HSAs allow individuals to enroll in a health insurance plan at a high deductible, which normally has a much lower premium cost. They then can use tax-free dollars to fund a savings account from which they pay for routine medical expenses that would otherwise be covered by a lower-deductible health insurance plan. Unlike Health Spending Accounts, money contributed to an HSA does not have to be used for expenses in the year contributed and contributions accumulate until they are actually used.

The credit union offers HSA trust accounts for members who qualify for such accounts. Following is a brief overview of HSAs.

Disclaimer
Four Points Federal Credit Union provides Health Savings Accounts (HSAs) for its members who qualify for such accounts, but does not offer tax advice. The information about HSAs contained in this website is very general in nature. We encourage you to consult with your tax preparer or other adviser concerning your eligibility for an HSA and for information about tax reporting and preparation.

What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a tax-exempt account with a financial institution in which you can accumulate savings to pay for qualified medical expenses. Contributions to an HSA are tax–exempt. Earnings on the account are also tax exempt. When withdrawals are made to pay for qualified medical expenses, those withdrawals are also tax-exempt. If money is withdrawn for any purpose other than qualified medical expenses, that money is subject to tax and there is also a 10% IRS penalty.

How do you qualify for an HSA?
In order to qualify for an HSA you must first have a qualifying High Deductible Health Plan (HDHP), either through the insurance plan where you work or through an insurance plan you purchase individually. If your insurance plan meets the requirements for an HDHP, you qualify for an HSA. If your health insurance plan offers options for various levels of deductible, you must enroll in the option with the highest deductible.

What are the requirements for a High Deductible Health Plan (HDHP)?
To qualify as an HDHP your insurance plan must meet certain requirements set by the Internal Revenue Service (IRS) in regard to deductibles and maximum out-of-pocket costs. The deductible must meet a minimum level and the total out-of-pocket must not exceed a maximum amount. For 2010 the required deductibles and out-of-pocket amounts are as follows:

Type of Coverage	Minimum Deductible (must be at least)	Maximum Out-of-Pocket (may not exceed)
Single Coverage	$1,200	$5,950
Family Coverage (2 or more)	$2,400	$11,900

How much can you contribute to an HSA?
The amount you may contribute to your HSA in a year is the amount of your HDHP deductible, but not to exceed limits set by the IRS. For 2009 the IRS limits are as follows:

Type of Coverage	Maximum Contribution
Single Coverage	$3,050
Family Coverage (2 or more)	$6,150

For example, if you have single coverage in 2010 and your deductible is $1,500, that is the amount you may contribute during the year. However, if your deducible were $3,500, you would be limited to the IRS maximum contribution of $3,050. If you make regular periodic contributions, each contribution is limited to a pro rata portion of the annual amount of your allowed contribution. For example, monthly contributions would be 1/12 of the annual amount, semi-monthly contributions would be 1/24.

There are provisions for catch-up contributions for people age 55 to 64 and not enrolled in or eligible for Medicare.

How can you use the money that accumulates in your HSA?
You can make withdrawals from your HSA to pay for any qualified medical expenses. Any money that you do not use continues to accumulate in your account and may continue to build year after year until it is used. Should something happen to you, the money in your account will go to your named beneficiary.

Interest Rates and Fees
Interest rates on the credit union HSAs are the same as regular savings rates on accounts with average monthly balances of $1,000 or more, except the balance requirement is waived on HSAs. A member must have a basic $20 regular membership savings account in order to establish an HSA. There are no set-up or administrative fees for the account. Click here for current rates.

Information Sources
The information on this page is brief and summaries only the highlights of HSAs. Additional information is available from the U.S. Treasury Department and from the Internal Revenue Service.

As stated previously, the credit union does not provide tax advice. It is your responsibility to determine your eligibility for an HSA and the levels of contribution you may make. We encourage you to research HSA requirements through authoritative sources such as the U.S. Treasury Department or IRS, or to consult a tax advisor.

Useful links:

http://www.treas.gov/offices/public-affairs/hsa/

http://www.hsainsider.com/