HSA (Health Savings Account) Frequently Asked Questions

A health savings account, or HSA, is a special tax-advantaged account designated to help you pay for qualified healthcare expenses now and in the future. An HSA is paired with an HSA-eligible health plan, also known as a high-deductible health plan, or HDHP, and allows you to pay for current healthcare expenses and save for future expenses on a tax-favored basis. You can even invest your HSA funds, similar to an IRA or 401(k).

HSAs provide triple-tax advantages: contributions, investment earnings and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states). Unused HSA dollars belong to you remain yours, even when you switch insurance plans, change jobs or retire. And when you turn 65, you can use your HSA funds for any expense without penalty (income taxes will apply for non-healthcare expenses, but healthcare expenses will still be tax-free).

To be eligible to contribute to an HSA, you must be covered by an HSA-qualified health plan (a high-deductible health plan, commonly known as an HDHP) and have no other first-dollar coverage (insurance that provides payment for the full loss up to the insured amount with no deductibles).

You may use your HSA to help pay for any qualified healthcare expenses covered under a high-deductible health plan, as well as for other common qualified healthcare expenses.

Unused HSA funds remain in your account indefinitely without penalty and may be able to be invested in a choice of investment options, providing the opportunity for your HSA funds to grow and become an additional retirement savings vehicle.

HSAs work in conjunction with an HDHP. All the money you (and/or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible from federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax. This makes HSA dollars truly tax-free. You can use these tax-free dollars to pay for healthcare expenses until meet your deductible.

You can use HSA funds to pay for expenses not paid by another plan, such as health plan deductibles and coinsurance. In addition, you can use your HSA to pay for qualified healthcare expenses not covered by your health plan, such as dental, vision, alternative medicines, and more. For a searchable list of eligible expenses, visit HSA Store at hsastore.com

You must be:

• Covered by an HSA-qualified health plan (a high-deductible health plan, known as an HDHP).
• Not covered under other non-HSA Qualified health insurance.
• Not enrolled in Medicare.
• Not another person's dependent.
• Exceptions: Other health insurance doesn’t include coverage for the following: accidents, dental care, disability, long-term care and vision care. Workers’ compensation, specified disease and fixed indemnity coverage is permitted.

Tax-free contributions to your HSA can be made in a variety of ways, including:

• Payroll deductions, if available through your employer
• Online transfers to your HSA from your linked personal savings or checking account
• Deposit a check in any Associated Bank branch location
• Mail a completed HSA contribution form (available in the Participant Portal) along with a check to Associated Bank for deposit into your HSA
• Transfer funds from an existing HSA into your Associated Benefits Connection HSA
• Rolling over or making a transfer from an existing Individual Retirement Account to an HSA, but only once in your lifetime

Your HSA funds are received tax-free when used to reimburse a healthcare expense. The following methods are available for you to pay an expense or reimburse yourself for an expense you have already paid:

• Pay for purchases and medical services at point of service using your Associated Bank HSA debit card.
• Withdraw money using an ATM. Associated Bank ATMs are always fee-free!
• Initiate a direct deposit from your HSA into a linked checking or savings account.
• Use online bill pay through your Participant Online Portal.

Both HSAs and FSAs allow you to pay for qualified healthcare expenses with pre-tax dollars. One key difference, however, is what happens at the end of the year. FSAs have a use-it-or-lose-it rule, meaning you might lose leftover money unless you submit claims in time or your plan allows some carryover. It's important to know your plan's rules and deadlines. HSAs, however, are yours forever, even if you change jobs, insurance plans, or retire. You may choose to use a Limited Purpose FSA to pay for eligible healthcare expenses and save your HSA dollars for future healthcare needs. You may use Limited Purpose FSA dollars to reimburse yourself for expenses not covered by your high-deductible health plan, such as:

• Vision expenses, including: Glasses, frames, contacts, prescription sunglasses, goggles, vision co-payments, optometrists or ophthalmologist fees and corrective eye surgery
• Dental expenses, including: Dental care, deductibles and co-payments, braces, x-rays, fillings and dentures

