Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Keeping Health Saving Accounts and other Health Insurance topics.
Opening a health savings account (HSA) is very similar to opening any other bank account. You can probably open a health savings account at your existing bank or credit union. Health savings accounts are also available through insurance companies and other approved companies as well as through many employers. As with any other banking service, do some homework before deciding where to open your account. There should not be opening fees associated with opening a HSA, but there may be other service fees associated with maintaining the account similar to those with checking accounts and savings accounts. The interest paid on the account will vary from institution to institution, sometimes considerably. Finally, some institutions may offer greater conveniences linked to your HSA such as debit cards that allow you to pay for medical expenses at the point of purchase. That way you will not have the hassle of submitting receipts. If you open your HSA through your employer, your contributions will be made on a pre-tax basis directly through paycheck deductions. If you are opening an HSA on your own, you will need to keep all documentation of contributions made during the calendar year so you can claim them as a direct deduction to your gross income when you prepare your income taxes.
As of January 2007, most banks and credit unions still DO NOT Offer HSAs. If your total fees are more then $25 per year, keep looking because fees are dropping. Also, don't be focused on high interest rates, its the fees that will have a greater impact on the future value of the account.
EVERY bank should offer a Free Debit card with your HSA. If they don't, keep looking!
You NEVER have to submit receipts to get reimbursed with HSA plans regardless if you use a debit card or cash. However, you do have to save your receipts if you get audited.
Having contributions made on a pre-tax basis has nothing to do with setting up your HSA through your employer. What you need to setup for max pre-tax savings is to run your contributions through your employer's section 125 plan. If your company doesn't have a 125 plan, you are only losing 7.65% (FICA/SS)on those contributions. You will still get an adjustment on your Federal and State Taxes when you complete your return. Finally, I would avoid using the HSA that comes with your healthplan. It typically contains high fees and can be a problem when you switch carriers the next year!
|Jennifer Mathes, Ph.D.|