A health savings account (HSA) is an employee-owned account that can be used to pay for qualified healthcare expenses, including the high deductible health plan (HDHP) annual deductible, coinsurance, and more.
To open and contribute to an HSA, you
HSAs are considered tax-advantaged because, under Internal Revenue Service (IRS) rules, you don’t pay taxes on your contributions, any investment growth is tax-free, and so are withdrawals for qualified expenses. The IRS decides what expenses can be paid through your HSA (see Qualified Expenses).
Here’s how an HSA works:
You may contribute to the HSA up to annual limits set by the IRS. The annual limits for 2024 are as follows:
If you will be 55 or older during the year, you may make additional catchup contributions of up to $1,000.
Your employer may also contribute to your HSA; you are not taxed on these contributions. Both your contribution and any employer contributions count toward the annual IRS limit.
HSA contributions are exempt from federal income and FICA (Social Security and Medicare) taxes. HSA contributions are also exempt from SECA taxes paid by ministers. Under current IRS rules, you may not contribute to both an HSA and a healthcare FSA unless the FSA is a limited scope FSA. The healthcare FSA available to you typically will not be a limited scope FSA.
You may use your HSA funds for your own qualified healthcare expenses or for qualified expenses for any family member that you can claim as a dependent for tax purposes. The family member does not need to be enrolled in the Medical Plan.
Qualified expenses are the medical, dental, and vision expenses that can be claimed as a tax deduction. Examples include, but are not limited to, deductible and coinsurance amounts, dental or orthodontic treatment not covered by the Dental Plan, and prescription drugs. Eligible expenses are outlined in IRS Publication 502 (Medical and Dental Expenses).
Important: You are responsible for making sure your HSA funds are used to pay for qualified expenses. If your HSA funds are used for expenses that are not qualified, the amount you used will be subject to federal income tax, with an additional 20 percent tax penalty if you are under age 65. In case of an IRS audit, keep copies of itemized bills to show you used your HSA funds to pay for qualified expenses.
Your employer will tell you how to make your elections and deduct your contributions from your pay. Your employer will also work directly with Further, the HSA administrator, to set up your account. Once enrolled, you will receive a welcome packet from Further with additional information. You’ll receive a separate mailing from Further containing a healthcare Visa debit card that you can use to access your HSA funds to pay for eligible expenses.
Then, each year during Annual Enrollment, your employer will provide instructions on what to do to change or continue your election.
If you already have an HSA with another administrator, you may transfer your existing HSA balance to Further to consolidate your savings. Check with your current HSA administrator to see if any fees may apply.