You and/or your employer can make contributions to your HSA (both of you can now contribute in the same tax year), and all contributions are tax-deductible.
|Maximum Contribution Limits for 2018|
|Maximum Contribution Limits for 2017|
|High Deductible Health Plan Limits For 2018|
|Minimum Annual Deductible||Out-of-Pocket Maximum|
* Maximum specified in law (indexed annually by M-CPI) Catch-Up Contributions For individuals age 55 and up, “catch-up” contributions are allowed. Contributions must stop once an individual is eligible for Medicare.
|HSA Catch-Up Contributions|
|Plan Year||Catch-Up HSA Contributions|
|2009 and after||$1,000|
Cloud-based– HSAToday is a secure, fast, and reliable web-based solution. All you need is an internet connection and computer to access it – there is no special software to install. Data backup and disaster recovery planning are included in the package, giving you peace of mind.
Intuitive and flexible– HSAToday was designed for ease-of-use, with an intuitive interface and flexible contribution and funding options. Online instructions are available to guide you through the processes.
Turnkey solution– HSAToday is a complete, end-to-end service for you and your employees, bringing together a savings account with fully-integrated investments, health plan information, and expense tracking through our patented ClaimsVault® technology.
Account setup via online enrollment and census import: Account setup can be completed through two options. Online enrollment will be facilitated by your administrator who will perform basic setup and provide a web link for your employees. HSAToday accounts may also be setup by your staff by importing a census file.
Contribution list funding by EFT: While the payroll deductions import tells HSAToday how much in deposits each employee should receive, employers can actually fund the accounts through our online portal as well by instructing us to draft your company’s bank account.
Tax year contribution tracking: HSAToday keeps track of employee contributions and their proximity to the IRS Contribution Limits. This solution also tracks your high-deductible health plan to distinguish between Individual and Family coverage and determine the appropriate limits – something most banks just cannot do.
Excess contribution alerts: If an employee exceeds or if an error in deposit exceeds IRS contribution limits, HSAToday displays a warning notification. The warning displays when loading contributions, allowing you to resolve the discrepancy before posting.
Cash management reporting: HSAToday includes both cash balance reporting and self-service tools to help you manage your unallocated funds. For example, you can add money to your employer account or initiate a withdrawal on demand.
To be an eligible individual and qualify for an HSA, you must meet the following requirements:
- You have a High Deductible Health Plan (HDHP) on the first day of the month (see deductible ranges below).
- You have no other health coverage except what is permitted. See the “Other Health Coverage” section in IRS Publication 969.
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else’s tax return.
High Deductible Health Plan Limits For 2016
Note: Preventive care services are not subject to the deductible. In addition, coverage for accidents, disability, dental care, vision care, and long-term care is not subject to the deductible.
Through OCA’s HSAToday platform, employers can easily implement HSAs within your employee group. Easing the HR burden must be a part of any effective Health Savings Account solution. HSAToday was designed with both the employee and employer in mind, and getting started is quick and easy!
Employer HSA FAQ
Q. Can all employers participate in an HSA program?
Any C-Corp, S-Corp, or LLC business entity can participate, along with their owners and employees. However, S-Corp owners cannot contribute to a personal HSA through pre-tax deductions. Instead, S-Corp owners can make direct contributions to their HSA and then take a tax credit on their personal income tax return at the end of the year.
Q. What is the minimum requirement for opening an HSA?
The employee must be enrolled in a Qualified High Deductible Health Plan (QHDHP), which is generally defined as a health plan having a deductible of at least $1,350 for Employee Only coverage and at least $2,700 for Family coverage.
Q. As an employer, I currently offer the Flexible Spending Account (FSA) to my employees. I plan to switch to a QHDHP in the middle of the FSA plan year. When can my FSA participants enroll in the HSA?
An employee cannot contribute to both an FSA and an HSA at the same time. Employees who have an FSA can change to the QHDHP in the middle of the FSA plan year, but must wait until FSA plan year ends before they can begin contributing to an HSA account.
Q. As an employer, I currently offer the FSA with a 2.5-month grace period to my employees. At the end of the current plan year, we are adding a QHDHP with HSA to our available health plan options. How does the FSA grace period affect the ability of my employees to enroll in the HSA?
Your FSA participants who do not have any balance left in their account at the end of the current plan year can enroll immediately into an HSA plan after the year ends and start making HSA contributions. If they do have a balance in their FSA at the end of the plan year, though, and will be accessing those funds during the grace period, then they cannot enroll in and begin contributing to an HSA until they have spent their remaining FSA balance or the grace period ends, whichever comes first.
