Health Savings Account

Health Savings Account - F.A.Q.

Given the constant increase of health insurance premiums, high deductible health plans are becoming increasingly popular. But coupled with a Health Savings Account, not only do you realize savings on your monthly premium, but you also get a tax deferred savings account that you can spend on your out of pocket health expenses, including vision, dental, orthodontics, medications and many other related expenses.

You fund the HSA bank account at your own pace and then you use those funds to pay for your out of pocket health costs, tax free. The healthier you are the more money you will build up as it also continues to compound interest, tax-deferred. Eventually the savings account becomes part of your retirement plan down the road!

That is why HSA accounts are becoming the wave of future.

Call to get answers to your specific questions... (949) 394-7676

Q. What is an HSA Account?

A. An HSA is a qualified tax deferred health savings account. The money that you contribute to your account is your own and you use that money to pay for any health related expense. The money you contribute is tax deductible at the end of the year, and your money grows in the account tax-deferred.

An HSA consists of a high deductible health plan (HSA compatible health plan), along with an HSA bank account. Your contributions in the Health Savings Account accrue interest and some banks also offer built-in investment options such as mutual funds, money market afunds and other investment vehicles.

Q. Is it available for my company's group plan?

A. Yes. HSA's can be set up for both individuals and families as well as company group plans. Employers are using HSA's to lower their premiums and then using the savings to fund their employee's HSA accounts. They can even fund the accounts as an bonus plan too, which is a huge employee incentive, as these accounts are portable and go with the employee when they change jobs. Later the HSA accounts can even be used as a retirement account.

Q. How much can I contribute?

A. The higher your deductible, the more you can contribute to an HSA. However the maximum amount you can contribute per year is $5,250 for family coverage and $2650 for self-only, excluding catch-up contributions for those 55 years of age and older.

Individuals age 55 and over can make additional catch-up contributions until they enroll in Medicare (Call for details).

Q. When and how much do I contribute immediately and ongoing?

A. You can front-load or fully fund your HSA account on day one of your health savings account, provided you do not exceed the annual maximum amount or pro-rated amount if your account is started mid-year. You can make the deposit anytime after the HSA is open.

If your high deductible coverage is effective after January 1st, then the total contributions to the account must be pro-rated based on the number of full months your qualified high deductible insurance plan is in effect. Count only those months for which your high deductible plan is in effect on the first day of the month. For example if the high deductible coverage starts on February 15th, the maximum number of months for which you can contribute to your HSA is 10 (for the first partial year).

Example: (using the 10 month contribution example above)

If your family deductible is large enough to contribute the full $5,250 contribution, for your first year of a plan starting on February 15th, the maximum 1st year contribution would be as follows:

$5,250 / 12 months = $437.50 / month

$437.50 X 10 months = $4,375.00 (Pro-rated first year contribution)

So based on a February 15th start date, you could contribute $4,375 for this first year. This can be dumped at the beginning or can be spread out over the 10 months, in amounts most comfortable for you.

Q. What are the advantages of the HSA?

1) You can deduct your entire annual contribution from your taxable income at the end of the tax year, regardless of how much you spend that year (always check with your CPA to fully understand your specific tax situation.)

2) Additionally, you would use the HSA account to pay for all eligible expenses throughout the year.

3) HSA as a tax deferred Retirement Fund...

At age 65, you can begin withdrawing the funds as retirement income, penalty free. At that point the money is taxable, but can be used for anything, without incurring penalties.

Essentially you are creating a tax deferred savings account that can be used tax free for qualified medical expenses and penalty free as a retirement fund after age 65, for any use whatsoever at that point.

4) You will save money each month on health insurance since your HSA compatible high deductible health plan has a lower premium than a standard non-HSA health plan. You can use your monthly savings to fund your HSA account. The healthier you are, the more you will retain to use at retirement age.

Q. Which HSA compatible plan does Cal-Health-Plans recommend?

A. At Cal-Health-Plans, we recommend the Anthem Blue Cross Lumenos HSA Plans.

Q. How do I learn more and get started?

A. Complete the information form below, or simply call for more information at (949) 394-7676.

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Call for assistance with your HSA Account today
Ph: (800) 610-6418

Broker: William Lorenz
CA Lic. 0D61899