HSA Site

Listed below are the 10 most frequently employer-searched questions from the HSA Knowledgebase. If you don't find the answer you are looking for here, please review these HSA Basics or search the HSA Knowledgebase for additional information.

1.	Q.	*What is a Health Savings Account (“HSA”)?*

	A.	A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account. You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

2.	Q.	*What Is a “High Deductible Health Plan” (HDHP)?*

	A.	You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that . Of course, your HSA is available to help you pay for the expenses your plan does not cover. For 2009, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,150 (self-only coverage) or $2,300 (family coverage). The annual out-of-pocket (including deductibles and co-pays) for 2009 cannot exceed $5,800 (self-only coverage) or $11,600 (family coverage). HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.

3.	Q.	As an employer, do I own my employees’ HSAs? Can I control how they spend the money in them?

	A.	No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation.

4.	Q.	My employees want to contribute to their HSAs but want to make sure they get a tax benefit out of doing so. How does that work?

	A.	Employee contributions can be made to HSAs on either after-tax or pre-tax basis. If made on an after-tax basis they should be counted as an above-the-line deduction on their tax return, effectively making their contributions tax-free. If they want to make the contribution pre-tax it can be done through a Section 125 (also called a “salary reduction” or “cafeteria plan”).

5.	Q.	As an employer, how much do I have to contribute to my employees’ HSA?

	A.	As much or as little as you want (while staying below the legal limit on annual contributions to the account).

6.	Q.	As an employer, do I have to contribute the same amount to every employee’s HSA?

	A.	Employer contributions must be “comparable”, that is they must be in the same dollar amount or same percentage of the employee’s deductible for all employees in the same “class”. You can vary the level of contributions for “full-time” vs. “part-time” employees, and employees with “self-only” coverage vs. “family coverage”. You do not need to consider employees who do not have HDHP coverage as they are not eligible for HSA contributions.

7.	Q.	Our company offers benefits through a Section 125 plan, do contributions have to be comparable under these plans as well?

	A.	Section 125 plans (also known as “salary reduction” or “cafeteria” plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet “non-discrimination” rules. These rules require the employer to ensure that contributions do not favor higher compensated employees.

8.	Q.	How are contributions treated for owners and shareholders of S corps?

	A.	Owners and officers with greater than 2% share of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.

9.	Q.	How are contributions treated for partners in a partnership or limited liability company (LLC)?

	A.	Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.

10.	Q.	May a self-employed person contribute to an HSA on a pre-tax basis?

	A.	No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.