What is a Health Savings Account?

A Health Savings Account (HSA) enables people with a High Deductible Health Plan (HDHP) to save for medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment and insuring you have money available to pay your deductible expenses.

Any company that sells health insurance coverage may offer HDHP policies. Check with your employer or another health insurance provider to see if you are eligible to enroll in a High Deductible Health Insurance Plan.

There are no set up, monthly or annual fees with a NW Preferred Health Savings Account and you have access to your money easily. You will have a special interest bearing checking account and a Visa Debit Card that can be used to access funds in your HSA. We also offer term investment options to help grow your Health Savings Account funds.

What expenses will be covered?

Money from your Health Savings Account can be used to cover “qualified medical expenses.” This includes:

• Most medical care and services including dental and vision care.
• Certain over the counter drugs such as aspirin.
• Any Health Plan coverage while receiving federal or state unemployment benefits.
• Qualified long-term care insurance.

You can use your HSA to pay for medical expenses for yourself, your spouse or your dependent children, even if they are not covered under your HDHP.

Funds in your Health Savings Account can also be used for purchases other than “qualified medical expenses.” But those amounts are then taxable as income and subject to an additional 10% tax penalty. Examples include:

• Medical expenses that are not considered “qualified medical expenses” under the federal tax law.
• Medicare supplement insurance premiums.

After you turn age 65, the 10% tax penalty no longer applies. If you become disabled and/or enroll in Medicare, the account can be used for other purposes without paying the additional 10% penalty.

Who can open a Health Savings Account?

You are eligible to open an HSA if you are enrolled in a High Deductible Health Plan, have no other “first dollar medical coverage”, are not enrolled in Medicare, and cannot be claimed as dependent on someone else’s tax return.

Contributions to your Health Savings Account can be made by you, your employer or both. If you make a contribution, you can deduct the contribution when completing your federal income tax return. Check with your tax advisor to determine eligibility.

Contributions must stop once you are enrolled in Medicare. However, you can still use the money remaining in your HSA to pay for medical expenses.

Determining Your Health Savings Account Contribution

You can make contributions to your HSA each year that you are eligible. You can contribute up to the amount of your HDHP deductible and the following amount to your Health Savings Account:

Individual Contribution
Maximum HSA Deposit (2010) - $3,050*

Family Contribution
Maximum HSA Deposit (2010) - $6,150*

Individuals who are age 55 or older can make additional “catch up” contributions. The maximum annual catch up contribution for 2010 and beyond is $1,000.

*2010 amounts: adjusted annually for inflation.