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A Health Savings Account at Houghton State Bank is actually an interest bearing checking account with a tiered, variable rate. Balances over $500.00 are not charged a monthly minimum balance fee. A special Health Savings debit card is available for convenient medical purchases and payments.
A Health Savings Account (HSA) is a special account owned by an individual where contributions to the account are to pay for current and future medical expenses. HSAs are used in conjunction with a "High Deductible Health Plan" (HDHP).
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Any individual who is covered by an HDHP, is not covered by other health insurance, is not enrolled in Medicare, is not claimed as a dependent on someone else's tax return.
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Contributions can be made by you, your employer, or both. If made by the employer, it is not taxable to the employee (excluded from income and wages). If made by the individual, it is an "above-the-line" deduction. Contributions can also be made by others for the benefit of an individual and deducted by the individual. Total contributions are limited annually, but there is no earned income requirement or limit to contributions due to income.
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HSA contributions are tax deductible and the earnings are tax-deferred. If used for qualified medical expenses, HSA distributions are not taxed. Unused HSA funds may be used for retirement after age 65.
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An individual can receive a distribution at any time. A distribution is tax-free if taken for "qualified medical expenses" of the insured, their spouse, or dependents. If a distribution is not used for qualified medical expenses, the amount withdrawn will be included in income and a 10% excise tax will apply. The excise tax does not apply
if the individual is age 65, disabled, or dies. Distributions can be used to reimburse prior years' expenses as long as they were incurred after the HSA was established. There are no "use it or lose it" rules for HSAs.
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Qualified medical expenses are those permitted under federal tax law. This includes most medical care and services, dental and vision care, and many over-the-counter drugs. Withdrawals can also be used to pay COBRA continuation coverage, qualified long-term care insurance, and Medicare premiums and out-of-pocket expenses.
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If you are married, your spouse beneficiary becomes the owner of the account and can use it as if it were their own HSA. If you are not married, the account will no longer be treated as an HSA upon your death and will pass to your beneficiary of become part of your estate.
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