HSAs provide triple-tax advantages: contributions, investment earnings, and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).
Unused HSA dollars roll over from year-to-year, making HSAs a convenient and easy way to save and invest for future medical expenses. You own your HSA at all times and can take it with you when you change medical plans, change jobs or retire.
Funds in the account not needed for near-term expenses may be able to be invested, providing the opportunity for funds to grow. Refer to the Consumer Portal to find out your investment options.
To be eligible to set up an HSA and to make contributions, you must be covered by a qualified high-deductible health plan, or HDHP.
- To be eligible to contribute to an HSA, you must be covered by a qualified HDHP and have no other first dollar coverage (insurance that provides payment for the full loss up to the insured amount with no deductibles).
- You may use your HSA to help pay for medical expenses covered under a HDHP, as well as for other common qualified medical expenses.
- Unused HSA funds remain in your account for later, and may be able to be invested in a choice of investment options, providing the opportunity for funds to grow.
The insurance company pays covered medical expenses above your deductible, except for any coinsurance; you can pay coinsurance costs with tax-free money from your HSA. In addition, you can use your HSA tax-free dollars to pay for qualified medical expenses not covered by the HDHP, such as dental, vision and alternative medicines.
Tax-free contributions to your HSA can be made in a variety of ways, including:
- Pre-tax payroll contributions, if available through your employer.
- Online transfers — transfer funds directly to your HSA from your linked personal savings or checking account
- Send a check to First American Bank Health Account Services for deposit into your HSA.
- Rolling over or making a transfer from an existing IRA (Individual Retirement Account) to an HSA, but only once in your lifetime.
Distributions from your HSA are used to pay for qualified medical expenses. This can be done by the following methods:
- Paying for purchases and medical services using your First American Bank Health Account Services prepaid Mastercard® debit card.
- Using online bill pay through your online Consumer Portal.
- Requesting self-reimbursement through the Consumer Portal when you have already paid out-of-pocket for qualified expenses.
- Paying with an HSA check (fees may apply).
Your HSA allows you to save pre-tax income that you can use to pay for qualified short- and long-term medical expenses. It complements your HDHP, giving you an additional method to save specifically for healthcare costs.
- HSA accountholders can choose to save up to $3,850 ($4,150 in 2024) for an individual and $7,750 ($8,300 in 2024) for a family (HSA holders 55 and older get to save an extra $1,000 - and these contributions are 100% tax deductible from gross income.
- Minimum annual deductibles are $1,500 ($1,600 in 2024) for self-only coverage or $3,000 ($3,200 in 2024) for family coverage.
If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.
- Healthcare FSA: Covers medical, prescription, dental and vision expenses
- Dependent Care FSA: Covers dependent care expenses including daycare, nursery school and day camp for children (up to the age of 13), and services for adult dependents who cannot care for themselves
- Limited Health Care FSA: Covers dental and vision expenses only (for compliance with a Health Savings Account)
Only those who have FSA coverage through December 31, 2023 can continue to incur claims against the 2023 plan year for services provided through March 15, 2024.
All FSA claims for services provided January 1, 2023 through March 15, 2024 will automatically be applied and processed from the 2023 plan year first if filed by the claims filing deadline for that plan year. If your claim exceeds the available funds from the 2023 plan year, any excess will be automatically applied to the 2024 plan year.
For FSAs with Rollover, on October 31, 2013, the U.S. Department of Treasury changed the policy on remaining funds in FSA’s. You are now able to roll over remaining funds into your next plan year up to $610. This rollover means enrollment in an FSA is much less risky. This gives you more flexibility to spend your FSA money when you need it. You can use it for necessary out-of-pocket healthcare expenses, rather than feeling pressured to engage in last minute and potentially unnecessary spending at the end of the year.
- The amount you put into your FSA
- The tax percentage you would normally pay on that money (tax bracket)
Let's say you normally pay 30 percent in federal, social security and state taxes on your income. In this example, you would enjoy a tax savings of 30% of the $2,000. In other words, you could get a $600 tax savings on the $2,000 you directed to your FSA.
- Parking: Expenses for parking at or near your work location or at or near a location from which you commute using mass transit.
- Transit: Expenses include public transportation such as train, bus, monorail, streetcar, subway, ferry. This also includes services such as UberPool and Lyft Shared. Vanpool expenses are eligible, but the highway vehicle must seat at least six adults, excluding the driver.
If available for your region, you can also place a Smart Commute order to load your transit authority smart card from the Consumer Portal. See the Smart Commute section for more information. When you use the prepaid debit card or Smart Commute, you don’t need to submit receipts to substantiate your expenses.
For parking and vanpool expenses, you can pay out-of-pocket and request reimbursement for your expenses on the Consumer Portal or mobile app. Reimbursement can be issued via direct deposit to your bank account or check. Mass transit expenses are not eligible for reimbursement per the IRS, when an eligible method such as the benefit debit card or Smart Commute are available.