How to Use Your HSA
If your employer offers a High Deductible Health Plan, now’s the time to learn more about HSAs. Selecting the right coverage for you and your family is important, and we want to help you understand your benefit options.
Health Savings Account FAQs
What is a Health Savings Account?
A Health Savings Account (HSA) allows eligible individuals who are covered by a qualified High Deductible Health Plan (HDHP) to pay for eligible medical expenses of the eligible individual, his/her spouse, and his/her tax dependents.
An HSA helps you pay for the medical expenses not covered by your HDHP—tax-free.
What is a qualified High Deductible Health Plan (HDHP)?
To contribute to an HSA, generally, you may only have health coverage under a qualified High Deductible Health Plan (HDHP). A qualified HDHP usually has a higher annual deductible than a typical health insurance plan. Additionally, there is a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that an individual must pay for covered expenses.
What are the benefits of an HSA?
HSAs offer the benefit of tax-advantaged savings and reduced taxable income, regardless of your income level. Individuals may set aside income tax-free and build assets that they can use in their retirement years; and/or reduce their medical costs right now.
- HSAs afford you several tax advantages:
- Tax-free contributions
- Tax-free growth
- Tax-free distributions for eligible medical expenses
- You “own” the account:
- Balances roll over from year to year, there’s no “use or lose” requirement
- Even if you change jobs, change medical coverage, become unemployed, move to another state, or change your marital status, your HSA goes with you!
- HSA dollars may pay for eligible medical expenses as defined by the Internal Revenue Code. Eligible medical expenses would include deductibles, co-payments, dental, vision expenses, or doctor appointments, as long as these expenses are not covered by other insurance.
What happens to my HSA if I switch employers?
Your HSA is your account, and you may take it with you wherever you work. If you participate in a qualified HDHP at your new employer, you may continue contributing to your HSA. If your employer has an HSA set up under a Section 125 Plan, you may continue to contribute on a pre-tax basis through payroll deduction. If your employer does not offer an HSA, you may no longer contribute to your HSA. However, you may still use your remaining HSA funds to pay for eligible medical expenses.
What if I am no longer covered by a qualified HDHP?
If you are no longer covered under a qualified HDHP, you may no longer contribute to your HSA. However, you may still use your remaining HSA funds to pay for eligible medical expenses.
Can my HSA be used to pay premiums?
Generally, HSA funds may not be used to pay for health insurance premiums tax-free. However, there are exceptions for some premiums where distributions are considered eligible. You may use your HSA funds to pay for health insurance premiums if you are collecting Federal or State unemployment benefits, if you have COBRA continuation coverage through a former employer, or have Medicare part A, B, C, or D (supplemental medical coverage premiums do not qualify).
Do the funds in an HSA roll over?
Yes! Unused funds roll over year to year, so you will not lose any money you don’t use.
Can you have more than one HSA?
Yes, you can have more than one HSA. You must be covered by a qualified HDHP to contribute to them, and your contributions combined must not exceed the annual maximum limit.
What can I purchase with my HSA?
The funds you withdraw from your HSA are tax-free when used to pay for eligible medical expenses. Refer to the HSA Eligibility List for a comprehensive look at many of the items covered by an HSA.
Do HSAs cover anything not covered by a Healthcare Flexible Spending Account (HCFSA)?
Yes, in addition to covering the same items as an HCFSA, HSAs will also cover COBRA and long-term care expenses.
Can HSA funds be invested?
An HSA offers significant tax advantages and provides opportunities to invest in mutual funds. If you’re looking for an additional way to plan for retirement, an HSA may provide you with another means to save for your retirement goals.
When to invest your money
Account holders can choose to invest their funds in a variety of options. A minimum balance of $2,500 must be maintained in the HSA before investing.
You will not be charged fees to invest, however, fees associated with certain funds may be incurred. We recommend you review the fund’s prospectus for additional information when choosing an investment option.
Where to invest your money
American Fidelity Assurance Company provides no-load mutual funds that cross all investment risk tolerances, such as American Funds, AIM, Vanguard, and Morgan Stanley. You pick the mutual fund that best suits your needs and risk tolerance from our selected list.
What happens to my HSA when I die?
