Your Associated Bank HSA (Health Savings Account)

A health savings account, or HSA, is a special tax-advantaged savings account designated to help you pay for qualified healthcare expenses now and in the future. An HSA is paired with an eligible high-deductible health plan (HDHP) and allows you to pay for current healthcare expenses and save for future expenses on a tax-favored basis. You can even invest your HSA funds similar to an IRA or 401(k), if your administrator offers this feature.

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).

Unused HSA dollars roll over from year to year, making HSAs a convenient and easy way to save and invest for future expenses. You own your HSA at all times and can take it (and the money in it) with you when you switch insurance plans, change jobs or retire. And when you turn 65, you can use your HSA funds for any expense without penalty.

To be eligible to contribute to an HSA, you must be covered by an HSA-qualified health plan (a high-deductible health plan, commonly known as an HDHP) and have no other first-dollar coverage (insurance that provides payment for the full loss up to the insured amount with no deductibles).

You may use your HSA to help pay for any qualified healthcare expenses covered under a high-deductible health plan, as well as for other common qualified healthcare expenses.

Unused HSA funds remain in your account indefinitely without penalty and may be able to be invested in a choice of investment options, providing the opportunity for your HSA funds to grow and become an additional retirement savings vehicle.

HSAs work in conjunction with an HDHP. All the money you (and/or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible from federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax. Interest paid to you on your cash deposits and earnings from investments are not subject to tax. Any reimbursements received for eligible healthcare expenses are also tax and penalty free. This makes HSA dollars truly tax-free. You can use these tax-free dollars to pay for healthcare expenses until you meet your deductible.

The insurance company pays covered expenses above your deductible, except for any co-insurance; you can also pay co-insurance costs with tax-free money from your HSA. In addition, you can use your HSA tax-free dollars to pay for qualified healthcare expenses not covered by your HDHP, such as dental, vision and alternative medicines.

Both HSAs and FSAs allow you to pay for qualified healthcare expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year is limited to a certain dollar amount of carryover to the immediately following plan year OR a grace period. Typically you can’t have an HSA with a standard healthcare FSA. However, you may choose to use a limited purpose FSA (LPFSA) paired with an HSA to pay for specific eligible healthcare expenses such as:

• Vision expenses, including: glasses, frames, contacts, prescription sunglasses, goggles, vision copayments, optometrists or ophthalmologist fees and corrective eye surgery
• Dental expenses, including: dental care, deductibles and copayments, braces, x-rays, fillings and dentures.

You must be:

• Covered by an HSA-qualified health plan (a high-deductible health plan, known as an HDHP).
• Not covered under other non-HSA qualified health insurance.
• Not enrolled in Medicare.
• Not another person's dependent.

Exceptions: Other health insurance doesn’t include coverage for the following: accidents, dental care, disability, long-term care and vision care. Workers’ compensation, specified disease and fixed indemnity coverage is permitted.

Visit our HSA FAQs for even more commonly asked HSA questions (and answers!).

Enrolling in multiple pretax plans can be a great way to save money on qualified healthcare expenses—however, it's important to know the rules about which plans can be paired together. A standard FSA covers healthcare expenses without a deductible, so it violates the requirement that HSA participants not have other "first-dollar" coverage. This means that pairing a standard FSA with an HSA is not allowed. However, you may choose to use a limited purpose FSA (LPFSA) paired with an HSA. An LPFSA allows you to use pretax money to pay for certain expenses that don't count as first-dollar coverage. Some of the expenses you can pay with an LPFSA include:

• Dental expenses, including x-rays, fillings, dentures, braces and clear aligners
• Vision expenses, including exams, glasses, frames, contacts, prescription sunglasses, goggles, optometrist or ophthalmologist fees and corrective eye surgery

Paying these expenses with your LPFSA can help you save on those expenses today while continuing to grow your HSA balance for the future.