HSA Plans

General HSA Information

The new year brings new limits on maximum HSA contributions and minimum deductibles for qualified high-deductible health plans (HDHPs).

In addition, HSA legislation that President Bush signed has a positive impact for all HSAs. The highlights of this legislation include:

  • Allowing people to take their health savings accounts with them if they move from job to job.
  • Raising contribution limits and allowing for a one-time transfers from IRA accounts.
  • Allowing a contribution up to an annual limit of $3,300 individual/ $6,550 family, regardless of the deductible for their insurance plan.
  • Allowing the option to fully fund their HSAs regardless of what time of year they sign up for the plan
  • People can transfer money from their IRA to their HSA ‐ just once, at any age, regardless if they’re 59 ½ or older


  • Individuals under the age of 65 are eligible to contribute to an HSA if they have a qualified health plan.
    • For self-only policies, a qualified health plan must have a minimum deductible of $1,250 with a $6,350 cap on out-of-pocket expenses (indexed annually).
    • For family policies, a qualified health plan must have a minimum deductible of $2,500 with a $12,700 cap on out-of-pocket expenses (indexed annually).
  • 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.


  • The maximum annual contribution is $3,300 for self-only policies and $6,550 for family policies (regardless of the selected deductible).  Annual contribution allowances for mid-year enrollment are allowed up to $3,300 individual/ $6,550 family if the accountholder remains HSA eligible for at least 12 months.
  • Individuals age 55 to 65 may make additional "catchup" contributions of up to $1,000 annually in 2009 and thereafter. A married couple can make two catch- up contributions as long as both spouses are at least 55. Catch-up contributions will help individuals accumulate assets for retiree health expenses.
  • Contributions may be made by individuals, family members and employers.
    • Contributions made by individuals and family members are tax-deductible (for the account beneficiary) even if the account beneficiary does not itemize. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers will be allowed to offer HSAs through a cafeteria plan.
  • Investment earnings accrue tax-free.


HSA distributions are tax- free if they are used to pay for qualified medical expenses, such as:

  • Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease,
  • Prescription drugs,
  • Qualified long-term care services and long-term care insurance,
  • Continuation coverage required by Federal law (i.e., COBRA),
  • Health insurance for the unemployed,
  • Medicare expenses (but not Medigap), and
  • Retiree health expenses for individuals age 65 and older (Note: retiree health plans would not have to meet the $1,250/$2,500 minimum deductible requirements.)

Distributions made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty is waived in the case of death or disability. The 10% penalty is also waived for distributions made by individuals age 65 and older.

Under guidelines implemented in the Patient Protection and Affordable Care Act (PPACA ), over-the-counter drugs may only be reimbursed if they have a prescription. If a policyholder uses an HSA to pay for items or services that aren't qualified medical expenses, the tax penalty is 20 percent of the HSA distribution.

HSA Rules for Dependents Under Age 26

While the Patient Protection and Affordable Care Act of 2010 (PPACA ) allows parents to add their dependent children (up to age 26) to their health plans, the IRS has not changed its definition of a dependent for health savings accounts. This means that a person could have their 25-year-old child covered on their HSA -qualified high-deductible health plan, but not be eligible to use their HSA funds to pay for medical bills for that 25-year-old. Reimbursements issued in violation of this rule will be taxed and could be subject to the 20% HSA penalty for an early withdrawal. For all HSA plans, group or individual, the IRS definition of a dependent is used when determining whether a dependent qualifies and how benefits are administered for dependents. The account holder must be able to "claim" the child/relative as a dependent on their tax return, and if they cannot, they are not allowed to spend HSA dollars on services provided to that child/relative. The IRS defines a qualifying child dependent as follows:

  • Daughter, son, stepchild, sibling or stepsibling (or any descendant of these)
  • Has same principal place of abode for more than one-half of taxable year
  • AND not yet age 19 (not yet age 24 if student)
  • OR permanently and totally disabled.

We at CDA Insurance encourage HSA account holders to seek advice from their financial advisor or tax consultant if they have questions.

Treatment at Death

Upon death, HSA ownership may transfer to the spouse on a tax-free basis.

Effective Date

January 1, 2014.

10 Essential Benefits

Healthcare reform says all health plans must include ten essential benefits. The basic benefits include:

  1. Outpatient Care - the kind you get without being admitted to a hospital
  2. Emergency Services - for issues that could lead to death or disable you if you do not treat them.
  3. Inpatient Care - covers room and board, tests, drugs, and care from doctors and nurses while admitted, which may include organ and tissue transplants, and hospice and respite care.
  4. Maternity and Newborn Care - care before and after your baby is born
  5. Mental Health and Substance Use Disorder Services - this includes behavioral health treatment, counseling, and psychotherapy.
  6. Prescription Drugs - covers retail, mail order, and specialty drugs.
  7. Rehabilitative and Habilitative Services - services and devices to help you recover if you are injured, or have a disability or chronic condition. This includes physical and occupational therapy, speech-language pathology, psychiatric rehabilitation, and more.
  8. Laboratory Services - covers lab tests, X-ray services, and pathology, and imaging and diagnostics such as MRI, CT scan, and PET scan.
  9. Preventive and Wellness Services - including mammograms, colonoscopies, vaccines. Covered in full if you use in-network providers for care such as routine physicals, screening, and immunizations. Disease management coordinates care for diabetes, asthma, and other conditions.
  10. Pediatric Services - including dental care (preventive, basic, major) and vision care (eye exam, lenses, and eyewear).