Health Savings Accounts
Your Tax-Advantaged Avenue for
Offsetting Personal Health Care Expenses
A Health Savings Account (HSA) offers those of you covered by High-Deductible Health Plans a tax-favored avenue for saving for qualified health care expenses not met by your Health Plan. Your High-deductible offers you the advantage of a lower premium. Your Health Savings Account offers you an important and valuable tax saving opportunity as you responsibly plan for, and save for, your health care needs of today, and the future.
A Winning Combination:
Scott Valley Bank’s Health Savings Account
& Your High-Deductible Health Plan
Scott Valley Bank’s Health Savings Account has been designed to complement your High-Deductible Health Plan. You’ll easily access your account via our special HSA debit card for payment of your medical expenses. It is so convenient for you! (Your HSA debit card is designed to be used for medical services and purchases only and is not activated to be used at an ATM.) Your account activity is reported as debits and credits on your account statements. You can access account information through your SVB Online Banking Service, keeping expense tracking, record-keeping, and tax reporting information at your fingertips! What could be more convenient?
Contributions Are Made Easily . . .
You can contribute via automatic payroll deduction through your employer, or we can assist you with automatic transfers to your Health Savings Account from any of your other bank accounts. Any HSA contributions not used in the year they accrue can be used later for retirement expenses and for your medical expenses.
Many Advantages – Minimal Overhead
You’ll enjoy tax-advantaged savings, a great return, and the security of greater preparation for possible needs, all for a nominal fee of $2 per month. Think of your Health Savings Account as your 'medical IRA' - a portable savings tool that you own, one designed to help you prepare for your medical expenses while offering the added benefit of helping you accumulate wealth.
So, You are Probably Wondering if You Are Eligible for a Health Savings Account
The answer to that question is “Yes!” provided:
• You are covered under an HDHP on the first day of the month in which you open your account and of each month you contribute
• The only health plan you are covered by is your High-Deductible Health Plan (with limited exceptions)
• You are not enrolled in Medicare
• And, you are not eligible to be claimed as a dependent on another person’s tax return
Do Self-Employed Individuals Qualify?
Certainly. If you are a sole-proprietor or otherwise self-employed, a Health Savings Account, and a High Deductible Health Plan can both be to your advantage. Your HDHP can help you contain health-care costs, while providing you with prudent catastrophic coverage. Your Health Savings Account can help you accrue for both medical and retirement expenses.
How Much Can You Contribute to Your H.S.A.?
Whether your High-Deductible Health Plan covers yourself only, or it is a plan for your entire family, is the determining factor for your annual Health Savings Account contribution limits.
HSA contribution limits* for 2010:
Self-only coverage $3,050
Family coverage $6,150
Any contributions that may be made by your employer reduce the amount that you may contribute. You may make additional ‘catch-up’ contributions if you are over
age 55. You must stop your contributions when you
enroll in Medicare.
HSA "Catch-Up" Contribution limit* for 2010:
Maximum $1,000
Just What is a High-Deductible Health Plan?
According to Federal law, a High-Deductible Health Plan is required to open and to contribute to your Health Savings Account. A High-Deductible Health Plan is an insurance policy that meets both of the limits as shown below. Federal law requires that qualifying High-Deductible Health Plan deductibles for 2010* be at least:
Self-only coverage $1,200
Family coverage $2,400
In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) for 2010* cannot exceed:
Self-only coverage $5,950
Family coverage $11,900
*Figures are subject to annual adjustment
In General, the plan deductible must apply to all medical expenses covered by the plan. Plans can pay for “preventive care” services on a first-dollar basis such as routine pre-natal and well-child care, child and adult immunizations, and annual physicals.
You can inquire about qualified High Deductible Health Policies by contacting your current insurance company, or any agent or broker licensed to sell health insurance in California.
Let’s Review the Tax Advantages . . .
The US Department of the Treasury states: “Health Savings Accounts (HSAs) were created by Public Law 108-173, the “Medicare Prescription Drug, Improvement and Modernization Act of 2003,” and signed into law by President Bush on December 8, 2003. Health Savings Accounts will change the way millions meet their health care needs because they are designed to help individuals save for qualified medical and retiree health expenses on a tax-advantaged basis.”
Your contributions to your Health Savings Account (subject to Federal limits), and the investment return generated on your account, are not subject to Federal Income Tax provided the funds are used within the parameters of the Health Savings Account legislations. Simply, any funds withdrawn to pay qualified medical expenses are tax-free.
Your Health Savings Account can
provide you with triple tax savings:
• tax-deductible contributions to your account
• tax-free earnings on your account
• tax-free withdrawals for qualified medical expenses
So . . . What Could be Better?
Your Health Savings Account contributions are tax-deductible; any Health Savings Account contributions made by you or your employer are excluded from your tax-reportable income; and the income on your Health Savings Account is tax-deferred. Provided you follow the rules and use your Health Savings Account for qualified medical expenses, the assets are tax-free.
As an individual, you may use your Health Savings Account assets for your retirement (if assets are distributed prior to age 65, or unless you meet disability stipulations as stated in the law, they are taxable and subject to a 10 percent penalty.) Assets remaining in your Health Savings Account upon your death become the property of your estate or of the named beneficiary (your spouse is allowed to treat the Health Savings Account as his or her own, other beneficiaries must treat the inheritance as ordinary taxable income.)
What Medical Expenses Qualify for Payment
from Your Health Savings Account?
Qualified medical expenses are generally expenses that qualify for the medical and dental income tax deductions as defined in IRS publication 502.
Expenses paid with H.S.A. assets cannot also be claimed as a deduction on your income taxes.
Some examples are:
• Medical expenses including: doctor visits, prescriptions, transportation to medical care, certain dental & vision care
• Qualified long-term care insurance
• Health plan premiums when unemployed
• Health plan premiums during COBRA
• Certain health insurance after age 65
• Over-the-counter drugs such as ordinary pain relievers!
Other Details:
Consult your tax advisor regarding other possible funding solutions for your Health Savings Account.
Your HSA contributions are tax-deductible whether or not you itemize your deductions!
Your Health Savings Account contributions will be reported to you and also reported to the Internal Revenue Service by the bank as required by law. It is up to you to report your contributions and distributions appropriately on your tax return. Contact a qualified accountant, attorney, or investment adviser to address your questions regarding investment advice, the law, or your tax liability.
Terms and conditions of the HSA are included in the HSA custodial agreement. Please contact your account representative at your local branch for any needed assistance. Scott Valley Bank deposit balances that are held in your HSA are FDIC insured, subject to FDIC insurance limits.
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