Effective December 1, 2012, STEL's current high deductible medical insurance plan and health care reimbursement plan offering no longer qualifies participants for a health care saving accounts.
Existing health care savings account participants may continue to spend HSA dollars from their accounts for qualifying expenses. However, no further contributions may be deposited.
If you should have any questions, please contact Mark Wasiewicz at wasiewiczm@stel.org or 716-366-7792 x212.
Frequently Asked Questions
What is a Health Savings Account? - A Health Savings Account is a special savings plan authorized by the federal government for individuals who qualify to pay so called first dollar medical expenses (i.e. the annual deductible on your health insurance plan.) This account is similar to an IRA account, but it is designed specifically for covering qualified medical expenses for the person who establishes the account and his or her dependents.
What are qualified medical expenses? Health Savings Accounts retain their tax-free status if they are used for the following expenses:
- Diagnosis, cure, mitigation, treatment, or prevention of disease and treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes (examples: body scan, crutches, hearing aids, medicines, dental treatment and psychologist). They also include dental expenses.
- Premiums you pay for insurance that covers the expenses of medical care and the amounts you pay for transportation to get medical care.
- Healthcare coverage while you are receiving federal or state unemployment compensation if you are unemployed.
- Long-term care insurance.
- Certain qualified continuation-of-benefit coverages.
- Health insurance plans that qualify after age 65.
Note: Violations non-qualified uses of Health Savings Account funds are subject to taxation and a 10% penalty. The 10% penalty does not apply if the Health Saving Account holder is age 65 or older, is disabled, or dies.
What are the tax benefits of a Health Savings Account? - Qualified individuals enjoy significant tax benefits related to paying qualified medical expenses. These benefits have mechanics similar to IRA accounts in that:
- Savings are never taxed if used for qualified medical expenses.
- Health Savings Account earnings are tax-free.
- Employer or employee contributions to a Health Savings Account are excluded from income.
- When a Health Savings Account holder dies, the savings becomes the property of the named death beneficiary or of the Health Savings Account holder’s estate. The spouse of the deceased account holder may treat the assets as their own Health Savings Account. Other death beneficiaries must treat such savings as ordinary taxable income.
- Savings from an unused Health Savings Account may be used for retirement, but these funds will be subject to a 10% penalty if the Health Savings Account holder has not reached 65. Any funds that are not used for medical expenses will be subject to income taxes and penalty.
Who is eligible? - To be eligible to have contributions made to your HSA, you must be covered under a High Deductible Health Plan (HDHP) and have no other health coverage except permitted coverage. You cannot be enrolled in Medicare or be claimed as a dependent on another person’s tax return. You must be an eligible individual on the first day of the month to make a HSA contribution for that month.
How do I show my participation in a Health Savings Plan on my tax return? - If you have a Health Savings Account, you must report all contributions and distributions on your individual tax return.
- Your W-2 form will show employer contributions (if any) to your Health Savings Account, which is also shown on the employer’s business tax return.
- The IRS receives a report of all contributions and distributions you make from your custodian or trustee where the Health Savings Account is held.
How do I know what qualifies as a High Deductible Health Plan? - The government has outlined certain dollar limits in an insurance plan to determine if it is a High Deductible Health Plan.
|
High
Deductible Health Plan Limits
(Note:
These limits are revised each year to reflect cost-of-living
increases)
|
|
Annual
Deductible
2011
2012
|
Individual
$1,200
$1,200
|
Family
$2,400
$2,400
|
|
Annual
Deductible
Added
to out-of-pocket expenses may not exceed
2011
2012
|
$5,950 $6,050
|
$11,900
$12,100
|
How much can I contribute to a Health Savings Account per year? - If you have individual or family coverage under a High Deductible Health Plan, the government chart below indicated contribution limits.
|
High
Savings Account Contribution Limits
(Note:
These limits are revised each year to reflect cost-of-living
increases)
|
|
Annual
Deductible
2011
2012
|
Individual
$3,050
$3,100
|
Family
$6,150
$6,250
|
If I am 55 or older, do catch-up contributions apply as they do with IRAs? - Yes, you can take advantage of additional contributions as follows:
|
Age
55 and over
Catch-up
Contribution Limits
|
|
Tax
Year
2011
2012
|
Catch-up
Contribution Limits
$1,000
$1,000
|
|
|