Upon the death of an HSA account holder, any amounts remaining transfer to the designated beneficiary. If the beneficiary is the surviving spouse, then the spouse becomes the account holder of the HSA and the transfer is not taxable. Any distributions that are used for non-eligible medical expenses are subject to income tax. If the beneficiary is someone other than the deceased account holder's surviving spouse, then the HSA ceases to be an HSA and is subject to income tax.
What are the rates and fees of an HSA?
Interest Rates & Annual Percentage Yield (APY)1
$0.00 - $500.00
$500.01 - $2500.00
$2500.01 - $5000.00
Set-up Fee2 (one time or waived with electronic enrollment)
Monthly Maintenance Fee3
Withdrawal Processing Fee
Manual Distribution Form
Deposit Item Return, Excess Contribution Withdrawal, Mistaken Distribution Return, Stop Payment
Investments (stocks, mutual funds)4
Reissue of Reimbursement Check, Corrected IRS Filing Fee/copy, Rollover/Transfer, Wire Transfer, Account Closure, Research on Account/Debit Card Transactions
Miscellaneous Fees5 (if applicable, fee is charged per transaction)
1 This is a variable rate account. The interest rate is subject to change daily at our sole discretion. Your entire balance will earn the interest rate in effect for the balance associated with your daily balance. We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day. Interest will be computed daily. This interest will then be compounded monthly and will be credited to your account within five business days after the previous month. If you close your account before interest is credited, you will not receive the accrued interest.
2 Set up fee can be submitted with the application or can be deducted from the first contribution to the account (Fees are an allowable tax free distribution from the HSA; however, you may not contribute funds above the annual contribution limits to cover fees.) If you signed up for the Health Savings Account through your employer or health plan, this fee may not apply.
3 Monthly maintenance fees will be deducted automatically from your HSA following set up of the account unless otherwise paid by you or paid by a third party. If you signed up for the HSA through your employer or health plan, this fee may not apply to your account as long as your employer or plan membership remains the same. Employees that terminate employment will be required to pay the current fee as outlined on americanfidelity.com.
4 Account funds over the minimum of $2,500 may be invested in a wide range of mutual funds. American Fidelity reserves the right to sell these funds if the HSA account does not have the funds to cover the monthly maintenance or other transaction fees.
5 All other fees will be deducted automatically from the HSA for each transaction unless otherwise paid by the account owner. American Fidelity may change the amount or type of any of the above fees or add additional fees at any time in accordance with the terms of the Custodial Agreement.
What is my HSA balance?
- Log in to your online account
- Select your HSA account to review your balance and transaction history
- Simply log in to AFmobile to view you HSA balance from the home dashboard.
How do I pay with my HSA?
Benefits Debit Card
When you use your Benefits Debit Card to pay for eligible medical expenses, the amount is deducted straight from your account.
With an HSA, funds are available in your account as contributions are made. If funds are not yet available at the time a payment is due, you may pay out of pocket and reimburse yourself when you have funds in your account with the following methods:
Online Bill Pay
You can choose to reimburse yourself for any eligible medical expenses or pay your provider directly from your online account using our online bill pay option.
If you prefer not to use the online reimbursement option, you can withdraw funds to reimburse yourself for eligible medical expenses by completing our Distribution Request Form and mailing or faxing it back to American Fidelity.
If I have a Limited Purpose Flexible Spending (LPFSA) and an HSA, will my Benefits Debit Card work for both?
If you have both an LPFSA and an HSA, you may use your red Benefits Debit Card for both accounts. Eligible vision and dental expenses will be deducted from LPFSA first, since those funds expire at the end of your plan year. When your LPFSA funds have been used up, your HSA funds will be deducted.
Are there any tax penalties if I close my HSA?
There are no tax penalties to close your HSA. Keep in mind that if you pay for an ineligible medical expense, you must report it in your annual tax filing and pay income tax and a 20% additional tax penalty before age 65.
Do I need to report HSA activity on my tax forms?
Yes, there are specific forms you will receive to report on your tax forms if you have an HSA. Below are a few of the necessary forms you will need to help you file your tax return correctly with the Internal Revenue Service (IRS).
NOTE: American Fidelity Assurance Company does NOT provide tax advice. If you have questions regarding how to fill out IRS Form 8889, you will need to consult a tax professional.
IRS Form 1099-SA reflects all distributions from your HSA for the previous tax year. You will only receive this tax form if you’ve taken distributions for the specific tax year. These forms are mailed out and made available to you through your online account at the end of January.
