Understanding The Power Of Your Health Savings Account

When you sign up for a Federal Employees Health Benefits (FEHB) High Deductible Health Plan (HDHP) with a Health Savings Account (HSA), you gain a valuable tool to help manage your medical expenses. Here’s how it benefits you:

HSAs receive equal monthly contributions that are partially funded by your premium, a process known as premium pass-through. The annual contribution amounts vary depending on your specific plan and the number of people covered. For self-only coverage, contributions range from $750 to $1,200, while contributions for self-plus-one or family plans range from $1,500 to $2,400.

Beyond your plan’s contributions, you have the option to contribute additional funds to your HSA. If you’re a self-only enrollee, your annual HSA deposits can reach up to $4,150, and for self-plus plans, the cap is $8,300. If you’re 55 or older, you can take advantage of an extra $1,000 yearly catch-up contribution. These voluntary contributions come with tax benefits: they can be made pre-tax via payroll deductions or as lump-sum contributions that you can deduct on your tax return. Plus, your HSA funds grow tax-free, and there’s no tax on withdrawals used for qualified healthcare expenses.

Your HSA isn’t just for major medical bills; it can also cover everyday items like over-the-counter medications, feminine hygiene products, and allergy remedies. Since you own your HSA, you can carry it into retirement and use it to pay for Medicare Part D and B premiums as well as long-term care insurance premiums.

If life throws you a curveball and you need to use your HSA for a non-qualified medical expense, there’s typically a 20% penalty plus your regular tax rate. However, once you turn 65, the penalty is waived, and you’ll only pay your usual tax rate on withdrawals.

Much like an Individual Retirement Account (IRA), your HSA is managed by a financial services company. This gives you the flexibility to invest your unused funds in a wide range of options, often more than what’s available through your Thrift Savings Plan (TSP). And because you own your HSA, you can take it with you if you change healthcare plans or leave federal service altogether.

Let an FRC^® trained advisor help you make the most of your HSA benefits.