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Health Savings Account (HSA)

What is a Health Savings Account?
A Health Savings Account is an individually owned tax-exempt account established exclusively for the purpose of paying for qualified medical expenses. An HSA, by nature, is a trust account. HSAs can be funded through a pre-tax salary deduction through a 125 Cafeteria Plan or on an after-tax basis by you, your employer, or both.

EBC has partnered with Cambridge State Bank in order to provide you with a competitive interest bearing HSA account. For more information on Cambridge State Bank’s Health Savings Account, including fees and interest earnings, please click on the Cambridge State Bank logo on the left.

For more information see the HSA Brochure.

Am I Eligible to Open and Contribute to an HSA?
To open an HSA you must be enrolled in a High Deductible Health Plan (HDHP). Your insurance provider can verify whether you have such a plan.

You cannot contribute to your HSA if you are enrolled in Medicare Part A or B. Nor can you contribute to your HSA if you are covered by any other health plan.

You may be covered by any one of the following types of insurance without making yourself ineligible to contribute to your HSA. These are:


What Can Distributions be Used for?
Distributions may be used for qualified medical expenses such as medical services, including dental and vision care, hospital costs, prescription drugs, over-the-counter drugs and long-term care insurance.

Can I use HSA Money for Non-Medical Expenses?
If distributions from the account are used for non-medical expenses, the amounts will be taxed and subject to an additional 10% penalty tax. People age 65 and older, disabled persons, or those who inherit an HSA upon the death of the account holder are not subject to the 10% penalty.

What Happens to the HSA Once I Turn 65?
Once enrolled in Medicare, a person can no longer make contributions to an HSA, but may continue taking tax-free distributions for medical expenses and taxable distributions for non-medical expenses.


Proper Coordination of an HSA and a Medical Flexible Spending Account Established Through a 125 Cafeteria Plan.
Individuals with a HDHP and an HSA may still participate in the employer-sponsored 125 Flex Plan offered through EBC. You may continue to Flex for your dependent/daycare expenses and your outside health insurance. You may also continue to Flex for some of your medical out-of-pocket expenses through a Limited-Use Medical Flexible Spending Account as long as your employer amends your Flex Plan to include that option.

For more information see brochure Limited HSA Brochure

Proper Coordination of an HSA and a Medical Flexible Spending Account Established Through a 125 Cafeteria Plan.
Prior to 2007 contribution limits were prorated based on the number of months you were eligible to contribute to an HSA. The IRS amended its rules and a full year’s contribution is allowed as long as the individual is eligible during the last month of the taxable year. However, you must remain eligible for the next twelve months to retain tax-free status of contributions.

2014 Contribution Limits 2015 Contribution Limits
Singlel Coverage = $3,300 Individual Coverage = $3,350
Family Coverage = $6,550 Family Coverage = $6,650
Between Ages 55 and 65
$1,000 more dollars $1,000 more dollars

1 Please refer to EBC’s pamphlet entitled “Health Savings Accounts and Flexible Benefits Plan—How They Work Together”.
2 Indexed for inflation
3 Indexed for inflation

What Happens If I Die?
If account owner dies and the HSA passes to a non-dependent beneficiary it ceases to be an HSA as of the date of death. The designated beneficiary or the estate must pay taxes on account.

 

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