Health Savings Account (HSA)
If you are enrolled in our High Deductible Health Plan (HDHP) then you are qualified to also contribute to a Health Savings Account (HSA)
WHAT IS AN HSA?
A health savings account (HSA) is a tax-advantaged savings account that an individual can use to pay medical expenses:
- It must be used in conjunction with an IRS‐qualified, High Deductible Health Plan (HDHP)
- An individual/employee owns the account but both the employee and the employer can contribute funds
- Triple Tax‐advantage:
- Contribute pre-tax money through payroll deductions
- Funds accrue tax‐free and are invested tax-free
- Funds can be withdrawn tax‐free (if used for eligible medical expenses)
Other benefits of HSAs:
- Funds roll over each year, so an individual can use their HSA to save tax‐free money for retirement
- The employee owns the account, even if they leave the company
- When you retire, you can use the funds for all types of expenses – they remain tax-favored for qualified medical, dental and vision services and you pay income tax on expenses that are non‐qualified
- For eligible employees enrolling for April 1, Lewis & Clark will contribute money into your HSA
WHO IS ELIGIBLE TO CONTRIBUTE?
Anyone who is:
- Enrolled in a qualified High Deductible Health Plan
- Not enrolled in Medicare, Medicaid, Tricare, or other government sponsored insurance plans
- Not covered under other non‐qualified health insurance* including Flexible Spending Accounts and Health Reimbursement Accounts (HRAs)
- Not another person’s tax dependent
NOTE: For employees participating in the FSA currently with rollover balances, you will be allowed to roll over into a limited‐purpose FSA which does not negatively impact your eligibility for the HSA.
*Other health insurance does not include specific disease or illness, accident, disability, dental, vision and/or long‐term care insurance.
HOW MUCH CAN BE CONTRIBUTED?
Each year, the IRS sets contribution limits for the total funds contributed, including employer contributions, employee contributions, and any other additional contributions.
In 2021 the limits are $3,550 for individual and $7,100 for employee + 1 or more.
Lewis & Clark College will contribute in the following format:
- Individual coverage:
- $375 preload in April 2021
- Up to $31.25 matching contributions per month
- Employee + 1 or more coverage:
- $750 preload in April 2021
- Up to $62.50 matching contributions per month
HOW DO I SPEND MY HSA FUNDS?
HSA distributions can be taken for qualified medical expenses for the following people:
- The account holder
- Spouse of that individual (even if not covered by the HDHP)
- Tax dependents of that individual (even if not covered by the HDHP)
For individuals aged 65 and older, HSA distributions can be used for nonqualified medical expenses without facing the 20% penalty
- income taxes will apply for nonmedical distributions
- regardless of whether the individual is enrolled in Medicare
The IRS defines what is considered a “qualified medical expense” for the purpose of HSA distributions
Expenses must be primarily to treat or prevent a physical or mental defect or illness.
Select insurance premiums, including:
- health insurance after you turn 65 (except for a Medicare supplemental policy)
- qualified long‐term care insurance
- health insurance premiums paid while receiving unemployment benefits
** If an individual uses HSA funds for expenses outside of what the IRS deems as qualified, they will be subject to income tax on the distribution and an additional 20 percent penalty **