A Health Savings Account (HSA) is used together with a high deductible health plan as an alternative to traditional health care plans. It is a tax-sheltered savings account similar to an IRA, but designated specifically for medical expenses. Deposits are tax-deductible and can be easily withdrawn by check or debit card to pay routine medical bills with tax-free dollars.
The balance not used from the account each year stays in the account and continues to grow interest on a tax-favored basis to supplement retirement, similar to an IRA.
Just a few of the benefits and features of an East River FCU HSA:
HSA Checking Account – HSA VISA® Debit Card(s) available
Interest paid monthly
Beneficiaries instead of joint ownership
Owner contributions are tax deductible
No use or lose provision
Withdrawals are tax and penalty free if used for medical expenses
Interest and investment gains may be tax-free
Distributions at 65 for non-medical uses are penalty free, but not tax-free
To qualify for an HSA
To be eligible for an HSA all of the following must apply to you:
You must be covered under a high-deductible health care plan
Not covered under another health care plan, other than your high deductible plan
Not eligible for Medicare
Not a dependent on someone else’s tax return
Cannot have received VA medical benefits in the previous three months
If you have questions about whether you qualify, contact your employer's health insurance plan administrator.
What classifies as a high deductible plan?
Ask your employer's health benefits plan administrator to determine if a high deductible plan is available to you and if you qualify for an HSA.
Contributing to your HSA
There are no limits on who can contribute to your HSA, however, there are contribution amount specifications.
There are limits on the amount you are able to contribute to your HSA per year. Contact your employer’s health insurance plan administrator for assistance in determining your annual contribution.
Contact the Credit Union if there are any changes to your health coverage throughout the year, such as, moving from individual coverage to family coverage. This affects how much can be contributed during the year.
If you're age 55 years or older by the end of the taxable year, and have not enrolled in Medicare, you can contribute an additional amount - contact an East River FCU Member Service Representative for specific amounts.
Your federal income tax return due date (April 15) is also your deadline for contributions.
Your HSA responsibilities
With your HSA, you are responsible for determining your allowable annual contribution and whether you have qualified medical expenses eligible for reimbursement.
Contact your tax advisor with questions on specific tax details regarding your HSA and tax liability.
View our Fee Schedule for a list of HSA fees.
Can the credit union help me determine if I qualify for a Health Savings Account?
No. Your health insurance plan administrator will be able to assist you with this determination.
Does the credit union monitor or approve my HSA transactions?
No. The HSA account holder is solely responsible for funds going out of the account and must keep sufficient records to show that the distributions were used exclusively to pay or reimburse qualified medical expenses. The records must show that the qualified expenses were not previously paid or reimbursed from another source and that they have not been taken as an itemized deduction in any prior year.
Can I use my HSA to pay for medical expenses incurred before I establish my HSA?
No. You cannot use funds in your HSA to pay for expenses you incurred before your account was established. It is recommended you open your HSA as close as possible to the effective date of your HSA qualified health plan.
Does the credit union keep track of my annual contributions?
Yes. We cannot accept annual contributions that exceed the maximum allowable amounts. However, if your deductible is less than the maximum allowable limit, the credit union is not responsible for determining the amount that you are actually allowed to contribute. It is your responsibility to notify the credit union of any excess contributions.
Do you notify the IRS of my HSA contributions and distributions?
The credit union files required annual information returns with the Internal Revenue Service for all HSA accounts.
What types of things are qualified medical expenses?
See IRS Publication 502 for a complete listing.
What if I spend the money on something other than a qualified medical expense?
The amount that exceeds the amount of qualified expenses will be subject to federal income tax and an early withdrawal penalty.
Must I use all the money each year like my flexible spending plan?
No. Unlike other medical savings products, HSA balances will automatically roll over from year to year, allowing you to build up savings to cover qualified medical expenses when the need arises. There is no “use it or lose it” scenario every year with an HSA.
Can I use my HSA to pay for medical expenses for my spouse or my dependent child?
Yes, distributions from an HSA are excluded from income if they are made for any qualified medical expense of your spouse or other dependent.
Who is allowed to make a contribution to a member's HSA?
Anyone can make a contribution to an HSA on behalf of an eligible individual. All contributions, regardless of who makes them, will be applied toward the total amount that the member is eligible to contribute.
How can I access my East River FCU Health Savings Account?
Your ERFCU HSA is set up like a checking account. You can access the funds in any number of ways:
Checks are available. You may simply write checks from your HSA account to pay medical expenses.
Online Banking and Bill Pay service is available. You can set up various vendors for your individual or recurring medical expenses.
Automatic debit is available. If you have a recurring medical payment, you can have the provider debit the payment from your HSA.
A VISA® debit card is available. You may use a debit card to conveniently access your HSA account.
What are the advantages of an East River FCU HSA VISA® debit card?
With a swipe of your HSA VISA® debit card, you can pay for prescriptions, doctor’s visits, dental expenses, and more. You can use the HSA debit card anywhere VISA® debit cards are accepted. You can also use it to make withdrawals at ATMs. If you need to pay a large medical bill, we ask that you give us a call and we can temporarily raise your HSA debit card daily limit.
What will happen if I overdraw my HSA?
You will be assessed a non-sufficient funds (NSF) fee, just as you would with a standard checking account. We will, however, be unable to honor the NSF check, or provide any type of overdraft protection, because the credit union would have no way of knowing whether we might inadvertently be over-contributing to your HSA. Health Savings Account overdraft items will, in all cases, be returned. The fee will not increase your annual contribution limit.
What happens if I change jobs or health plans?
HSAs are owned by the individual, so if you change jobs or health plans, you may keep your HSA at ERFCU and continue to spend HSA funds on qualified medical expenses. You may contribute to your HSA as long as you stay in an HSA high-deductible health plan. However, you cannot make additional contributions to the account if you are no longer covered under a qualified high deductible health plan.
Can I use funds from an HSA for non-qualified medical expenses?
Yes, but you’ll be required to pay income tax and a tax penalty on the amount you use for non-qualified medical expenses. Contact your tax advisor with questions on specific tax details regarding your HSA and tax liability.
What do you charge for fees on an HSA?
Please see our fee schedule for a list of fees.
What happens to my HSA upon death?
If married, your spouse becomes the owner of the HSA account and can use it as if it were his/her own HSA. If not married, the account is no longer treated as an HSA. It will pass to your beneficiary, or becomes part of your estate, and funds will become taxable.
For more questions and answers about Health Savings Accounts, visit the U.S. Department of Treasury’s website.