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Health Spending Accounts

HSA

Through our banking partner, PayMaster can provide your company with a Health Savings Account (HSA). A HSA is a portable savings account that allows your employees to set aside money for health care expenses tax-free.

In order for your employee to qualify for a HSA they must have a high deductible health insurance plan. The minimum deductible to qualify in 2015 is $1300 for individuals and $2600 for families, and is tied to annual cost-of-living adjustments. High deductible health plans usually cost less than traditional health care insurance, so the money saved on insurance can be put into the Health Savings Account.

Money in an HSA rolls over from year to year, so there is no "use it or lose it". The HSA is owned by the employee, not the employer. Many people compare a HSA to a "medical IRA".

Contributions to HSAs by individuals are tax deductible, even if the taxpayer does not itemize. The employer will recognize an employer tax savings as any contributions are made on a pretax basis from the employee’s paycheck. Contributions to the HSA by an employer are not included in the individual's taxable income. Individuals, their employers, or both can contribute tax-deductible funds each year up to the amount of the policy's annual deductible, subject to a cap of $3,350 for individuals and $6,650 for families in 2015, and is also tied to annual cost-of-living adjustments. In addition, individuals over age 55 can make extra contributions to their accounts of up to $1,000 and still enjoy the same tax advantages.

HSA funds can be used to cover the health insurance deductible and any co-payments for medical services, prescriptions, or products as described in Section 213(d) of the Internal Revenue Service Tax Code. A list of covered expenses can be found in IRS Publication 502. The interest and investment earnings generated by the account are not taxable while in the HSA. Amounts distributed are not taxable as long as they are used to pay for qualified medical expenses.