HSA Eligibility
You must meet certain requirements to be eligible for an HSA; most importantly, you must be covered under a high deductible health plan (HDHP). An HDHP generally has lower premiums than other types of health plans, but also has a high deductible. Until your deductible is met, you must pay for all your medical expenses, except for preventive care, which is almost always covered. Assuming your HDHP is HSA-compatible, you can use your HSA assets to pay for these expenses.

An HDHP is considered HSA-compatible if it satisfies the annual deductible and out-of-pocket expense limits.

Besides having coverage under an HDHP, to be eligible for an HSA, you cannot be covered by another health plan (with limited exceptions), cannot be enrolled in Medicare and cannot be eligible to be claimed as a dependent on another person’s tax return. Also note that your HSA eligibility is determined as of the first day of each month.

Funding Your HSA
HSA contributions must be made by your tax return due date (April 15), and generally are tax deductible. The maximum amount you (and/or your employer) can contribute to your HSA each year depends on if you have self-only or family HDHP coverage. Also, if you attain age 55 before the close of a taxable year, your contribution limit increases by $1,000 for the annual catch-up contribution.

HSA Benefits
Savings tool with investment earnings; flexibility to pay current medical expenses or save for the future; tax-deductible contributions; tax-deferred earnings; tax-free withdrawals (if used properly); balance carries over from year to year; remains with you regardless of change in coverage or employment.

Using your HSA
You can withdraw money from your HSA tax-free if the money is used to pay qualified medical expenses as permitted under federal tax law. This includes most medical, dental, and vision care, but generally does not include health plan premiums. You can pay medical expenses for yourself as well as for your spouse and any dependents, even if they are not covered by the HDHP.

Qualified medical expenses also include the premiums you pay for qualified long-term care insurance, health insurance when unemployed, health insurance under COBRA continuing health coverage, and certain health insurance premiums after age 65. Use your HSA money for medical expenses now or in retirement. Keep in mind that HSA distributions not used for qualified expenses are subject to ordinary income tax and a 20% IRS penalty tax if taken before age 65 (unless due to death or disability).

Single Coverage Annual Contribution Limit

  • 2020 – $3,550
  • 2021 – $3,600

Family Coverage Annual Contribution Limit

  • 2020 – $7,100
  • 2021 – $7,200

Over 55 Catch-up Contribution

  • 2020 – $1,000
  • 2021 – $1,000

Single Coverage HDHP

  • 2020
    • Minimum Deductible – $1,400
    • Maximum Out of Pocket – $6,900
  • 2021
    • Minimum Deductible – $1,400
    • Maximum Out of Pocket – $7,000

Family Coverage HDHP

  • 2020
    • Minimum Deductible – $2,800
    • Maximum Out of Pocket – $13,800
  • 2021
    • Minimum Deductible – $2,800
    • Maximum Out of Pocket – $14,000

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