By Cindy Lohrey, AVP, Payroll & Benefits Manager
Most of us are aware of different investment vehicles used to get tax advantages — 401(k) plans, IRAs, and 529 college savings plans. But we’re often less knowledgeable about the tax advantages of contributing to an HSA, or health savings account.
If you are enrolled in a high-deductible health plan, you can contribute to an HSA. Per the IRS, the minimum annual deductible to qualify for an HSA is $1,350 for self-only HDHP coverage and $2,700 for family HDHP coverage. North Shore Bank’s medical plans all qualify for an HSA.
With an HSA, you can pay for current health care expenses and save for future ones as well. The first advantage of an HSA is that contributions are made through payroll deduction and are pre-tax. (You can also make after-tax contributions outside of a payroll deduction.) Second, the interest earned on an HSA is tax-free. Third, account owners may make tax-free withdrawals for qualified medical expenses. Triple advantage!
Other advantages:
- Can be used for Medicare premiums and out-of-pocket expenses
- Rolls over year after year — no “use it or lose it” like a flexible spending account
- Portable — goes with you where you go
Another important thing to note is that if you are on a North Shore Bank plan and you contribute to an HSA, the bank will match your contributions as follows:
| Plan A Single Coverage Plan A Family Coverage Plan B Single Coverage Plan B Family Coverage |
$400 $800 $750 $1,000 |
TAKE ADVANTAGE OF THIS FREE MONEY. DON’T LEAVE IT ON THE TABLE!
If you are thinking about the future and your retirement, we all know that increased health care expenses are a reality of aging. Having money to cover those medical expenses once you are on a limited budget could make a big difference. Another thing to consider is that once you reach the age of 65, you can spend your HSA money on things other than qualified medical expenses. Those distributions will be penalty-free.
For 2019, the IRS contribution limits are as follows:
| Single Coverage Family Coverage Age 55 and over can make an additional $1,000 catchup contribution. |
$3,500 $7,000 |
For those “plan ahead” employees, the 2020 IRS contribution limits will be as follows:
| Single Coverage Family Coverage Age 55 and over can make an additional $1,000 catchup contribution. |
$3,550 $7,100 |
The North Shore Bank match amount counts toward those limits, so be sure to take that into account when calculating what you want to contribute.
There is still time THIS calendar year to start contributing at the 2019 limits, or increase your contribution (if not already at the maximum allowed). Call me at X-3384 or stop by my office to talk about how to start your HSA account – and start saving TODAY!