What is a Health Savings Account?
A Health Savings Account, or HSA, is exactly what the name implies: a Savings Account established to help pay for qualified medical expenses. Savings roll over year after year, so your unused funds are available to pay healthcare expenses even during retirement. An HSA is similar to an Individual Retirement Account (IRA) - you open your HSA and you own it. So, whether you change jobs or become self-employed, your account stays with you - it is fully portable.
Who is eligible for an HSA?
An eligible individual is anyone who:
- Participates in a High Deductible Health Plan (HDHP)
- Does not have coverage through an additional health plan that is not an HDHP
- Is not enrolled for Medicare or receiving VA Benefits
- May not be claimed as a dependent on another person's tax return
What is a High Deductible Health Plan?
This is your health insurance plan. HDHPs usually have lower premiums and higher annual deductibles than traditional health insurance. There is also a limit placed on the total out-of-pocket expenses for an individual or family each year. Individuals/employees must be enrolled in an eligible HDHP before they can open an HSA. Ask your insurance provider if your plan qualifies.
What are the tax advantages of an HSA?
- Contributions by individuals are tax-deductible from your gross adjusted income
- Contributions you make through your employer may be deducted from your gross pay. That way you won't pay state or federal taxes on money going into your HSA.
- Funds may be used to pay for qualified medical expenses through retirement
- Those funds continue to grow tax-free
HOW IT WORKS
What happens to my unused funds at year's end?
Your unused funds, plus your earned interest, roll over year after year. This means your money stays with you and is yours to use in years to come.
Who owns the HSA?
You do. It is a personal, portable account that remains yours even if you change jobs or are no longer enrolled in an HDHP.
Can I have an HSA in addition to an IRA or other qualified retirement plan?
Yes. Although similar in the way they operate, an HSA is not an IRA.
What is the difference between healthcare flexible spending accounts (FSAs) and HSAs?
With both HSAs and FSAs you can pay for qualified expenses with pre-tax dollars. However, whereas your FSA money left unspent at the end of the year is forfeited, your HSA balance simply rolls over from year to year. If you are eligible for a HSA, you may have a limited use FSA only-to be used for dental and vision expenses only.
Can I have an HSA even though I have accident, short-term disability or illness-specific insurance?
You (and your spouse, if you have family coverage) can have additional insurance that provides benefits only for the following items:
- A specific disease or illness
- Liabilities incurred under workers' compensation laws, tort liabilities or liabilities related to ownership or use of property
- A fixed amount per day (or other period) of hospitalization
You can also have coverage (whether provided through insurance or otherwise) for the following items.
- Accidents
- Disability
- Dental care
- Vision care
- Long term care
Plans in which substantially all of the coverage is through the above listed items are not HDHPs. For example, if your plan provides coverage substantially all of which is for a specific disease or illness, the plan is not an HDHP for purposes of establishing an HSA.
FUNDING
I enrolled for the Abbott Health Investment Plan for 2017 and had an ALEC Health Savings Account in 2016 and made payroll deductions to my HSA. How do I continue with my payroll deductions to my HSA in 2017?
- If you elected the Abbott Health Investment Plan in 2016 and had your payroll deductions going to an ALEC Health Savings Account, you may continue to have your payroll deductions deposited to your ALEC Health Savings Account.
If you did not elect the Abbott Health Investment Plan in 2016 or didn’t elect to have your payroll deductions going to an ALEC Health Savings Account, you will not see ALEC as an HSA option within your benefit enrollment system and will be directed to select another provider for your payroll deductions.
I was enrolled in Abbott’s HDHP Pre-Tax Payroll in 2016, and had an ALEC Health Savings Account and made contributions via payroll deduction. Do I need to re-enroll for 2017?
Yes, your 2017 payroll election will not be automatically renewed. You will need to elect the Abbott Health Investment Plan via your online enrollment platform along with the amount of pre-tax payroll you would like to contribute to your ALEC HSA in 2017. The Abbott Human Resources team will provide you with all information regarding online enrollment.
If you did not elect the Abbott Health Investment Plan in 2016 or didn’t elect to have your payroll deductions going to an ALEC Health Savings Account, you will not see ALEC as an HSA option within your benefit enrollment system and will be directed to select another provider for your payroll deduction.
I enrolled for AbbVie's High Deductible Health Plan. How do I open my ALEC Health Savings Account and begin funding my account through payroll?
If you elected an AbbVie High Deductible Health Plan for 2016, please visit ALEC's HSA Center to open your ALEC Health Savings Account. You will then need to complete a 2017 AbbVie Pre-Tax Payroll Deduction form which ALEC will submit on your behalf. Click here to print and complete the 2016 AbbVie Payroll form.
