Not all employers offer health plans to cover medical expenses. That’s why many people have to purchase their own health plans to help with the high cost of medical care. These individual health plans are expensive, so many choose a High Deductible Health Plan and a Health Savings Account (HSA) to help manage the expense.
What is a Health Savings Account?
An HSA is a tax-sheltered account similar to an Individual Retirement Account (IRA). However, the funds in an HSA are used to pay for current and future medical expenses rather than for retirement. Qualifying contributions for an HSA are tax-deductible, and distributions from an HSA are tax-free as long as they are used for qualifying medical expenses. Funds that are not used stay in the account and continue to earn tax-deferred interest. You can easily withdraw tax-free funds with your ATM card to pay routine medical bills.
Who is eligible for a Health Savings Account?
To qualify for a Health Savings Account you must:
- Be covered by a Qualified High Deductible Health Plan
- Not be covered by other health insurance
- Not be enrolled in Medicare
- Not be claimed as a dependent on someone else’s tax return
What is a Qualified High Deductible Health Plan?
A Qualified High Deductible Health Plan is a health insurance plan that has an annual deductible of at least the following:
- For single employee coverage—the deductible can be no less than $1,100 for tax year 2007
- For family coverage—the deductible can be no less than $2,200 for tax year 2007
Out-of-pocket expenses include deductibles, co-payments, and other amounts the participant must pay for covered benefits, but do not include premiums. High deductible plans can have first-dollar coverage (no deductible) for preventative care and higher out-of pocket expenses (co-pays and co-insurance) for non-network services.
What is the annual contribution limit?
The maximum contribution is the lesser of the amount of the High Deductible Health Plan’s annual deductible or:
- For an individual—$2,850 for tax year 2007
- For family coverage—$5,650 for tax year 2007
- Individuals 55 or older are allowed to contribute an additional $800
If you currently have a High Deductible Health Plan, Southland Credit Union has a solution for you! We’re proud to offer Health Savings Accounts that allow you to use pre-tax dollars to pay for your medical expenses.
To learn more or to see if you qualify for a Health Savings Account, call 800.426.1917, visit www.SouthlandCU.org, or come by one of our branch locations today!
You should consult a tax advisor regarding your eligibility in an HSA and the deductibility of your contributions. |