Enrolling in multiple pretax plans can be a great way to save money on qualified healthcare expenses—however, it's important to know the rules about which plans can be paired together. A standard FSA covers healthcare expenses without a deductible, so it violates the requirement that HSA participants not have other "first-dollar" coverage. This means that pairing a standard FSA with an HSA is not allowed. However, you may choose to use a limited purpose FSA (LPFSA) paired with an HSA. An LPFSA allows you to use pretax money to pay for certain expenses that don't count as first-dollar coverage. Some of the expenses you can pay with an LPFSA include:

• Dental expenses, including x-rays, fillings, dentures, braces and clear aligners
• Vision expenses, including exams, glasses, frames, contacts, prescription sunglasses, goggles, optometrist or ophthalmologist fees and corrective eye surgery

Paying these expenses with your LPFSA can help you save on those expenses today while continuing to grow your HSA balance for the future.

Yes, you may have more than one HSA and you may contribute to them all, as long as you are currently enrolled in an HSA-eligible health plan, otherwise known as a high-deductible health plan or HDHP. However, this does not give you any additional tax advantages, as the total contributions to your accounts cannot exceed the annual maximum contribution limit.  There are advantages to consolidating your prior HSAs into a single HSA with Associated Bank. This allows you to have one login, one set of tax forms each year, and one place to call when you need help! Contact Participant Services for assistance with transferring your prior accounts.

Per the IRS rules, in order to contribute to an HSA, you must be covered by an HSA-qualified health plan, otherwise known as a high-deductible health plan or HDHP, and you cannot be covered under other, non-HSA-qualified health insurance.

Examples of coverage that could cause you not to be eligible to contribute to an HSA:

• A spouse’s non-HSA-qualified health plan
• Medicare
• TRICARE

Examples of types of insurance that you may have while still contributing to an HSA:

• Accident insurance
• Hospital indemnity insurance
• Dental insurance
• Vision insurance
• Long-term care insurance
• Workers compensation

You must be:

• Covered by a qualified high-deductible health insurance plan.
• Not covered under other non-HSA qualified health insurance.
• Not enrolled in Medicare.
• Not another person's dependent.

Exceptions: Other health insurance does not include coverage for the following: accidents, dental care, disability, long-term care and vision care. Workers’ compensation, specified disease and fixed indemnity coverage is permitted.

With a high-deductible health plan, you have the security of comprehensive health care coverage. Like a traditional plan, you are responsible for paying for your qualified medical expenses up to the in-network deductible; however, the deductible will be higher, and you can use HSA funds to pay for these expenses.

After the annual deductible is met, you are responsible only for a portion of your medical expenses through coinsurance or co-payments, just as with a traditional health plan.

The health insurer or your employer can verify the status of your coverage. In addition, the words "qualifying (or qualified) high-deductible health plan" or a reference to Internal Revenue Code Section 223 will be included in the declaration page of your policy or in another official communication from the insurance company. A high-deductible health plan is a health insurance plan that generally doesn't pay for the first several thousand dollars of healthcare expenses (i.e., your "deductible") but will generally cover you after that.

It is important when selecting your high-deductible health plan that your insurance carrier verify and guarantee that the high-deductible health plan meets Internal Revenue Service regulations to ensure your HSA is qualified.

The IRS determines the annual maximum contribution you can make to your HSA. This amount is adjusted annually. For more information, visit IRS.gov.

Catch-up contributions can be made at any time during the year in which the HSA participant turns 55.

While you can technically have more than one HSA account, your total contributions across all accounts must not exceed the annual contribution limit. Having multiple accounts may increase administrative complexity, so it's generally more convenient to consolidate your HSA funds into a single account.

You may use your HSA to pay expenses for:

• Yourself
• Your spouse
• All dependents you claim on your tax return
• Any person you could have claimed except:
  • The person filed a joint return
  • The person had gross income of $4,400 or more; or
  • You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s return

A qualified medical expense is one for medical care as defined by Internal Revenue Code (IRC) Section 213(d). The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. Most expenses for medical care will fall under IRC Section 213(d).

