If you have one of our qualified1 high-deductible
BlueOptions health plans
and haven’t opened a health savings
account (HSA), consider this: An HSA
is a great way to save toward current
or future qualified out-of-pocket
medical expenses.2 What’s more,
an HSA provides triple tax savings:
- Tax deductions when you
contribute to the account
- Tax-free interest and investment
gains
- Tax-free withdrawals for qualified
medical expenses
Your account is portable; it travels
with you no matter where you live
or work.
Contributions
HSA contributions are subject to IRS
rules. As part of the Tax Relief and
Health Care Act of 2006, you can now
contribute more into an HSA. For
2007, your annual contribution can
equal up to:
- $2,8503 if you have individual
coverage; or
- $5,6503 if you have family coverage.
Those ages 55 and older can make
an additional “catch up” contribution
of $8003 in 2007.
An HSA is your account to manage in
conjunction with a qualified financial
institution or trustee. You can open an
HSA with the financial institution of
your choice. But we’ve made it easy
for you through our arrangement
with Affiliated Computer Services
and Mellon Financial Corporation
(ACS/Mellon).
How an HSA works
How much you contribute depends on
your circumstances. If you can afford
to contribute the maximum allowed,
you’ll save the most on taxes. If you
want to limit your contribution to
likely withdrawals, try to estimate
your usual medical expenses. Reviewing
your 2006 Personal Health Report,
which itemizes medical claims paid,
can help. If you contribute more than
the amount you actually withdraw for
qualified expenses, the extra money
will remain in your account. You’ll
save on taxes and have more money
for future expenses.
Let’s say you contribute $1,250 and
your qualified medical expenses are
$1,000 for the year. You will pay no
income tax on the $1,250 of earnings
you contribute to the HSA and no
income tax on money withdrawn for
qualified medical expenses. The $250
left in the account at the end of the
year will roll over year after year and
will earn interest or investment gains
tax free. You’ll pay no tax or penalty
if you later withdraw that money for
other qualified medical expenses. If
you withdraw the money to pay for
non-qualified medical expenses, you
will pay income tax and a 10 percent
penalty—unless you are age 65 or
older. At age 65 the 10 percent penalty
no longer applies.
If you are overcharged and pay more
than the eligible amount from your
HSA, you must re-deposit the overcharged
amount back into your HSA
account to avoid tax penalties. If you
have set up your HSA with ACS/Mellon, they will provide you with a
form for redepositing overpayments
so your records for contributions
vs. withdrawals are accurate for
tax-reporting purposes.
www.treasury.gov/offices/public-affairs/HSA
¹As defined by the IRS.
² Blue Cross and Blue Shield of Florida offers only the high-deductible
health plan to be used in conjunction with the
health savings account (HSA). For more information on the
tax advantages and implications of HSAs as used with a
high-deductible health plan, contact your legal or tax
advisor.
³Adjusted annually for inflation.
