Friday, October 25, 2013

Four Steps to Funding Your HSA

The IRS establishes how much you can contribute to an HSA each year. In 2014, an individual can contribute $3,300 and a family can contribute $6,550. If you're older than 55, you can contribute an additional $1,000 to your account as a catch-up contribution.

The HSA limits are set for the calendar year. If you're part of an HSA for a partial year, you can prorate your contribution limit based on the number of months that you participate in a high deductible health plan. 

Wondering where you will come up with the money to fund the account? 
The deductible is only $4,000!
  1. Take note of the amount your employer will contribute. ASHA will contribute -- $1,000 for individual coverage and $2,000 for family. 
  2. Calculate the difference in the premium from the plan you're in now and our new Choice Plus with HSA. I have Choice Plus family coverage, so that's $301 a month next year. The HSA is only $104, so I'll save $197 a month or $2,364 a year. 
  3. Look at how much you're contributing to your FSA now. Mine is maxed out at $2,500. Remember you can't have an FSA if you have an HSA, so you can redirect that money. 
  4. Add up the above.
2,000 + 2,364 + 2,500 = $6,864 

I've covered my $4,000 deductible. Maxed out my contribution of $6,550 and will have $314 back in my pocket. Easy Peasy!

If you and your spouse are both HSA eligible, then there are other factors to consider. I could spell them out here, but Barb Simmons wrote a very clear and instructive post on the topic and I wouldn't do a better job of it. If you're married, read Rules and Best Practices When Spouses Are Both HSA Eligible.

Keep in mind that you can only use your HSA to pay for expenses for the family members you have covered under your plan and that you can claim as a dependent on your taxes. If you cover your young adult children, please read Why Wouldn't I Want an HSA? 

I have my 23 year old son on my plan, so I'm still weighing my options. My initial thinking was that a plan with an HSA didn't make sense for us because we couldn't use the money in the HSA for Ian's expense, but now that I've done the math, I'm finding it hard to turn away from the HSA.

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