Health Savings Account

At KleinBank, we understand the concerns many individuals, families and businesses have about healthcare costs. We are here to help you save for healthcare costs and manage healthcare expenses by providing Health Savings Accounts (HSAs).

A Health Savings Account provides eligible individuals who participate in a High Deductible Health Plan (HDHP) the opportunity to save for future medical expenses tax-free.

A KleinBank Health Savings Account is easy to use, affordable and pays you a high rate of interest. To open your HSA, simply apply online, call or come in to any of our convenient bank locations.

We’ll help you take charge of your health now and for the future.

Frequently Asked Questions & Answers

Q: What is a Health Savings Account (HSA)?

A: A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

Q: What Is a High Deductible Health Plan (HDHP)?

A: You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover.

In order to qualify to open an HSA, your HDHP minimum deductible must be:

Annual out-of-pocket limits are set annually. Limits (including deductibles and co-pays) cannot exceed:

HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co-pays & coinsurance) for non-network services. Please consult your tax advisor if you are not sure if your plan is an HDHP.

Q: Does the amount of my deductible on my HDHP impact my HSA?

A: Yes. Your annual HSA contribution cannot exceed the deductible of your HDHP. So if you choose the minimum deductible of $1,050, you may not deposit more than $1,050 in your HSA for that year. If you want to save more, you must choose an HDHP with a higher deductible. The most you can put into your account is:

These amounts will be increased for inflation in future years. You can put that money in over the course of a year, or all at once.

You do not have to make equal contributions to your account every month. If your employer or anyone else contributes some of the money, you can only contribute the difference.

Q: Who is eligible for a Health Savings Account?

A: To be eligible for a Health Savings Account, an individual must be covered by an HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance”, including insurance for specific injuries or accidents, disability, dental care, vision care, and long-term care, and will not jeopardize your eligibility for an HSA.

If you are enrolled in Medicare or Medicaid, you are not eligible for an HSA. If you have coverage under Tricare, you are not eligible for an HSA. If you are eligible for VA benefits, you can still have an HSA unless you have used VA benefits and services (including prescription drugs) within the past three months. Finally, dependent children cannot have their own HSAs.

Q: Does an HSA pay for the same things that regular insurance pays for?

A: HSA funds can pay for any qualified medical expense, even if they are not covered by your health insurance. For example, most health insurance does not cover the cost of over-the-counter medicines, but HSAs can. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.

Q: How do I know what is included as “qualified medical expenses”?

A: We cannot provide a definitive list of “qualified medical expenses.” A partial list is provided in IRS Pub 502 (available at www.irs.gov). There have been many cases involving the many nuances of what constitutes "medical care" for purposes of section 213(d) of the Internal Revenue Code.

A determination of whether an expense is for "medical care" is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness.

The determination often hangs on the word "primarily."

The two significant differences are that: 1) HSAs can only be used to pay health insurance premiums in limited situations (see discussion below), and 2) HSAs can also pay for non-prescription drugs (even though they are not qualified medical expenses for purposes of the itemized medical expense deduction, as described in IRS 502).

Q: I’m over 55 and would like to make catch-up contributions to my HSA, like I’ve done with my IRA. Is that possible?

A: Yes, individuals 55 and older who are covered by an

HDHP can make additional catch-up contributions each year until they enroll in Medicare. The additional “catch-up” contributions to HSA allowed are as follows:

Q: What happens to the money in a Health Savings Account after you turn age 65?

A: Once you turn 65, you can continue to use your account tax-free for out-of-pocket health expenses. If you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, co-pays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.

Q: When must contributions be made for a taxable year?

A: For calendar year taxpayers, the deadline is generally April 15th, following the year for which the contributions are made.

Q: Do my HSA contributions have to be made in equal amounts each month?

A: No, you can contribute in a lump sum or in any amounts or frequency you wish. However, your account trustee/custodian can impose minimum deposit and balance requirements.

Q: How can I open an HSA?                                                   

A: To open your Health Savings Account, call or stop in and talk to a Personal Banker today.

This is not intended to provide legal advice or a detailed explanation of the HSA rules. For specific information, please consult your tax or legal professional. Additional helpful information on HSAs can be found on the IRS website, www.irs.gov and www.hsainsider.com.

*Annual Percentage Yield. The rate may change after the account is opened.

Health Savings Account Application