Health Savings Account FAQs

What is an HSA?

A Health Savings Account is a new type of account, in which you deposit funds to pay for future out-of-pocket medical expenses.

Earnings on your HSA are not taxed on your annual income, and the balances in your HSA can roll over from year to year and continue to grow tax-deferred, unlike the money in a more common "flexible spending account." *

Furthermore, even if you don't itemize deductions each year, you may still deduct the total contributions when completing your federal income tax return.*

How to open a Tech CU HSA

• Step 1: Apply for HSA eligible insurance (aka: High Deductible Health Insurance Plan) if you do not currently have one.
• Step 2:  Download, print, and complete a Tech CU membership application (even if you’re already a Tech CU member).
• Step 3:  Submit it with your Health Savings Account forms (found in the HSA Service Center). (Don’t forget to show your ID or make a copy of your valid license and send it in with your application!)

You can either drop your paperwork off at a local Tech CU Financial Center or mail it in to the address below:

Technology Credit Union
Attn: HSA/IRA Department
2010 North First Street
San Jose, CA 95131

Who is eligible to open an HSA?

An HSA is available to individuals and their families who are covered by a high deductible health plan (HDHP), regardless whether the person is self-employed or employed by a small employer.

• is not also covered by any other health plan that is not an HDHP
• is not enrolled for benefits under Medicare
• is not eligible to be claimed as a dependent on another person's tax return

What are the benefits of an HSA*?

• HSAs can provide significant tax benefits to eligible individuals:
• HSA contributions by employer or employee are excluded from Federal income tax 
• HSA earnings are tax-deferred
• If used for qualified medical expenses, HSA assets are never taxed
• Unused HSA assets may be used for retirement, however, they will be subject to a 10% penalty until the HSA account beneficiary turns age 65. If not used for medical expenses, they will be subject to income taxes

What is an HDHP (high deductible health plan)?

An HDHP is an insurance policy that meets certain dollar limits as shown below:

What are qualified medical expenses?

For HSA assets to retain their tax-free status, they may only be withdrawn and used for certain expenses:

• Actual medical expenses, including doctor visits, prescriptions, transportation to get medical care, and dental care
• Long-term care insurance
• Healthcare coverage when unemployed
• Certain continuation-of-benefit healthcare coverage
• Certain health insurance after age 65

Non-qualified uses of HSA assets are subject to taxation and a 10% penalty unless the HSA account beneficiary is age 65 or older, dies, or is disabled.

What are the regular contribution limits?

The total HSA contribution amount for any taxable year is dependent upon whether you have individual or family coverage under the HDHP:

In addition, persons over the age of 55 may also contribute an additional amount known as a "catch-up" contribution. The catch-up contribution limit for 2008 is $900, and is scheduled to increase by $100 each year to reach $1,000 by 2009.

You may make regular contributions for the previous tax year up to your tax return due date (not including extensions).

Who may contribute to an HSA?

Contribution may be made by the eligible individual, employer or the eligible individual, or any other person on behalf of the eligible individual.

How do I access funds from an HSA?

You can access funds from your Health Savings Account by writing Health Savings Account checks, using your Health Savings Account CheckCard, and by withdrawal by teller check drawn from your Health Savings Account. Signature-based transactions on HSA CheckCards fall under Visa’s Zero Liability Policy. PIN-based HSA CheckCard transactions, however, do not fall under Visa’s Zero Liability Policy, rendering the cardholder liable for those transactions in case of dispute. Health Savings Account checks are subject to the same rules that govern Checking Accounts generally, but overdraft protection is not available on Health Savings Accounts. Any Health Savings Account check written on insufficient funds will be returned unpaid. 

What are the IRS reporting requirements for HSAs?

HSA owners and HSA trustees and custodians are subject to IRS reporting requirements for contributions and distributions. If the employer makes contributions to the HSA, they must be reported in box 12 of Form W-2 Wage and Tax Statement, with a code of "W."

If a contribution or distribution is made by the owner, you must fill out form 8889 and include the contribution or distribution on your 1040 tax forms.

If you're married, do you have to name your spouse as your beneficiary?

If you're married and reside in a Community Property state (e.g. California) or a Marital Property state, you must either name your spouse as the 100% primary beneficiary or have your spouse sign the Spousal Consent.

* Consult a Tax Advisor.
** HDHP and contribution limits are revised each year to reflect cost-of-living increases.