Health Savings Account (HSA) FAQ
Revised August 2021
These questions and answers summarize the basic concepts of a Health Savings Account (HSA). It is not intended to provide all the information you need to make a decision on whether or not an HSA is right for you. You may want to consult your tax advisor.
What is a Health Savings Account?
A Health Savings Account (HSA) is an account that works in conjunction with the Healthcare + Savings Plan (high deductible health plan) or ACA Basic High Deductible Health Plan. The account allows you to put money aside and reimburse yourself for eligible out of pocket healthcare expenses on a tax-deductible basis (see the next question on how an HSA works). Unspent funds accumulate tax-free and roll over from year- to-year. (There is no “use it or lose it” rule as with flexible spending accounts.)
You can setup an HSA at any financial institution that provides HSA services. As long as you are enrolled in, and covered solely by an HSA-qualified health plan and meet the eligibility guidelines, you can continue to contribute to your HSA. Each Open Enrollment, you must actively elect your contribution amount for the following plan year as your election amount from the previous plan year will not automatically roll over.
An HSA gives you the freedom to spend the funds today or save them for the future. The HSA is your account. You own it. You fund it. And you can take it with you wherever you go.
How does an HSA work?
Contributions you make to your HSA are tax-deductible. You contribute to the account during the year and deduct the contributions on your Federal income tax return. Funds you withdraw to pay for qualified health care expenses, as defined by Section 213(d) of the IRS Tax Code, are tax-free. If you use your HSA funds to pay for non-health related expenses, the amount will be taxable, and you will pay an additional 20 percent tax penalty. The tax penalty does not apply if you are disabled, reach age 65 or die, but is treated as gross income for tax purposes.
Who is eligible for an HSA?
You are eligible for an HSA if you are covered only by a compatible HSA-qualified health plan, such as the Healthcare + Savings Plan or the ACA Basic High Deductible Health Plan.
Other rules and restrictions apply, including:
- You are not covered by other health insurance
- You are not enrolled in Medicare (Part A and B)
- You are not listed as a dependent on someone else’s tax return
- You do not participate in Stanford’s health care Flexible Spending Account
- Your spouse is not enrolled in a health care Flexible Spending Account
- You live in the United States and have a US address on file with Stanford.
Where can I setup an HSA?
Banks, credit unions and other financial institutions offer these accounts. Depending on the institution, your HSA may be a simple interest-bearing account or investment account. Some institutions offer debit cards to make accessing your HSA funds easier. Checks or direct deposit services may also be available.
Here is a partial list of banks that offer individual HSA services. These institutions are listed for your convenience only and are not endorsed by Stanford University. You may want to contact your bank and ask if they offer HSAaccounts.
|Bank||Phone Number||Website Link|
Bank of America
Stanford Credit Union
Who is HealthEquity?
HealthEquity is Blue Shield’s financial partner for Blue Shield members who want to setup an HSA.
When you enroll in the Healthcare + Savings Plan or the ACA Basic High Deductible Health Plan, you can setup an account with HealthEquity at the same time, if you are eligible. This gives you easy access to online tools and resources linked directly with your medical plan. You can also review medical and pharmacy claims, schedule payments to providers and reimbursements to yourself.
If you set up a HealthEquity HSA, you have the option to enroll in an interest bearing or investment account. Beginning August 1, 2021, we lowered the investment threshold with Health Equity to $1,000 (previously $2,000) required to set up an investment account. Once you have a balance over $1,000 you can invest your HSA balance. The Health Equity account offers a debit card to make accessing your HSA funds easy.
Why would I choose HealthEquity instead of another financial institution?
If you are enrolled in the Healthcare + Savings Plan, setting up your HSA with HealthEquity offers two additional advantages:
- You can fund your account through pre-tax payroll deductions instead of putting money in the account on your own. This means your HSA contributions are made with pre-tax dollars, so you do not have to claim a deduction on your income tax return.
- In 2021 Stanford will contribute up to $750 to your account when you cover yourself only in the Healthcare + Savings Plan, or up to $1,500 when you cover yourself plus one or more eligible family members. This is only available if you open your HSA through HealthEquity and you are enrolled in the Healthcare + Savings Plan.
