Health Savings Accounts

Money and stethoscope

If you have benefits through a qualified High-Deductible Health Plan (HDHP), a Health Savings Account (HSA) lets you put money aside, tax-free, for healthcare expenses. Unused funds in the HSA are carried over from year to year and continue to earn tax-free interest until you withdraw the funds. 

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Eligibility

To qualify for an HSA, you must:
  • Be covered under a qualified High Deductible Health Plan (HDHP) 
  • Have no other health coverage besides an HDHP 
  • Not be enrolled in Medicare or Medicaid 
  • Not be eligible to be claimed as a dependent 

If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. This is true even if the other person does not actually claim the deduction. 

HSAs are titled as individual ownership, although you may designate an authorized signer and/or beneficiary.


Eligible Expenses

Choose an HSA to pay for qualified medical expenses*:
  • Medical services (including dental and vision care) 
  • Hospital costs 
  • Prescription drugs
  • Long-term care insurance 
  • Health insurance premiums during any period of unemployment

*This is only a partial list. The Internal Revenue Code Section 2103(d) states that eligible expenses must be made for "medical care." This is defined as amounts paid for the "diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body." 

For a detailed description of medical expenses eligible for payment through your HSA, please refer to publication 502 at treasury.gov .


Benefits

Advantages of a STAR Bank Health Savings Account:
  • Competitive interest rate
  • $4.00 monthly maintenance fee is waived when you sign up for STAR's free Online Banking
  • Monthly e-mail with a direct link to your HSA online statement where you can check your contributions and distributions, and view cancelled check images.
  • Free STAR Online Banking also gives you fast access to your HSA records, making it easier to prepare your taxes.
  • If you change employers, your HSA moves with you.


Contributions

An HSA features many tax benefits that help you better manage medical expenses. At the same time, it can be a very attractive retirement savings option.

With an HSA, you may claim a tax deduction for contributions that you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.

Contributions to your HSA made through payroll deductions by your employer may be excluded from your gross income, including those contributions made through a cafeteria plan.

  • HSA interest earned is tax-free 
  • Distributions are tax-free, as long as funds are used for qualified medical expenses 


Rollover Rules 

  • Rollovers from Archer MSAs and other HSAs are permitted. Only one rollover per year is allowed. A rollover to a new HSA must be completed within 60 days. These restrictions follow the IRA rollover rules. 
  • Direct trustee-to-trustee transfers of HSA funds are not subject to the rollover restrictions. Thus, multiple trustee to trustee transfers are allowed in a single year. Both trustees must agree to do the transfer and they are not required to do so. 
  • Individuals may make a one-time lifetime transfer from their IRA to fully fund their HSA, not to exceed the maximum allowable contribution. (IRA distribution is not taxable. HSA contribution is not deductible. Testing period applies.) 

To rollover your HSA to STAR, please contact a banker to get started.

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