An account holder can deduct contributions to the account from the individual's adjusted gross income. (The employer's contribution is excludable from the account holder's gross income).
The account holder need not include interest earned on the account as gross income.
Individuals between 55 and 65 may make catch-up contributions, starting with $500.00 in 2004 and increasing by $100.00 each year until it reaches $1,000.00.
In addition, an employer and members of the individual's family may also contribute.
Benefits
Tax-Free contributions and distributions
Flexibility in expense options
Contribution Options
Year-to-year rollovers
Personal Control and Choices
Contribution Options
Although this is an individual account and goes with you from career to career, your employer may choose to make contributions to a Health Savings Account as an added benefit to you.
The maximum annual contribution amount is generally the lesser of 100 percent of the annual deductible under the high-deductible health plan or a specified amount.
Additionally, you are eligible for a "catch-up" contribution if you are 55 or older by the end of your taxable year and have not enrolled in Medicare. The chart that follows shows the contribution limits.
Tax
Standard
Limit
Additional
Year
Self-Only
Family
Catch-up
2004
$2,600
$5,150
$500
2005
$2,650
$5,250
$600
2006
$2,700
$5,450
$700
2007
Subject to COLAs*
Subject to COLAs*
$800
2008
Subject to COLAs*
Subject to COLAs*
$900
2009
Subject to COLAs*
Subject to COLAs*
$1,000
*Subject to cost-of-living adjustments
Health Savings Account
What is it?
An account that the customer can put money into to save for future medical expenses
How does it work?
Contributions can be made each year the customer is eligible
Can contribute up to the amount of your HDHP* deductible but no more than $2,900 for individual coverage and $5,800 for family coverage (2008 numbers-adjusted annually for inflation)
Catch up contributions available if over 55 years of age
Money can be used to pay for any “qualified medical expense” permitted under federal tax law
Eligibility Requirements
Covered by an HDHP on the first day of the month
Have no other first-dollar medical coverage
Not enrolled in Medicare
Not eligible to be claimed as a dependent on a federal income tax return
Customer benefits
Contributions are tax deductible (even if you don’t itemize)
Savings – can save for future medical expenses; no “use it or lose is” rules
Portability
Control – customer makes all of the decisions (how much money to save, which expenses to pay, where the money will be held, etc.)
Security – protect customers from high or unexpected medical bills
Earnings potential on the funds (currently 3.00% APY)
costs
American Bank currently has a $25 annual fee to maintain an HSA (automatically deducted on January 1st of every year)
If the account is opened after June 30th, the initial fee will be prorated to $12.50
Check charge (if customer chooses to have checks): $8.90 for 25; $10.65 for 50
*HDHP - High Deductible Health Plan
how does the customer access?
An interest bearing savings account is opened where the customer can deposit funds up to the maximum allowed
If customer wants to access with point of sale card or checks, a checking needs to be opened too
Funds will sweep nightly from savings to checking to bring checking to zero balance
Checks are allowed
Point of sale card can be issued (no ATM access)
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Regular Savings