IRS Form 5498-SA indicates your total contributions from the previous tax year. These contributions can be made up until the federal tax-filing deadline (usually April 15) of the new tax year. These forms are mailed out and made available to you through your online account at the end of May.
The information for contributions is also on your W-2, box 12, as long as you've contributed via payroll deduction. You do not have to wait until the end of May for your contribution information.
IRS Form W-2 shows total contributions made to your HSA through your employer (both your own pre-tax contributions and any your employer makes on your behalf) in Box 12W. This form is provided to you by your employer.
IRS Form 8889 is used to report contributions, distributions, and your tax deductions. You or your tax professional will complete this form using IRS Forms 1099-SA and 5498-SA provided by American Fidelity.
IRS Publication 502 – Eligible and ineligible medical expenses.*
IRS Publication 969 – Health Savings Accounts and other tax-favored health plans
IRS Forms 1099-SA and 5498-SA – Complete instructions for these forms
How do I find my HSA tax forms?
Your annual tax forms will be mailed to the address on file by January 31st each year. If you prefer to have a digital copy, follow the instructions below to download your forms.
- Log in to your account and select the blue Manage My Reimbursement Account button.
- From the red navigation bar, hover over My Accounts, then select Benefit Account Summary.
- Select the Tax Forms link. This link is located just above your account balance graph.
- You may be prompted to complete a PDF verification step. Follow the instructions provided.
- Select the form name to download.
How do I reimburse myself?
- Log in to your online account
- Click on the Access My Reimbursement Account button
- Choose Add Claim from the Claims dropdown
- Complete the claim form
- Click the Submit button
- Touch the Submit Reimbursement button on the AFmobile dashboard
- Complete the Claim Form
- Click the Submit button
- Fax or Mail
Although receipts are not required to receive reimbursement for your HSA, it is important to keep all documentation to show proof of eligible expenses in case of an audit.
Is there a time limit to when I can reimburse myself?
No, there is no time limit to when you can reimburse yourself, as long as the expenses were incurred after you opened your HSA.
Do I need to keep receipts for HSA transactions?
You are not required to submit receipts to withdraw funds from your HSA. However, we recommend keeping receipts for your records to prove funds were used for eligible medical expenses in case of an audit.
Who is eligible to open an HSA?
Employees can open an HSA if they:
- Are included in an employer-sponsored qualified High Deductible Health Plan
- Are not covered by any other type of health plan, including Medicare
- Are not claimed as a dependent on another person’s tax return (excluding spouse)
Can I use my HSA to pay for my spouse or dependent’s medical expenses?
Yes. As the HSA account holder, you are eligible to use your funds, without penalty, for eligible medical expenses of your spouse and any tax-dependent children, regardless of their major medical plan.
What expenses are eligible to purchase with HSA funds?
Refer to the HSA Eligibility List for a comprehensive look at many of the items covered by an HSA.
Who is not eligible participate in an HSA?
- You may not have secondary coverage that is non-HSA compatible.
- If you are covered by a qualified HDHP and also have secondary coverage through your spouse’s health plan that does not meet the minimum requirements for an HDHP, you would not be eligible to establish a new HSA or make contributions to a current HSA.
- You may not be claimed as a dependent on another’s tax return.
- If you are still being claimed on someone else’s tax return, you are not eligible to establish your own HSA. If this is the case, you may still be able to use the HSA funds (if applicable) of the parent or guardian claiming you on their tax return.
- You may not participate in a general purpose Healthcare FSA or HSA.
- If you or your spouse participates in a Healthcare Flexible Spending Account (Healthcare FSA) or a Health Reimbursement Arrangement (HRA) that allows for reimbursement of your medical expenses, you are not eligible to establish a new HSA or make contributions to a current HSA.
- You may not use VA or Indian Health Service medical benefits.
- If you have accessed VA or Indian Health Service medical benefits, you must wait three months from the time of use of those benefits to make contributions to your HSA. This does not include use of VA or Indian Health Service benefits for preventative care, dental, vision, well-baby visits, and immunizations.
- You may not be enrolled in Medicare or TRICARE.
- Once you are enrolled in Medicare or TRICARE, you are no longer eligible to make contributions to your HSA. However, you may still continue to use your funds. If you are age 65 or older, as long as you have not enrolled in Medicare or TRICARE, you may continue to make contributions and use your funds.
What is the maximum annual contribution amount?