I was enrolled in AbbVie’s Pre-Tax Payroll in 2016, Do I need to re-enroll for 2017?
Yes. You will need to re-enroll for your 2017 Pre-Tax Contribution by completing a 2017 AbbVie Pre-Tax Payroll Deduction form. Your 2016 contribution will not be automatically renewed. Please return the completed AbbVie Pre-Tax Payroll Deduction form to an ALEC Service Center. You can also fax your request to 847.360.0314
I am not a current ALEC member, but I would like an ALEC HSA. What is required to apply for an ALEC HSA?
If you are a new Abbott employee or an Abbott employee who isn’t a current ALEC member and is electing the Health Investment Plan for 2017, you can become a member by visiting alecu.org and clicking on Join. You will be prompted to complete our online membership application. At this time, new Abbott employees as well as current Abbott employees who are electing the Health Investment Plan as a new option for 2017 will NOT see ALEC as an HSA choice within the benefit enrollment system. This means that your payroll deductions will not be directed to your ALEC HSA and you will be prompted to select another HSA provider. You do have the option, however, to still open an ALEC HSA for your own Health Savings Account contributions outside of payroll deductions. To open an ALEC HSA, membership in the credit union is required. At the same time your new membership is established, you can open an ALEC HSA by visiting ALEC's HSA Center.
If you an AbbVie employee and are not a current ALEC member at the time of open enrollment, you can become a member by clicking on Join at alecu.org. You will be prompted to complete our online membership application. A Member Service Representative will contact you to fund your account. At the same time your new membership is established, you can open an ALEC HSA by visiting ALEC’s HSA Center.
You will also need to enroll for your 2017 Pre-Tax Contribution by completing a 2017 AbbVie Pre-Tax Payroll Deduction form. Please return the completed AbbVie Pre-Tax Payroll Deduction form to an ALEC Service Center. You can also fax your request to 847.360.0314
Is there a monthly fee for an ALEC HSA?
Yes, there is a $5 monthly HSA fee. If you already have an ALEC Checking account with $500 in direct deposit per month or an active ALEC Visa credit card or loan, you will not be charged a fee.
If you do not have an ALEC Checking with $500 in direct deposit per month or active loan relationship with ALEC, we encourage you to look to ALEC for more of your financial needs. We would love to provide you with more information on our products and services so you can take better advantage of your membership with ALEC!
How much may be contributed to an HSA?
You and your employer can make contributions to your HSA. See chart below for the maximum contributions allowed. Persons age 55-65 can also make an additional "catch-up" contribution. Please note, the total contributions include any employer contributions.
Who may contribute to my HSA?
Anyone - you, your employer or any individual - can contribute to your HSA. Contributions made by you or another individual are deductible from your gross income. Your employer's contributions are exempt from federal employment taxes (e.g., income, FICA and FUTA).
Is there a deadline for contributions?
The deadline for contributions are:
- 2016 - April 15, 2016
- 2017 - April 15, 2017
Can Individual Retirement Account, Health Reimbursement Account or Flexible Spending Account funds be rolled into an HSA?
No, an IRA, Health Reimbursement Account or Flexible Spending Account funds cannot be rolled into a HSA.
USING HSA FUNDS
What is a qualified medical expense?
One of the primary benefits of an HSA is that you can pay for qualified medical expenses from your HSA account tax-free. These include most medical related expenses for you, your spouse and dependents. View a complete list at https://www.irs.gov/pub/irs-pdf/p502.pdf
Who is responsible for determining if a medical expense is qualified?
As the individual account holder, you are responsible for determining if an expense qualifies to be paid with HSA funds. Be sure to save all invoices, receipts and statements that support the eligibility of withdrawals from your HSA.
Do health insurance premiums count as "qualified medical expenses"?
Generally, no, except in the following instances:
- Qualified Long-Term Care insurance
- COBRA health care continuation coverage
- Health care coverage while an individual is receiving unemployment compensation
Can HSA funds be used for non-medical expenses?
Non-medical distributions from an HSA are included in gross income and as such are taxed, as well as subject to a 10% penalty if withdrawn for non-medical purposes prior to age 65. Consult your tax advisor for regulations regarding distributions from HSAs.
What happens to my unused HSA funds when I die?
Like an IRA, the assets in an HSA become the property of a named beneficiary upon the account holder's death, or go to the estate if no beneficiary is named. A spouse beneficiary can treat such assets as their own account, while a non-spouse must include them as ordinary income for taxation purposes.
What if funds are not available in my HSA when I incur a qualified medical expense?
Use another method to pay for a qualified medical expense. Then, once the money is in your HSA, you can reimburse yourself from your HSA account for whatever amount you paid for the expense.