Opening an HSA can come with a confusing amount of information Here, we answer some of your most common questions about HSA's. Review and familiarize yourself with how HSAs work so you can feel confident when using this unique financial tool.

What is an HSA?

A health savings account (HSA) is a tax-exempt* trust or custodial account created for the purpose of saving and paying for qualified medical expenses in connection with a high deductible health plan (HDHP).

What is a high deductible health plan (HDHP)?

An HDHP is a health plan with an annual deductible for an individual (self only) or a family (coverage for more than one individual) that meets the minimum deductible amount published annually by the U.S. Treasury Department. Connect with your employer for more information.

Who is eligible for an HSA?

An eligible individual may establish an HSA. An "eligible individual" is someone who:

1. Is covered under an HDHP as of the first day of the month.
2. Is not covered by any other health plan that is not an HDHP (with some exceptions).
3. Is not entitled to Medicare benefits
4. May not be claimed as a dependent on another person's tax return.

Eligibility and qualifications for opening an HSA

The eligibility and qualifications for opening an HSA are quite specific. To begin with, you must be covered under an HDHP at the start of any month in which you wish to contribute to or use your HSA. The HDHP acts as the foundation for your eligibility, and it's crucial that it meets the guidelines from the U.S. Treasury Department regarding deductibles and out-of-pocket maximums.

To maintain eligibility, you cannot be covered by any other health insurance plan that is not an HDHP, although there are a few exceptions, such as certain types of ancillary insurance‡. Here are some examples:

• Insurance related to liabilities from workers' compensation laws, torts, or ownership or use of property (such as automobile insurance)
• Insurance for a specified disease or illness
• Insurance paying a fixed amount per day (or other period) of hospitalization
• Coverage for accidents, disability, dental care, vision care, or long-term care.

You may also have coverage under an employee assistance program (EAP), and you may have a discount card that enables you to obtain discounts for healthcare services or products at managed care market rates.

Do you have to spend your HSA in the calendar year?

No, you do not have to spend all of your HSA money in a calendar year. The money you deposit into your HSA is yours to spend on eligible health expenses throughout your life. There is no use or lose it provision as part of an HSA

If you change jobs, do you lose your HSA money?

An HSA is established for the benefit of an individual and is "portable." This means that if you change employers or leave the workforce, the HSA stays with you rather than with your former employer.

Can a health plan with a lifetime limit on benefits still qualify as an HDHP?

Yes, and in those cases, amounts paid above a lifetime limit will not be treated as out-of-pocket expenses in determining the annual out-of-pocket maximum.

Establishing an HSA

How much does an HSA cost?

An HSA typically has a low monthly service fee to maintain the account. In addition, there are other fees that may apply depending upon the services you select with your HSA provider.

How do you set up an HSA?

If eligible, you can open an HSA through your provider, whether it's your employer or someone else. Your provider will share an HSA custodial agreement with you and the steps for creating the account.

Who can serve as an HSA trustee or custodian?

Any insurance company or any bank can be an HSA trustee or custodian. In addition, anyone else approved by the IRS to be trustees or custodians of IRAs are automatically approved to be HSA trustees or custodians.

HSA card purchases: What to know

Is the HSA card like other debit cards?

No, the HSA debit card can only be used for qualified healthcare expenses. This card can only be used at specific healthcare-related merchants that accept debit cards.

When asked by a merchant or directed by a point-of-sale system to choose a payment method, should I select debit or credit?

When making a purchase using a keypad or screen, select credit.

What can I purchase with my card?

Use your HSA debit card to pay for qualified medical expenses. It should only be used at healthcare-related locations like physician offices, drug stores, pharmacies, etc.

Qualified medical expenses

Qualified medical expenses that can be paid for using HSA funds include doctor visits, hospital services, and prescription medications. Additionally, HSAs cover a variety of specialized health needs, such as dental services, and vision care.

Can I use my HSA to buy glasses?

Yes, you can use your HSA to buy prescription glasses, since they are considered a qualified medical expense according to IRS guidelines. This includes the cost of both frames and lenses, as well as special lens coatings or treatments prescribed by your optometrist or ophthalmologist.

Besides prescription glasses, HSA funds can also be used to purchase prescription sunglasses and contact lenses, along with cleaning solutions and lens storage products necessary for maintaining them.

