Frequently Asked Questions

Health Savings Accounts

How do I qualify for an HSA?

To be an eligible individual and qualify for an HSA, you must be covered under a “qualifying” high deductible health plan (HDHP). Additionally, you cannot be enrolled in Medicare or claimed as a dependent on someone else’s tax return. For details, refer to IRS publication 969, “Health Savings Accounts (HSA).

What are the benefits of an HSA?

You may enjoy several benefits from having an HSA –contributions to an HSA are fully deductible. The interest or other earnings on the assets in the account are tax free and the distributions are tax-free for qualified medical expenses. An HSA is portable, staying with you if you change employers or leave the work force.

What is the difference between the new HSA and the flexible-spending accounts (FSA)?

The tax benefits for both plans are similar. However, the most important difference is that the entire balance of your HSA can roll over from year to year and continue to grow tax-differed. You do not need to have an HDHP to open an FSA, but your employer must offer it. A year to year roll over of a portion of the balance may be offered with an FSA.

Who can contribute to an HSA?

Any eligible individual can contribute to an HSA. For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Family members or any other person may also make contributions on behalf of an eligible individual.

Are there limits on Contributions?

The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. Refer to the enrollment form for current contribution amounts.

How will I pay medical expenses using my HDHP?

You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. When you pay medical expenses during the year that are not reimbursed by your HDHP, you can use the debit card or check that you received from Mid America Bank at the time that you opened your HSA account.

You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You do not have to make distributions from your HSA each year.

Do I pay taxes on the balance of my HSA?

An HSA is generally exempt from tax. You are permitted to take a distribution from your HSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Amounts that remain at the end of the year are generally carried over to the next year. Earnings on amounts in an HSA are not included in your income while held in the HSA.

What happens if I want to withdraw the money for non-medical expenses after age 65?

You won’t be hit with the 10% penalty if you use the money for non-medical expenses after age 65, but you would still have to pay income taxes on the money. Keep in mind that you can continue to withdraw money from the account tax-free for qualified medical expenses after age 65.

If I set up an HSA with my employer, what happens if I switch jobs?

You will keep the money in an HSA account even after you leave that job.

What happens to my HSA if I die?

You should choose a beneficiary when you set up your HSA. What happens to that HSA when you die depends on whom you designate as the beneficiary. If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. If not, the account stops being an HSA and the balance is taxable to the beneficiary.