If you setup your HSA during Open Enrollment, you will receive Stanford’s contribution starting with your first paycheck in January. The contributions will be in 24 equal installments during the year. You also decide how much of your own money you want to contribute and can change that amount at any time. To receive the university's contribution, you must make an HSA election (even if it's $0).
If you decide to set up your HealthEquity HSA after Open Enrollment ends, the amount Stanford contributes will be prorated based on the number of pay periods remaining in the calendar year after you set up your account.
You must be an active employee or on a non-personal leave to be eligible to receive Stanford’s contribution. VA doctors are not eligible to receive the Stanford contribution.
Each year during Open Enrollment, you will need to choose a new annual contribution amount for your HealthEquity HSA in order to contribute money and continue to receive Stanford's contributions for the following plan year. If you do not make a choice, the contribution amount for the current year will end December 31.
What if I am enrolled in the ACA Basic High Deductible Health Plan?
The ACA Basic High Deductible Health Plan is compatible with an individual Health Savings Account (HSA). You can set up an HSA with any financial institution that provides HSA services. Or, if you are a benefit-eligible employee, you can elect the ACA Basic High Deductible Health Plan and set up an account with HealthEquity when you make your elections through My Benefits. Note that Stanford does not contribute to your HSA and you cannot make payroll contributions to the account, unlike those enrolled in the Healthcare + Savings Plan. For more information, call HealthEquity Member Services at 877-857-6810.
How do I contact HealthEquity or get more information?
HealthEquity Member Services is available to answer your questions 24 hours a day, every day at 877-857- 6810. You can also find information online at http://www.HealthEquity.com/stanford.
How soon can I setup my HSA?
With HealthEquity: You can setup your HSA on My Benefits when you enroll in the Healthcare + Savings Plan. When you are a new hire or have a qualified life event and you choose to enroll in the Healthcare + Savings Plan and an HSA, your HealthEquity HSA will become active and funded the first of the month following your benefits election effective date. Each Open Enrollment, you will need to choose your annual contribution amount (your contribution from the previous plan year will not automatically rollover).
With any other financial institution: Depending on the financial institution, you can setup your account as early as the effective date of your coverage in the Healthcare + Savings Plan, or any day thereafter. You can use your printed enrollment summary or your enrollment confirmation statement from the benefits enrollment site as evidence of enrollment, and then work with your bank to setup your HSA.
Does my HSA contribution have to be made in equal amounts each month?
If you make your HSA election during Open Enrollment your contributions are made in equal amounts each pay period; however, Stanford will allow you to make a lump-sum contribution for the year from your first paycheck in January (or, for new hires, your first paycheck after you make your election). Call the University HR Service Team for help.
Or, if you set up your HSA through a financial institution, you can choose to contribute in any amount or frequency you wish. Your account trustee/custodian (for example, bank or credit union) can impose minimum deposit and balance requirements.
How do I request a lump sum contribution to my HSA?
With HealthEquity: During Open Enrollment, you are limited to one lump sum request that will take place on the first paycheck in January. Call the University HR Service Team at 877-905-2985 before the start of winter close. A Service Team specialist will process your request to have the lump sum amount deducted from your Stanford payroll on the first paycheck of the year. Lump sum amounts cannot be spread over multiple pay periods.
New enrollments and new hires can request a one-time lump sum which will be reflected within the first two paychecks after the enrollment date. Call the University HR Service Team at 877-905-2985 within 31 days of enrollment.
With any other financial institution: Contact your financial institution. You may be able to contribute the total amount in a lump sum at the beginning of the year, or choose to contribute in any amount or frequency you wish. Your account trustee/custodian (for example, bank or credit union) can impose minimum deposit and balance requirements.
HSAs have a contribution deadline similar to an Individual Retirement Account (IRA). To claim contributions for the current tax year (January to December), the deadline is April 15 of the following year.
Will it cost me anything to setup an HSA?
If you setup your HSA with HealthEquity there are no account or set-up fees while you are employed by Stanford and enrolled in the Healthcare + Savings Plan. Other financial institutions may charge fees. For additional questions, contact HealthEquity at 877-857-6810.
Who owns the HSA?
You do. There is no “use it or lose it” rule as with a Flexible Spending Account.
Can I rollover the money from my bank’s HSA to HealthEquity?
