Health Savings Accounts (HSA)

A Health Savings Account, or HSA, is a unique, tax-advantaged account that can be used to pay for current or future healthcare expenses. When combined with a high-deductible health plan (HDHP), it offers savings and tax advantages that a traditional health plan can't duplicate. Why launch an HSA?

• Tax-free distributions (if  qualified)
• Tax deferred earnings
• Tax deduction
• Accessibility to HSA assets
• Yours wherever you go
• Balance carried over from year to year
• Control of contributions and investments
• Additional source of retirement income
• Lower insurance premiums on HDHP

Eligibility

Before you launch your HSA, take a look at your health insurance coverage.  To contribute, you must be covered under an HSA-eligible high deductible health plan (HDHP).  An HDHP generally requires that you pay out of pocket for medical expenses incurred (excluding certain preventive care expenses) until your deductible is met.  Plan coverage kicks in after that.  An HDHP may be HSA-eligible if it satisfies the IRS’ annual deductible and out-of-pocket expense limits.  But the rules that define an HSA-eligible HDHP can be complicated so check with your insurance provider or employer to see if your health plan is HSA-eligible.  HSA eligibility is determined as of the first day of each month.

In addition to having HSA-eligible HDHP coverage you:

• Cannot be covered by another health plan (with limited exceptions),
• Cannot be enrolled in Medicare, and
• Cannot be eligible to be claimed as a dependent on another person’s tax return.

High Deductible Health Plan Limits

* These limits are subject to annual cost-of-living adjustments

Allowable HSA Expenses

The IRS Publication 502 provides helpful information including a list of allowable expenses.

Tax Deduction

As your HSA contributions take off, don’t forget about that tax deduction.  As long as you cannot be claimed as a dependent on another person’s tax return, you can deduct your HSA contributions (except those made by your employer).

Tax-Free Distributions

When it’s time to take money out of your HSA, prepare for a smooth landing without tax or penalty.  Simply use the money for qualified medical expenses.  This generally includes most medical, dental, and vision care expenses that are incurred by either you, your spouse, or any dependents. 

HSA distributions not used for qualified medical expenses are subject to ordinary income tax and, if taken before age 65, a 20 percent IRS penalty tax (unless the distribution is because of death or disability).

Be sure to consult with a competent tax advisor regarding your HSA deductions and how to claim tax-free HSA distributions.

Distributions

Your HSA deposits are held in your name at DMB Community Bank.  You, or an authorized signer, can make withdrawals (or distributions) for qualified expenses.  You’re responsible for keeping receipts for all distributions from your HSA.  The bank does not monitor how the funds are spent.  Distributions can be made in any of the following ways:

• VISA Debit Card
• Personalized HSA Checks
• Online Bill Pay
• In-person Request

Interest Rate on Health Savings Accounts

Visit our Current Rates page.

For more information, refer to IRS Publication 502 or consult with a competent tax advisor regarding your HSA deductions and how to claim tax-free HSA distributions.

Contact DMB Community Bank with questions about your HSA Account.

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