Health Savings Account (HSA)

This content in this section provides in introduction to HSAs and covers the basics of this type of account.

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What is an HSA and how does it work?: A health savings account (HSA) is a tax-advantaged account that works in conjunction with an HSA-eligible health plan that meets IRS guidelines and allows the participant to save tax-free money for eligible medical expenses. Money in an HSA rolls over year after year and is owned by the participant even if they change jobs or health plans.

What are the advantages of an HSA?

There are many financial advantages to owning an HSA, including:

Employer contributions and employee pretax contributions via a cafeteria plan are not taxable income
Post-tax contributions are tax deductible even if you do not itemize deductions on Form 1040
You may make tax-free withdrawals from your HSA for eligible medical expenses not covered by your plan
The interest or other earnings on the HSA funds accumulate tax free
If, in the future, you are not covered by an HDHP you may still make tax-free withdrawals from your account for eligible medical expenses but you can no longer contribute to the HSA
If you become disabled or reach age 65, withdrawals can be made for non-medical reasons without penalty, but amounts must be reported as taxable income

What are my responsibilities as an HSA account holder?

Your HSA belongs to you. You’re responsible for maintaining the account. Here’s what is expected of you as an HSA holder:

Ensure that you have an HSA-qualified HDHP
Ensure that contributions do not exceed your applicable annual IRS maximum
Ensure that withdrawals for non-qualified expenses are added back to gross income
Keep all records that support withdrawals from your account. Further’s My Records and Receipts electronic document storage system is a convenient tool you can use to keep track of your important health care receipts and documents
Complete the required tax form (Form 8889) and attach it to Form 1040
Ensure that you do not have any medical coverage that will disqualify the HSA including a general purpose FSA
Ensure that you cannot be claimed as someone else’s tax dependent

Is there a fee for having an HSA?: Yes, there is a monthly fee associated with the HSA plans offered by Further. The fee is dictated by your HSA plan type. If your HSA is through your employer, your employer will choose the plan type option and may pay the fee for that plan type or pass it on to you. Accounts paid by individual account holders are billed annually and payment is automatically debited directly from the HSA, as soon as funds are available.

Unlike other HSA administrators, we don't have hidden fees, such as a debit card replacement fees, non-sufficient funds fees, or electronic funds transfer fees. To see a comprehensive chart of all costs associated with an HSA, check out the HSA Plan Options table.

Is someone enrolled in Medicare eligible for an HSA?: If you’re enrolled in a Medicare program, you cannot establish a new HSA. Contributions to an existing HSA must be prorated for the year you enroll in Medicare. You can, however, spend down your existing HSA. If you decline Medicare coverage when you turn 65, you can continue to contribute to an HSA. For more information, see Medicare and HSAs.

What happens to an HSA at the end of the year?: The funds in an HSA, regardless of the source of contributions, always belong to you as the account holder. Contributions remain in the account from year to year until used.