In recognition that November is typically the beginning of open enrollment for employee benefits, including health insurance plans, we here at the Centre for Mediation and Dispute Resolution would like to call attention to the great benefits afforded by health savings plans.
What is a health savings account?
HSA(s) afford individuals with qualified high deductible health insurance plans to set aside pre tax funds to be used for health care expenses without assessment of taxes at any time. In short, the money deposited in an HSA goes in tax-free and comes out tax-free, even if it has increased through investment return before withdrawal.
What qualifies as a high deductible health plan?
In calendar year 2023, any health insurance plan with deductible of $1,500 for an individual plan and $3,000 for a family plan is considered high deductible.
What are the contribution limits to health savings accounts?
Individual annual contribution limit: $3,850, with an additional $1,000 catch-up for individuals age 55 or older. However, if there are two family members age 55 or older, they must have two separate HSA Plans to qualify for the additional contributions.
Family annual contribution limit: $7,750
What is the maximum annual withdrawal for HSA Plans?
Individual Plans have maximum withdrawal of $7,500
Family Plans have maximum withdrawal of $15,000
Can individuals open their own HSA, apart from their employment?
Health Savings Accounts have increased in value as a result of the recent upswing in inflation rates. What was a good deal before is increasingly becoming an even better deal. Indeed, health savings plans are more advantageous to individuals than are contributions to traditional IRA(s) and even Roth IRA(s). Moneys invested are in pre-tax dollars, growth on money is tax free, and withdrawals for medical expenses are tax-free. Even years after you paid for the health service, you can receive reimbursement provided you have saved the receipts.
At age 65, you are eligible, without penalty, to withdraw funds for any reason, with the reminder that if funds are not used for qualified medical expenses, you will be taxed on the withdrawal, as with an IRA, at ordinary income tax levels.
Health Savings Accounts should be considered as assets with unique attributes in estate planning as well as in planning for divorce. The Health Savings Account is certainly not an ordinary account and should not be viewed as one.