Healthcare is an important part of our lives. In America, it can also be expensive. The Centers for Medicare and Medicaid Services reported that, “U.S. healthcare spending grew 9.7 percent in 2020, reaching $4.1 trillion or $12,530 per person.”
To combat rising healthcare costs, many people turn to Health Savings Accounts (HSAs)—one of the most tax-advantaged accounts allowed by the Internal Revenue Service (IRS). If you’re new to HSAs, you might be wondering where to start. Happily, while an HSA might seem complicated, you’ll have a lot of support to keep the process simple. Before you know it, you’ll be spending smarter and saving more on healthcare. We’ll walk you through the HSA basics including rules to know. Plus, you’ll get a breakdown of steps to take and tools to help you take full advantage of your HSA.
What is an HSA?
An HSA is a triple tax-advantaged account that allows you to set aside funds for qualified medical expenses.1 Any contributions to your HSA are tax-deductible. Growth from interest or from investing2 your HSA are tax-free, plus distributions from your HSA for qualified medical expenses are also tax-free.1 Other benefits of HSAs include:
- Unlike Flexible Spending Accounts (FSAs), your unused HSA funds automatically roll over to the next year and never expire—all the way to retirement and beyond
- Also, unlike FSAs, you own the HSA, so if you change jobs or retire, your HSA and any funds go with you wherever you go.
HSA rules to know and follow
Because the HSA is tax-advantaged, the IRS has certain rules to contribute into an HSA. For example, your HSA must be paired with an HSA-qualified high deductible health plan and you cannot open an HSA if you are listed as a tax dependent on someone else’s tax return. The IRS also establishes annual contribution limits.
|Individual plan||Family plan|
|Members 55 and older can contribute an additional $1,000|
Establishing your HSA
Because many people have health insurance through their employer, they generally also elect an HSA through their employer—but you don’t have to. Here’s a general outline of how to get started opening an HSA on your own. Please note: The steps below are specific to establishing a HealthEquity HSA.
Opening an HSA on your own
HealthEquity team members are available to support you to ensure your implementation process is quick, clear, and smooth.
- To begin, you’ll want to review the rules implemented by the IRS to ensure you are eligible to have an HSA. If you are eligible, visit healthequity.com/open-account.
- Because an HSA is a personal account, you will need to provide some personal information, including your name, address, and date of birth. Our highest priority is keeping personal information safe and secure.
- Once you have filled out and submitted an enrollment form, a HealthEquity team member reviews your information and will reach out to you to begin the process of opening your HSA.
- When your account is open, you’ll receive a Welcome kit and debit card,3 if selected. HealthEquity also provides a member account portal orientation so you can navigate your account, view balances, and set up communication preferences and account beneficiaries.
Opening an HSA through your employer
The process of setting up an HSA through your employer is similar to the steps outlined above. The major difference is your employer may handle more of the administration process. You’ll provide the information to your employer, and they’ll send it along to HealthEquity.
Don’t forget, even if you sign up for an HSA with your employer, you still own the account. This means any funds you contribute—and funds contributed by your employer—are yours to keep even if you leave your employer or retire.
What should you expect from your HSA provider?
One of the most important benefits an HSA administrator should offer to their members is a wide range of educational resources. After all, an HSA is only helpful if you know how to maximize the benefits it provides.
HealthEquity provides many resources to help our members understand their HSAs. Start with the HSA Getting Started guide for a high-level overview of your HSA, including expanding on many of the topics mentioned in this post. Then, you can move on to bite-sized webinars. You’ll have access to live and pre-recorded webinars, including “Harnessing the Power of an HSA” and “HSA: the new retirement strategy.”
After opening your HSA, you’ll be able to access the HealthEquity’s Member Portal and mobile app4 where you can view all your accounts (including your 401(k) account if it’s integrated) all in one place. The Member Portal and mobile app make it easy to track your HSA contributions and distributions. From there, you can sign up to invest your HSA funds to potentially maximize your HSA earnings.
Your HSA and you
Now that you’re familiar with the HSA basics and why it’s valuable, it might be time for you to choose an HSA. Visit HealthEquity.com to get started and learn more about how an HSA may help you save money on healthcare costs now and for the future.
1HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.
2Investments are subject to risk, including the possible loss of the principal invested, and are not FDIC or NCUA insured, or guaranteed by HealthEquity, Inc. Investing through the HealthEquity investment platform is subject to the terms and conditions of the Health Savings Account Custodial Agreement and any applicable investment supplement. Investing may not be suitable for everyone and before making any investments, review the fund’s prospectus.
3Your HealthEquity® Visa® Healthcare Card can be used at participating merchants who sell eligible healthcare products or services everywhere Visa debit cards are accepted. Your HealthEquity Visa Healthcare Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. The Bancorp Bank; Member FDIC.
4Accounts must be activated via the HealthEquity website in order to use the mobile app.
HealthEquity does not provide legal, tax or financial advice. Always consult a professional when making life-changing decisions.