Health Savings Accounts

A Health Savings Account (HSA) is an account that you can put money into to save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment. HSAs were signed into law by President Bush on December 8, 2003.

Who can have an HSA?

Any adult can contribute to an HSA if they:

1. Have coverage under an HSA qualified "high deductible health plan" (HDHP)
2. Have no other first-dollar medical coverage
3. Are not enrolled in Medicare
4. Cannot be claimed as a dependent on someone else's tax return

Contributions to your HSA can be made by you, your employer, or both. However, the total contributions are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return. Contributions to the account must stop once you are enrolled in Medicare. However, you can keep the money in your account and use it to pay for medical expenses tax-free.

High Deductible Health Plans

You must have coverage under an HSA-qualified "high deductible health plan" (HDHP) to open and contribute to an HSA. Generally, this is health insurance that doesn't cover first dollar medical expenses. Federal law requires the health insurance deductible be at least:

$1,100 - Self only coverage
$2,200 - Family coverage

In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays and co-insurances) cannot exceed:

$5,600 - Self only coverage
$11,200 -Family coverage

In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for "preventive care" services on a first-dollar basis (with or without a co-pay). "Preventive care" can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.

HSA Contributions

You can make a contribution to your HSA each year that you are eligible:

$2,900 - Self only coverage
$5,800 - Family coverage

Catch-Up Contributions

Individuals age 55 and older can also make additional "catch-up" contributions. The maximum annual catch-up contribution is as follows:

Year 2008 - $900
Year 2009 and after - $1,000

Determining Your Contribution

Your eligibility to contribute to an HSA for each month is generally determined by the effective date of your HDHP coverage. If you do not have HDHP coverage for the entire year, you will not be able to make the maximum contribution. All contributions (including catch-up contributions) must be pro-rated. Your annual contribution depends on the number of months of HDHP coverage you have during the year (count only the months where you have HDHP coverage on the first day of the month).

Contributions can be made as late as April 15 of the following year.

Using Your HSA

You can use the money in the account to pay for "qualified medical expenses" permitted under federal tax law. This includes most medical care and services, and dental and vision care, and also includes over-the-counter (OTC) drugs such as aspirin.

You generally can not use the money to pay for medical insurance premiums, for any of the following:

• Any health plan coverage while receiving federal or state unemployment benefits
• Cobra continuation coverage after leaving employment with a company that offers health insurance coverage
• Qualified long-term care insurance
• Medicare premiums and out-of-pocket, including deductibles, co-pays and co-insurance for:
  • Part A (hospital and inpatient services)
  • Part B (physician and outpatient services)
  • Part C (Medicare HMO and PPO plans)
  • Park D (prescription drugs)

You can use the money in the account to pay for medical expenses of yourself, your spouse, or your dependent children. You can pay for expenses of your spouse and dependent children even if they are not covered by your HDHP.

Any amounts used for purposes other then to pay for "qualified medical expenses" are taxable as income and subject to an additional 10% tax penalty. Examples Include:

• Medical expenses that are not considered "qualified medical expenses" under federal tax law (i.e., cosmetic surgery)
• Other types of health insurance unless specifically described above
• Medicare supplement insurance premiums
• Expenses that are not medical or health related

After you turn age 65, or become disabled, the 10% additional tax penalty no longer applies.

What happens to my HSA when I Die?

If you are married, your spouse becomes the owner of the account and can use it as if it were their own HSA. If you are not married, the account will no longer be treated as an HSA upon your death. The account will pass to your beneficiary or become part of your estate (and be subject to any applicable taxes).

Opening Your Health Savings Account (HSA)

Banks, credit unions, insurance companies, and other financial institutions are permitted to be trustees or custodians of these accounts. Other financial institutions that handle IRAs or Archer MSAs are also automatically qualified to establish HSAs. If you cannot locate a local institution willing to establish your account, check links under "Resources" on the Treasury website.  https://www.treasury.gov/resource-center and https://search.treasury.gov/search (search for: institutions for HSA accounts)

The following lists provide a brief summary of the information described in the Internal Revenue Code and IRS publication. The lists are intended to serve as a quick reference to help determine whether or not an expense may be eligible for HSA reimbursement. This information is provided with the understanding that the Tomei Insurance Agency is not providing tax advice. Tax advice should be obtained from a professional tax advisor.

Listed below are qualified medical expenses eligible for reimbursement:

Acupuncture			Gynecologist			Premiums (for long-term care
Alcoholism Treatment  Ambulance			Healing Services  Hearing Aid & Batteries			insurance)  Premiums (for continuation coverage
Anesthetists  Artificial Limbs			Hospital Bills  Hydro Therapy			required by Federal Law (COBRA))  Premiums (for insurance received while
Autoette (when used for relief     of sickness & disability)			Insulin Treatments  Lab Test			receiving unemployment compensation)  Prenatal Care
Birth Control Pills (by prescription)  Blood Tests			Lead Paint Removal  Legal Fees (to authorize treatment			Prescription Medicines  Psychiatrist
Braces  Cardiographs			for a mental illness)   Lodging (away from home for			Psychoanalyst  Psychologist
Chiropractor			outpatient care)			Psychotherapy
Christian Science Practitioner			Metabolism Tests			Radium Therapy
Contact Lenses			Neurologist			Registered Nurse
Contraceptive Devices  Convalescent Home (for Medical			Nursing (including board and meals)    Obstetrician			Special School Costs (for the handicapped/     challenged)
treatment only)  Crutches  Dental Treatment			Operating Room Costs  Ophthalmologist   Optician			Spinal Fluid Test  Splints  Sterilization
Dental X-Rays			Oral Surgery			Surgeon
Dentures  Dermatologist			Organ Transplant (including     donor's expenses)			Telephone or TV Equipment (to assist     the hearing impaired)
Diagnostic Fees			Orthopedic Shoes			Therapy Equipment
Diathermy  Drug Addiction Therapy			Osteopath     Over the Counter Medication (OTC)			Transportation Expenses (relative to     health care)
Drugs (prescriptions)			Oxygen & Oxygen Equipment			Ultra-Violet Ray Treatment
Eyeglasses  FICA & FUTA (tax paid for			Pediatrician  Physician			Vaccines  Vaccines
medical care service)			Physiotherapist			Vasectomy
Fluoridation Unit			Postnatal Treatments			Vitamins (if prescribed)
Guide Dog			Practical Nurse (for Medical    services)			Wheelchair  X-Rays

Expenses not eligible for reimbursement:

Advance Payment (for services to    be rendered next year)			Cremation or Burial Expenses  Diaper Service			Maternity Clothes  Premiums for Life Insurance
Athletic Club Membership			Disability			Sight or Similar Benefits
Autoette or Special Equipment			Domestic Help			Scientology Counseling
Automobile Insurance Premium    (allocable to medical coverage)			Funeral   Health Programs (offered by a resort)			Social Activities  Special Foods or Beverages
Boarding School Fees			Hotel Health Clubs & Gyms			Swimming Pool
Bottled Water			Hygiene Products & Similar Items			Travel for General Health Improvement
Commuting Expenses (of a    disabled person)			Illegal Operations & Treatments  Illegally Procured Drugs			Tuition & Travel Expenses (for sending     a problem child to a particular school)
Cosmetic Surgery & Procedures			Income Protection			Weight Loss Programs
Cosmetics			Loss of Limb(s)