Q. As an employer, I currently offer the FSA with Carryover option to my employees. At the end of the current plan year, we are adding a QHDHP with HSA to our available health plan options. How does the FSA Carryover affect the ability of my employees to enroll in the HSA?
Your FSA participants who do not have any balance left in their account at the end of the current plan year can enroll immediately into an HSA plan after the year ends and start making HSA contributions. If they do have a balance in their FSA at the end of the plan year, they have three options:
- Wait until the end of the next FSA plan year to open and contribute to an HSA. This applies even if the Carryover money is completely spent well before the end of the next FSA plan
- Open a Limited Purpose FSA and have the FSA Carryover Funds rolled over exclusively into the new Limited Purpose FSA, which allows them to open and contribute to an HSA immediately, as if they had not had a Carryover balance a
- Waive their rights to the FSA Carryover balance, in writing, which allows them to open and contribute to an HSA immediately, as if they had not had a Carryover balance at
Q. How much can an employee contribute to their HSA each year?
Contribution limits are based on the IRS tax year for individuals (calendar year). For 2018, the limits are $3,450 and $6,850, respectively. Employees have until April 15th of the following year (tax filing deadline) to make contributions for a given tax year.
Q. Is the amount of money an employee can contribute to their HSA limited or prorated by the date that they enroll in the QHDHP plan?
Yes. Although an employee can contribute the full amount as long as they stay enrolled in the QHDHP for a full year, we recommend that employees who come on the plan mid-year prorate their contributions accordingly.
For example, with QHDHP plan year of 1/1-12/31, enrolling in January does not create an issue. If the employee enrolls in the QHDHP on 7/1, however, and then contributes the individual maximum , they would have to stay enrolled in the QHDHP through 6/30 of the following calendar year to avoid possible tax consequences. The employee would not be able to switch to the POS plan during that full year unless they were willing to pay back taxes on the funds contributed to their HSA in excess of the prorated limitation. The same situation would apply if the employee left and went to a traditional, non- QHDHP plan before the full 12 months were up.
Q. What happens if an employee contributes too much to their HSA? How can they fix it?
An “excess contribution” is when employee contributes more to their HSA than their maximum contribution limit for the tax year. The amount of the excess contribution is not eligible for pre-tax treatment or for a deduction on the employee’s individual tax return. If the excess contribution is spent or otherwise distributed from the HSA by the filing deadline for that tax year (usually April 15 of the following calendar year), there is no tax on the distribution itself, although the associated net income is taxable. If the excess contribution is allowed to sit in the HSA beyond the tax filing deadline, the amount of excess contribution is subject to an excise tax for each tax year it remains in the account.
Q. How much can an employee spend each year out of their HSA?
The only spending limit is the employee’s HSA account balance. They can only withdraw up to the amount in their account at that point in time. Any unused funds roll over from year to year. Employees do not lose any funds if they have a balance left over at the end of the year.
Q. What types of expenses can employee use their HSA for?
In addition to the attached listing of eligible healthcare expenses, employees can use their HSA for certain insurance premiums, including COBRA, Medicare (if age 65 or older, but not including premiums for Medicare supplements), and Long- Term Care insurance (subject to limits based on age).
Q. Do HSAs have “catch-up” rules and withdrawal penalties like 401(k) accounts do?
Yes. If the employee is over 55, they can contribute an additional $1,000 to your HSA each year above the normal limits. If the employee has Family coverage and their spouse is over 55, the same provision applies, but their spouse would have to have his or her own HSA in which to make the catch-up contribution.
- If the employee takes money out prior to age 65 for anything other than qualified expenses, they will pay taxes on the withdrawn amount as well as an early withdrawal penalty of up to 20 percent.
- Once over the age of 65, or if disabled at the time of withdrawal, the employee can use their HSA funds for any purpose without penalty. They pay only income tax on the amount withdrawn each year.
Q. How long can employees contribute to an HSA?
As long as they are enrolled in a QHDHP, employees can contribute to an HSA account until they enroll in Medicare. Once enrolled in Medicare, they can use the balance remaining in their HSA but can no longer contribute additional funds to the account. (This applies to spouses also; there are special rules if one spouse enrolls in Medicare before the other does.) Employees also cannot participate in an HSA if enrolled in either TriCare or Medicaid.
Q. What are the rules on HSA inheritance?
Employees should choose a beneficiary when opening their HSA. Inheritance rules differ based on whether the named beneficiary is their spouse or not. If their spouse is the beneficiary, then upon their death, the spouse inherits the HSA and for tax purposes it is treated as the spouse’s HSA. If the employee names someone else as their beneficiary, that person will inherit the HSA, but the account will no longer be considered an HSA for tax purposes, and the account balance will be taxable to the beneficiary.