Yes. For more information, call HealthEquity Member Services at 877-857-6810.
Do I have to claim Stanford’s contributions to my HealthEquity HSA on my income tax?
You do not have to claim contributions you receive from Stanford as gross income on your annual tax return.
How much can I contribute to an HSA?
For 2021, the maximum contribution set by the IRS for an individual account is $3,600; $7,200 for family coverage.
Catch-up Contributions – If you are age 55 or older, you can make an additional “catch-up” contribution of $1,000.
These limits include any contribution amount you receive from your employer, as well as any contributions your spouse makes to another HSA.
Can I claim my HSA contributions on my income tax return?
For federal tax filing purposes, if your HSA contributions are made on an after-tax basis, you can deduct your contributions when you file. There are three states that do not yet allow deductions on state tax returns. The states are Alabama, New Jersey, and California.
Do I have to claim Stanford’s contributions to my HealthEquity HSA on my federal income tax?
You do not have to claim contributions you receive from Stanford as gross income on your federal tax return.
What is imputed income and why is Stanford’s HSA contribution reported on my paycheck and W-2?
The Internal Revenue Service defines imputed income as the value of the non-monetary compensation given to an employee by an employer in the form of a benefit. Stanford’s HSA contribution is not taxed for the federal return. Recently, the state of California provided guidance with respect to tax treatment of employer funded dollars to an employee’s HSA. Employers are now required to tax and report on W2s any dollar amount the employer contributes to an HSA on behalf of an employee as imputed income.
This will be done each pay period you receive the Stanford’s HSA contribution. You will notice a line item on your pay stub as HSS (Health Saving Seed) in reference to the Stanford’s contribution. Tax code rules are subject to change from time-to-time and Stanford will always comply with the new requirements.
My spouse and I are both over age 55. Can both of us make catch-up contributions?
Your HealthEquity HSA will be in your name. If you both want to make catch-up contributions, then you must establish separate accounts.
Do I need to keep any records when I use my HSA?
Although some financial institutions track the use of the HSA for you, it is a good idea to keep your own records. It is your responsibility to track the use of your HSA. The IRS may require you to show proof of your expenditures. We recommend you designate a place to store all your receipts so they are available when you need them.
Is an HSA the same as a health care Flexible Spending Account (FSA)?
There are some similarities, but here is what makes an HSA different from an FSA:
- You choose which financial institution you want to use, and setup the account yourself.
- Your HSA rolls over each year. There is no “use it or lose it” rule, so you can accumulate funds for future health expenses.
- Your HSA is portable. It is your own account, so you use the same account from one employer to the next.
- Interest or investment earnings on the HSA funds are tax-free.
- You can spend the funds on non-health purposes, although those funds will be taxed and additional penalties apply.
Can an employee have a Healthcare FSA (HCFSA) and an HSA in the same plan/tax year?
No, due to IRS regulations the FSA makes employees ineligible to have an HSA for the same plan/tax year. So, for example if you are in Kaiser, SHCA or Trio and have elected a HCFSA at the beginning of the year and then change medical plans mid-year to one of the high deductible plans you cannot terminate the FSA and switch to contributing to the HSA.
Do I pay for the full doctor’s office visit when I go to the doctor?
You are responsible to pay the amount your insurance has contracted to pay your doctor, typically a discounted rate, until your deductible is met. You can use your HSA for this expense.
It is best to have your doctor’s office put the charge through to Blue Shield first so you receive credit toward your deductible and know exactly what to pay. Some doctors may require you pay up front, but most bill your insurance, then bill you once Blue Shield processes the claim. Make sure you do not pay more than your portion shown on Blue Shield’s Explanation of Benefits (EOB), which you receive from Blue Shield after your expense has been processed.
What health care expenses can be paid from an HSA?
Some examples of qualified health care expenses include:
- Un-reimbursed medical expenses including chiropractic visits and acupuncture for yourself and your dependents.
- Dental expenses, including braces for you or your dependents.
- Vision expenses, including Lasik eye surgery.
- Out-of-pocket expenses such as your deductible and copays.
- Medical insurance premium if you are unemployed and collecting federal unemployment benefits, or if you have COBRA continuation coverage through a former employer.
- Long-term care expenses and insurance.