The 2020 the contribution limits are $3,550 for single plans and $7,100 for family plans. For 2021, the contribution limits are $3,600 for single plans and $7,200 for family plans.
How do the contributions work for married couples?
If both spouses have an HSA and are eligible to contribute, their total contributions cannot exceed the family maximum, regardless of if they have individual HSA accounts or a family account.
What is the "catch-up" contribution for individuals 55 or older?
The “catch-up” contribution is $1,000 annually. To be eligible for the catch-up contribution, you must be between the ages of 55 and 65, (or 65 and older if you are not enrolled in Medicare).
How do I contribute to my HSA?
We offer three easy ways to contribute funds to your HSA:
Contribute Through Payroll Deduction
Payroll deduction allows you to have contributions taken directly from your paycheck. The funds are deducted pre-tax through your employer’s Section 125 Plan. You may change or stop your contribution amount at any time through your employer.
Employees should contact their Human Resources department to start payroll deductions.
Contribute Online or By Check
To contribute online, log in to your online account and click Manage My Reimbursement Account. From the home dashboard, select Health Savings Account. Click on the Contributions button, then select Add Contribution.
If you decide to contribute directly to your account, you will need to take the appropriate steps on your annual tax return to receive the tax savings benefit. You may also contribute by check by completing a Contribution Form.1
Transfer Funds from Another Provider
New or existing account holders may roll over or transfer HSA funds from another provider to American Fidelity. This allows you to consolidate your HSA funds into one account, minimizing account maintenance. Contact your HSA provider for instructions.
Can I have an HSA and an Individual Retirement Account (IRA)?
Yes, you can have both an HSA and an IRA.
Although HSAs operate under many of the same rules that apply to traditional IRAs, an HSA is not an IRA; it is a tax-advantaged savings account for current and future medical expenses.
Can you use your HSA after you retire?
At age 65 and older, your funds continue to be available without federal or state income tax (in most states) for eligible medical expenses. For instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.
If you use your funds for eligible medical expenses, the distributions from your account remain tax-free. If you use the monies for non-eligible expenses after you turn 65, the distribution becomes taxable but exempt from the 20% penalty.
With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.
How does an HSA work with Medicare?
You may not contribute to an HSA if you are enrolled in Medicare. However, you may still use your existing HSA funds for eligible medical expenses tax-free. If you choose to use the funds for ineligible medical expenses, and you are age 65 and older, you must only pay income tax on the funds—the 20% additional tax penalty does not apply to you. If you are Medicare eligible, but you have not enrolled in Medicare, you are eligible to contribute to an HSA if you meet all other eligibility requirements.
Benefits Debit Card
What is a Benefits Debit Card?
A Benefits Debit Card allows you to pay for eligible medical expenses, such as prescriptions and copayments. If your employer has elected to provide a Benefits Debit Card, you may use this card instead of paying out of pocket.
Where can I use my Benefits Debit Card?
If you have a Benefits Debit Card, you may use it at most health care facilities, including hospitals, physician’s, dental, and vision offices.
Additionally, many merchants also accept the card. To view a list of participating stores, visit Sigis Store Locator.
My Benefits Debit Card was lost or stolen. How do I get a new one?
How do I request additional debit cards for my family members?
If you have additional debit card users, you’ll need to request cards for them through your online account. Here’s how:
- Log in to your online account.
- Select the Access My Reimbursement Account button.
- Click your Username on the right side of the navigation bar.
- From this page, you can add or update an existing dependent, as well as manage other account details.
- When adding a family member, the dependent or spouse’s Dependent ID is their Social Security number.
- In the Add Family Member window, select the box to Issue Dependent Card.
- When complete, click Next and Save.
Invest Your HSA Funds
An HSA offers significant tax advantages and provides opportunities to invest in mutual funds. A minimum balance of $2,500 must be maintained in the HSA before investing.
How to Invest Your Money
InvesTrust serves as the custodian for all investments made through your HSA. You will not be charged fees to invest, however, fees associated with certain funds may be incurred. We recommend you review the fund’s prospectus for additional information when choosing an investment option.
Where to Invest Your Money
American Fidelity Assurance Company provides a strong offering of no-load mutual funds that cross all investment risk tolerances, such as American Funds, AIM, Vanguard and Morgan Stanley. You pick the mutual fund that best suits your needs and risk tolerance from our selected list.