Employees & Individuals Q&A

A Health Savings Account is an account that you can put money into to pay for current or future qualified medical expenses for yourself and your dependents. There are certain advantages to putting money into these accounts, including favorable tax treatment. You own the account and it is portable.

In general, any adult enrolled in a qualified High Deductible Health Plan (HDHP) can establish an HSA. Some exceptions do apply. You cannot establish an HSA if:

• You are covered by another medical plan, unless it is also an HDHP
• You are enrolled in Medicare
• You can be claimed as a dependent on someone else's tax return

An HSA-qualified HDHP is health insurance that has a minimum deductible and a maximum out-of-pocket expense. These amounts are adjusted for inflation each year. In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. Plans can pay for "preventative care" services (with or without a co-pay). For the 2013 calendar year, the following amounts apply:

Type of Coverage	Minimum Deductible	Maximum Out-of-Pocket Expense
Individual HDHP coverage	$1,250	$6,250
Family HDHP coverage	$2,500	$12,500

Contact your health care insurance provider or your benefits representative to obtain specific information on your health plan and whether or not it qualifies as a HDHP.

You can make a contribution to your HSA each year you are eligible. Contribution maximums are adjusted each year. For the 2013 calendar year, the following limits apply:

Type of Coverage	Maximum annual contribution*
Individual coverage under age 55	$3,250
Individual coverage age 55 and older	$4,250
Family coverage under age 55	$6,450
Family coverage age 55 and older	$7,450
*Contribution limits may vary depending on whether you are covered by your HDHP plan for the entire calendar year or not, or whether your HDHP is changed any time during the year between individual and family coverage or vice versa. Consult your HSA provider or tax advisor for more information. Contributions can be made up to April 15 of the following year.

Contributions to your HSA can be made by you, your employer, or both, or anyone else. Contributions can no longer be made once you are enrolled in Medicare or have other non-HDHP coverage. However, you can continue to keep the money in the account and use it to pay for qualified medical expenses tax-free. It is important to remember that total contributions in any year cannot exceed the maximum, regardless of who is making the contributions. Excess contributions may be subject to additional taxes.

HSAs provide you triple tax savings:

# Contributions are tax deductible on your federal income tax return*
# Interest earned on your account is tax-free
# Distributions are tax-free if made for qualified medical expenses**

No, the interest earned on your account is tax-free.

Yes, if held in an FDIC insured bank account. (FDIC coverage limits to apply.) Investments, mutual funds and other securities are not FDIC insured products.

You can use the money in the account to pay for, or reimburse yourself for, any “qualified medical expense” for yourself, your spouse, or your dependent children (even if they are not covered by your HDHP). A list of qualified medical expenses can be found in IRS publication 502. These withdrawals from the account are considered distributions are tax-free if used for qualified medical expenses. If you make withdrawals for non-qualified medical expenses, the amount is taxable to you as income and, unless you are 65 or older, you will also incur additional penalties from the IRS.

You can make payments for medical expenses directly from the account using your QNB Health Savings Account Check Card on the bill payment option via QNB-Online. If you pay for your qualified medical expenses from funds other than those in your QNB Health Savings Account, you can reimburse yourself by making a withdrawal from your QNB Health Savings Account. It is important to retain all your receipts to support your withdrawals/distributions from your HSA to prove they were used for qualified medical expenses.

You are only able to remove from your HSA funds you already have on deposit in the account. If you should need to make a payment that exceeds the balance in the account, you may pay the expense out-of-pocket and reimburse yourself for the expense as funds become available in your HSA to cover it.

While, it is important to retain all your receipts to support your withdrawals/distributions from your HSA to prove they were used for qualified medical expenses you do not need to supply these receipts to your employer or the financial institution.

The IRS makes a publication 502 available that includes a listing of “qualified medical expenses”. You can find this online at www.irs.gov.

You will be issued a Form 1099-SA reporting all the distributions from your HSA. You are responsible for determining which of your distributions are for qualified medical expenses and reporting these amounts on your IRS Form 1040 (on Form 8889). If you make withdrawals for non-qualified medical expenses, the amount is taxable to you as income and, unless you are 65 or older, you will also incur additional penalties from the IRS.

There is no “use it or lose it” rule with HSAs unlike other health spending accounts (for example Flexible Spending Accounts), so the money remains in your account earning interest. It is then available to you for future medical expenses.

Once enrolled in Medicare, you are no longer eligible to make contributions to your HSA. At age 65, you can begin to make withdrawals/distributions from you HSA for non-qualified medical expenses without incurring the IRS penalty; however such distributions are taxable as income.

As the HSA Account owner, you are responsible for maintaining records of transactions and supporting receipts. These may be required by the IRS to document the activity in your HSA account. QNB will provide monthly statements and certain forms for year-end tax reporting; however, the specific medical purpose of each individual transaction is information not known to or reported by the bank. You may find that QNB’s online banking and bill payment systems assist you in your recordkeeping.

Simply stop by any QNB branch location where a Financial Services Representative will be happy to help you complete the necessary forms to establish your new HSA.

Simply stop by any QNB branch location where a Financial Services Representative will help you establish your new HSA at QNB and complete a form to request your existing HSA financial institution to transfer the HSA to QNB.