An HSA, or Health Savings Account, is available to individuals enrolled in high deductible health plans (HDHPs).
Traditionally, HSAs are a popular type of tax-exempt medical savings account. Allocated HSA funds can be used to pay for expenses covered under an HDHP plan until their deductible has been met; or to pay for qualified medical expenses, as defined by the IRS, that are not covered under an HDHP. Over-the-counter drugs and menstrual products are now considered qualified medical expenses that can be paid for with HSA dollars on a tax-free basis.
Due to the current pandemic, HDHP plans may pay for COVID-19 testing, treatment, and telehealth services, before the deductible is reached. Additionally, several HSA requirements and limits have been adjusted to accommodate individual needs.
- For 2021, the maximum contribution amount for those with single coverage is $3,600 (a $50 increase from 2020). For those that elect family coverage, $7,200 (a $100 increase from 2020) is the maximum amount that can be contributed.
- Individuals who are age 55 or older may make an additional $1,000 “catch up” contribution.
An employee, employer, family members, or any other person may contribute to an HSA. Specifically, an individual is eligible to establish and contribute to an HSA if they:
- Are covered under an HDHP;
- Are not covered by another health plan that is not an HDHP, except for certain limited types of coverage;
- Are not enrolled in Medicare; and
- May not be claimed as a dependent on another person’s income tax return.
We encourage employers to consistently educate and equip employees with the information needed to become knowledgeable healthcare consumers. When it comes to healthcare cost-savings, employees may have the opportunity to take advantage of loosened requirements regarding how they spend their HSA dollars. Therefore, it is important for them to use income wisely and understand their options.
For additional information on HSAs, click here. The IRS has provided additional guidance, outlined here.
Questions? Do not hesitate to reach out to Creative Benefits, Inc. at 866-306-0200 or firstname.lastname@example.org.