Examples of expenses that qualify for reimbursement from an HSA include:

• Healthcare expenses
  • Doctors appointments
  • ER visits
  • Hospital stays
  • Physical therapy
  • Prescription medications
  • Some over the counter medications
  • Other treatments related to your health
• Dental expenses
  • Dental exams
  • Fillings
  • Oral surgery
  • Braces
  • Root canals
  • Other treatments related to your oral health
• Vision expenses
  • Vision exams
  • Glasses
  • Contacts
  • Other tests and treatment for your vision

Examples of expenses that do not qualify for reimbursement from an HSA include:

• Surgery for purely cosmetic reasons
• Health club dues
• Illegal operations or treatment
• Maternity clothes
• Toothpaste and cosmetics

HSA money cannot generally be used to pay your insurance premiums, however there are some exceptions. No penalty or taxes will apply if the money is withdrawn to pay premiums for: Qualified long-term care insurance; or Health insurance while you are receiving federal or state unemployment compensation; or Continuation of coverage plans, like COBRA, required under any federal law; or Medicare premiums.

See Internal Revenue Service (IRS) Publications 502 (“Medical and Dental Expenses”) and 969 (“Health Savings Accounts and Other Tax-Favored Health Plans”) for more information.

In general, using HSA funds to pay insurance premiums would be an ineligible expense, subject to taxes and penalty, however, there are some exceptions. No penalty or taxes will apply if the money is withdrawn to pay premiums for: Qualified long-term care insurance; or Health insurance while you are receiving federal or state unemployment compensation; or Continuation of coverage plans, like COBRA, required under any federal law; or Medicare premiums.

Account holders may make a withdrawal (also known as a distribution) at any time. Distributions received for qualified medical expenses not covered by the HSA-qualified health plan, also know as a high-deductible health plan or HDHP, are distributed tax-free.

Unless individuals are disabled, age 65 or older, or die during the year, they must pay income taxes plus an additional percentage (determined by the IRS) on any amount not used for qualified medical expenses. Individuals who are disabled or reach age 65 can receive non-medical distributions without penalty but must report the distribution as taxable income.

For favorable tax treatment, the funds in your HSA must be used for qualified expenses, including:

• Medical expenses, such as doctor visits, prescriptions, dental care or transportation to get medical care
• Long-term care insurance
• Healthcare coverage when receiving unemployment
• Certain continuation-of-benefit healthcare coverage
• Certain health insurance after age 65

For more information, see: IRS Publication 502

At age 65 and older, your funds continue to be available without federal taxes or state tax (for most states) for qualified medical expenses; for instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.

If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

Your HSA is portable. This means that you can take your HSA with you when you leave and continue to use the funds you have accumulated. Funds left in your account continue to grow tax-free. If you are covered by an HSA-qualified health plan, otherwise known as a high deductible health plan or HDHP, you can continue to make tax-free contributions to your HSA.

Distributions from your HSA used exclusively to pay for qualified expenses for you, your spouse or dependents are excluded from your gross income. Your HSA funds can be used for qualified expenses even if you are not currently eligible to make contributions to your HSA.

Triple tax savings:

• Contributions are tax free.
• Earnings are tax free.
• Withdrawals are tax free when made for eligible medical care expenses.

Three kinds of tax-favored contributions:

• Employee contributions that are deductible over-the-line (i.e., deductible even by non-itemizers).
• Employer contributions that are excluded from income and employment taxes.
• Salary reduction contributions made through a Section 125 cafeteria plan.

All three forms of contributions are exempt from federal income taxes. Employer and salary reduction contributions (section 125 cafeteria plan) are exempt from FICA and FUTA as well.

If you are no longer eligible to contribute because you are enrolled in Medicare benefits, or are no longer covered by a qualified high-deductible health plan, distributions used exclusively to pay for qualified medical expenses continue to be free from federal taxes and state tax (for most states) and excluded from your gross income.