It's important to keep all receipts and prescriptions related to these purchases to ensure you have the necessary documentation if ever questioned by the IRS. As vision care is a crucial aspect of overall health, utilizing HSA funds for these expenses can help manage out-of-pocket costs while taking advantage of tax savings.

Can I use my HSA to pay for expenses for my spouse?

Yes, if they are your tax dependent. HSAs are designed to offer tax-advantaged savings for medical expenses for the accountholder and their dependents, which means that as long as your spouse is considered a tax dependent, their medical costs can be covered using your HSA funds.

Can I use my HSA to pay for expenses for my friend?

Unfortunately, unless your friend qualifies as your legal tax-dependent-as declared on your federal tax return-you cannot use your HSA to pay for their medical costs.

Can I use my HSA to pay for gym membership?

HSAs cannot generally be used to pay for gym memberships. The IRS has set specific guidelines on what constitutes a "qualified medical expense," and, typically, gym fees do not fall within this category. However, there may be exceptions in cases where a doctor prescribes exercise‡ as a necessary treatment for a specific health condition, in which case you might be able to pay for your gym membership with your HSA.

Can I use my HSA to purchase over-the-counter medications?

Yes, you can use your HSA to purchase prescription medications, as well as many over-the-counter medications without a prescription, such as pain relievers, cough syrup, heartburn medications, allergy relief, sleep aids, and more.

Can I use my HSA to buy vitamins?

No. According to IRS guidelines, vitamins are generally considered general health and wellness purchases rather than qualified medical expenses.

Can I use my HSA to pay for therapy?

Counseling services, including therapy with licensed mental health professionals, are generally considered eligible for HSA reimbursement because they address specific health-related needs. It's important to note that the counselor or therapist must be a licensed healthcare provider for the expenses to qualify.

Maintaining detailed receipts and records of these services is crucial in case of any IRS inquiries regarding the legitimacy of the expenses. This allows you to effectively manage mental health care costs while benefiting from the tax advantages of an HSA, making counseling more accessible and affordable.

Can I use my HSA to pay for feminine care products?

Yes, you may use your funds for feminine care products.

Can I use my HSA to buy healthcare-related items online?

Yes, as long as your purchases are for qualified medical expenses. The Coronavirus Aid, Relief and Economic Security (CARES) Act greatly increased the number of products that can be purchased or reimbursed with an HSA.

Yes, as long as your purchases are for qualified medical expenses. The Coronavirus Aid, Relief and Economic Security (CARES) Act greatly increased the number of products that can be purchased or reimbursed with an HSA.

What happens if my healthcare provider does not accept debit cards?

In that case, you'll need to use another payment method (cash, check or credit card) and then reimbursement may be available on your provider's online repayment tool. You may need to wait until you receive your Explanation of Benefits (EOB) from your insurance company before you pay your HSA account provider. In these instances, you can also use the online bill-pay service. Your HSA account provider can also send a check directly to your healthcare provider if you submit a request.

What if my card doesn't work at check out, or the cashier tells me my transaction has been declined?

You may have to use another form of payment. The decline may be due to the following reasons:

• Your purchase wasn't considered a qualified medical expense under your HSA plan.
• Your HSA balance was too low to cover the transaction.

What if I don't have enough money in my HSA to cover the qualified medical purchases I want to make?

Your transaction will be denied if there isn't enough money in your account. In this case, you can use your health savings account card to pay for part of the transaction with the funds remaining in your account and pay the balance using a different payment method.

Do I need to save my receipts?

Yes. Always retain your itemized receipts and prescriptions for over-the-counter medications as proof of your qualified medical purchases. You will need them if the IRS requests documentation to verify that the funds in your HSA were used only for qualified medical expenses.

Additionally, saving your receipts is a good idea if you are purchasing outside of your HSA and want to reimburse yourself.

Can I withdraw money from HSA anytime?

Yes, you can withdraw money from your HSA whenever you need, as long as you use that money for qualified medical expense. If you use the money for other items, you may incur penalties.

Find more information on eligible HSA items on irs.gov‡.

*All mention of taxes is made in reference to federal tax law. States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own, some states tax HSA contributions. Please check with each state's tax laws to determine the tax treatment of HSA contributions or consult your tax adviser. Neither UMB Bank, n.a., nor its parent, subsidiaries, or affiliates are engaged in rendering tax or legal advice and this document is not intended as tax or legal advice.

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