Health Savings Administrators» Health Savings Accounts – HSA Administrators

HSA Contribution Limits for 2010

WPJ — Tue, 26 May 2009 19:01:13 +0000

The maximum contributions that can be made to health savings accounts in 2010 will increase as will the minimum deductible imposed by health insurance plans linked to HSAs and the maximum out-of-pocket expenses that employees can be required to pay.

The maximum contribution that can be made to an HSA in 2010 for employees with single coverage will be $3,050. The maximum HSA contribution for those with family coverage will rise to $6,150.

Account holders age 55 or older may add $1,000 to the numbers above as their catch-up contribution.

Additionally, the maximum out-of-pocket expense, including deductibles, that employees can be required to pay next year will rise to $5,950 for single coverage, and $11,900 for family coverage.

The minimum deductible of the high-deductible health insurance plan to which HSAs must be linked will increase next year to $1,200 for single coverage and $2,400 for family coverage.

What are the keys to successful implementation of an HSA in the workplace?

WPJ — Wed, 18 Jun 2008 21:04:48 +0000

The attractiveness of a High deductible Health Plan (HDHP) is dependent upon three factors:

The difference between the employee contribution to the premium of HDHP vs. the traditional plan being offered. The greater the difference, the more the employee has to put into their HSA.
The employer contribution to the HSA. If #1 above is sufficient, the employer contribution doesn’t really matter. Ultimately the total employee savings and employer contribution need to be sufficient to fund the HSA to a level that makes the increased risk of the HDHP acceptable for the employee.
Education. If the employee (and their spouse) does not have a good grasp if the HDHP and HSA interaction they will not make a change, even if the contribution/savings numbers described above make sense. Repetition and education over time are the best methods for conveying the benefits of an HSA and for overcoming the natural fear of the unknown.

Can I pay Long Term Care premiums with my HSA?

WPJ — Wed, 11 Jun 2008 19:21:25 +0000

You may use your HSA for long term care premiums provided your policy meets certain requirements and you stay within the allowable premium expenditure limits.In order to spend money from your HSA on long-term care, your long-term care insurance contract must:

Be guaranteed renewable;
Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed;
Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract, must be used only to reduce future premiums or increase future benefits;
Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.

For 2008, the amount of premium you can pay with HSA funds are:

Age 40 or Under – Up to $290
Age 41 to 50 – Up to $550
Age 51 to 60 – Up to $1,110
Age 61 to 70 – Up to $2,950
Age 71 or Over – Up to $3,680

I am getting a divorce; can I transfer part of my HSA to my spouse?

WPJ — Wed, 11 Jun 2008 15:00:36 +0000

HSAs are the property of only one tax payer. IRS regulations do not permit transfers from one taxpayer to another under normal circumstances. Publication 504 does address the issue of HSA transfer (full or patial) in divorce situations. The IRS guidelines described below require legal documentation (an “instrument”) for a custodian to move money from one HSA to another.

From IRS Publication 504:

”Health savings account (HSA). If you transfer your interest in an HSA to your spouse or former spouse under a divorce or separation instrument, it is not considered a taxable transfer. After the transfer, the interest is treated as your spouse’s HSA.”

If I elect the HDHP mid-year, can I still contribute the maximum HSA annual contribution?

WPJ — Wed, 11 Jun 2008 14:50:39 +0000

Normally, you are permitted to contribute 1/12^th of your annual maximum for each FULL month you are covered by the HDHP. For example if you have single coverage and are covered for 6 of 12 months in the TAX year, you may contribute 6/12ths of the annual maximum of $2900 (in 2008) or $1,450. Some people want to maximize their contribution for the tax year so they contribute more than is permitted under the 1/12^th rule. If you contribute any amount in excess of the 1/12^th rule in the tax year you subject your self to what is known as the “Testing Period.”

The testing period requires you to maintain the HDHP though the entire month of December of the current tax year AND all 12 months of the following tax year. The type of HDHP coverage (single or family) an individual HSA on December 1 governs the amount that a employee is eligible to contribute for the year. For instance, if you are enrolled in individual coverage on December 1, you may contribute up to $2,900 or if you are enrolled in family coverage, you may contribute up to $5800 to your HSA If you fail to satisfy the testing period, the additional contributions made under this exception become taxable and subject to an additional 10% penalty tax.

Do I need to name a beneficiary for my HSA?

WPJ — Wed, 11 Jun 2008 14:41:48 +0000

Yes, you will need to name a beneficiary for your HSA. If your spouse is the beneficiary of your HSA, the account transfers as an HSA with all of the tax benefits intact. When you initially enroll in the HSA, you will be required to complete enrollment forms. Included in the enrollment form is a section for you to name your HSA beneficiary.