You can find a complete list of allowable expenses for an HSA by checking IRS Publication 502 available online at http://www.irs.gov/pub/irs-pdf/p502.pdf.
Can I use my HSA for over-the-counter medicines and drugs?
Only prescribed medicines or drugs (including prescribed over-the-counter medicines and drugs) and insulin (even if purchased without a prescription) are considered qualifying over-the-counter (OTC) medical expenses. Most other OTC medicines and products are not eligible for reimbursement.
You can find more information about changes the IRS made to OTC medicines on the IRS Web site at http://www.irs.gov: type “over the counter medicines and drugs” in the search field.
Can I use my HSA funds for my domestic partner?
The HSA is a federal program and covered by the Family Protection Act. This Act does not recognize domestic partnerships even if the state of residency does. For example, in California, you can cover your domestic partner on the Healthcare + Savings Plan, and you can contribute to the HSA up to the family maximum.
However, note that you will be taxed if you use your HSA funds for your domestic partner’s expenses (even if qualified). The only way a domestic partner can be recognized for federal tax purposes is if the partner qualifies as a legal tax dependent.
Can my domestic partner set-up his or her own HSA?
Yes. As long as your domestic partner is covered by the Healthcare + Savings Plan, he or she can open and fund an individual HSA. You may also want to consult your tax advisor.
Can I use my HSA funds to pay for my child(ren)’s health care expenses?
The money in your HSA can be used to pay for qualified health care expenses of any family member who qualifies as a dependent on your tax return.
What happens to my HSA if I change medical plans or leave Stanford University?
Your HSA is portable, which means you can keep your HSA even if you:
- Change jobs
- Change your medical coverage
- Become unemployed
- Move to another state
- Change your marital status
We strongly encourage you to check with your financial institution to find out if any of these changes might impact your ability to contribute to or access funds tax-free from your HSA.
What happens to my HealthEquity HSA contributions when I leave Stanford?
Your pre-tax contributions (and Stanford's) stop the date your benefits eligibility ends. Because you own the account, you're eligible to withdrawal unused funds from the account to pay for eligible expenses.
If you plan to enroll in the Healthcare + Savings Plan through COBRA, you may be eligible to contribute directly to your HealthEquity HSA (or establish a HealthEquity HSA if you are newly enrolled in the Healthcare + Savings Plan). Under a direct-relationship with HealthEquity, monthly administrative fees may apply.
For assistance with questions related to maintaining, contributing to or establishing a HealthEquity HSA after you leave Stanford, call HealthEquity Membership Services at 877-857-6810.
I am retired. Can I still contribute to my HSA?
Yes, if you are covered by the Healthcare + Savings Plan and are not enrolled in Medicare.
What happens to my HSA if I only enroll in Medicare Part A or Part A and Part B?
When you enroll in Medicare (even if you only enroll in Medicare Part A): According to IRS rules, you are no longer eligible to contribute to your HSA; however, you can continue to withdraw the funds and use them to pay for expenses such as Medicare premiums and out-of-pocket expenses (including Part A and Part B deductibles, copays and coinsurance, and long-term care insurance premiums). You also can use these funds to pay medical expenses for your spouse and your dependent children.
Example: An employee Bill, turns 65 on August 27 and enrolls in Medicare on July 10. He is no longer eligible to contribute to his HSA as of August 1, which would be his Medicare effective date. His maximum contribution for the year would be 7/12 (he was eligible seven twelfths of the year) times the total HSA contribution amount for the year. So, if Bill had elected $2600 (including the employer contribution) and also the $1000 catch-up contribution for a total of $3600 then he could contribute $2100 for that year ($3600 divided by 12 months = $300 x 7 months = $2100).
If you are age 65 or older and still working: We recommend that you contact Social Security to understand how long you can defer receiving your Social Security payments and enrolling in Medicare Part A in order to continue contributing to your HSA. Keep in mind that if you are already over 65 and plan to receive Social Security payments either for yourself or as a spouse that could make your previous 6 months of HSA contributions ineligible and therefore incur a tax penalty.
What happens to my HSA if I die?
The account will pass to your beneficiary. If there is no beneficiary designated, the account becomes part of your estate.
You can find additional information on Health Savings Accounts in the IRS Publication 969 at http://www.irs.gov/pub/irs-pdf/p969.pdf.