Consult your tax advisor. There is a substantial penalty for early withdrawal. Interest rates are subject to change.
†Qualified HSA contributions are tax deductible, and qualified distributions are tax free. Refer to IRS Publication 502 for a list of tax-free (qualified) medical distributions.