Contributions

• Contributions may be funded by an employer, employee, and any other individual on behalf of a qualified individual up to the annual maximum amount.
• 2008 contribution maximums are $2,900 for single coverage and $5,800 for family coverage. An additional catch-up contribution of $900 is allowed for individuals age 55-64.
• 2009 contribution maximums are $3,000 for single coverage and $5,950 for family coverage. The catch up contribution for individuals age 55 or older is increased to $1,000 for 2009 and all years going forward.
• Married couples can make two catch-up contributions if each spouse is eligible.
• Contribution deadline is the due date of the individual’s federal income tax return.
• Contributions must stop once an individual is enrolled in any type of Medicare.
• The self-employed, partners, and S-Corporation shareholders are generally not considered employees and cannot receive an employer contribution — they can make deductible contributions to the HSA on their own.
• An HSA may be offered only with an HSA-qualified HDHP.

Distributions

• Distributions are tax-free if taken for qualified medical expenses.
• Distributions used for nonqualified medical expenses are includable in taxable income and may be subject to a 10 percent penalty tax (10 percent penalty tax does not apply when distribution is taken after the account holder is age 65, dies or becomes disabled).
• Tax-free distributions can be taken for the qualified medical expenses of:
  • a person covered by the HDHP;
  • the spouse of the individual (even if not covered by the HDHP);
  • any dependent of the individual (even if not covered by the HDHP).
• Expenses must be incurred after the HSA has been set up.
• Distributions do not have to occur at the same time as the medical expense.
• Distributions may be taken even if the individual is no longer eligible to contribute to an HSA.
• HSA funds may accumulate for use after retirement.
• The account holder is responsible for determining the eligibility of the expense and maintaining records.

See IRS Pub 502 to view a list of qualified medical expenses.

* The Bancorp Bank of Wilmington, DE, is a federally qualified bank offering HSA trustee services. It is not affiliated with Independence Blue Cross.