Have You Maxed Out the Contribution to Your Health Savings Account (HSA) for the 2021 year?April 15, 2022 is fast approaching!

3/31/2022 - By Judy Fryer

With the high cost of healthcare, many people with a high-deductible health plan (HDHP) establish a Health Savings Account (HSA) to pay for qualified medical expenses with tax-free dollars. Your HSA will provide you tax savings and flexibility as a wealth-building tool.

For 2021, the maximum contribution for an eligible individual with self-only coverage is $3,600 and the maximum contribution for an eligible individual with family coverage is $7,200. 

You might be thinking, what is an HSA?

An HSA is a special tax-advantaged savings account similar to a traditional Individual Retirement Account (IRA) but designated for medical expenses. An HSA allows you to pay for current eligible healthcare expenses and save for future qualified medical and retiree healthcare expenses on a tax-favored basis.

HSAs provide triple-tax advantages: contributions, investment earnings and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  1. You are covered under a high-deductible health plan (HDHP) on the first day of that month 
  2. You are covered under an HSA qualified High Deductible Health Plan (HDHP) and have no other health coverage except what is permitted under “Other health coverage” 
  3. You are not enrolled in Medicare 
  4. You cannot be claimed as a dependent on someone else’s tax return

Unused HSA dollars roll over from year-to-year, making HSAs a convenient and easy way to save and invest for future medical expenses. You own your HSA at all times and can take it with you when you change medical plans, change jobs or retire.

Your Funds at the Age of 65 or Older

At age 65 and older, your funds continue to be available without federal taxes or state tax, in most states, for qualified medical expenses. For instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.

At age 65 and older, if you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable but exempt from the 20% penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

So, if you have not maxed out your 2021 contributions, do this as soon as possible, but certainly before April 15, 2022! Reach out to our Flexible Spending Plan Administration team for more information on your HSA contributions!

About the Author | Judy Fryer

Judy is a manager in the Retirement & Medical Plans practice of Saltmarsh, Cleaveland & Gund. She has been practicing in this field since 1982 and has significant management, medical billing, CPT and ICD9 coding experience. Her primary areas of concentration include supervision of claims processing, adjudication of medical, health and dental claims, FSA benefit education and enrollment and FSA, HRA and HSA consulting for the firm’s employee benefit plans clients. Judy is a Certified Section 125 Administrator through the HR certification Section 125 training program and remains compliant with HIPAA training and active membership with the Employee Benefits Institution of America (EBIA).


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