Health Savings Account
Make Your Own Healthcare Decisions
A Health Savings Account (HSA) is available to Consumer-Directed Health Plan (CDHP) members.
When making decisions about healthcare, no two people are exactly alike. With an HSA, the retiree has control and flexibility when it comes to making decisions about healthcare expenses.
An HSA is a special tax-advantaged account that puts the retiree in control over how his or her healthcare dollars are spent. The accounts are individually-owned, so the retiree chooses when to use the HSA and how to invest the HSA funds. The retiree also chooses whether to use funds now to pay for qualified out-of-pocket medical expenses, or pay for current expenses with after-tax dollars and save the money in the HSA for retirement or future medical costs.
Either way, the money is the retiree’s (i.e., the account owner) − and the retiree makes the decisions.
The following three important tax benefits are associated with an HSA:
- HSA contributions are 100-percent tax-deductible, reducing total taxable income.
- Investment earnings on HSA funds are tax-free, making the HSA a valuable savings vehicle.
- Funds can be withdrawn tax-free at any time to pay for qualified medical expenses incurred by the retiree, his or her spouse, or dependents.
After age 65, HSA funds can be withdrawn penalty-free to pay for non-medical expenses, and only regular income tax on the amount withdrawn is applied.
Contributing to an HSA
The HSA is serviced by HSA Bank, a division of Webster Bank, N.A., Member FDIC. TVA will make contributions of $600/individual or $1,200/family to each retiree’s HSA after the retiree opens the account.
The retiree decides whether or not to contribute to the HSA. Retirees can make tax-deductible contributions to their HSA by:
- mailing contributions using deposit slips from their HSA checkbook or contribution form on the back of their quarterly statement or
- automatically transferring contributions from a personal checking or savings account through HSA Bank’s internet banking site.
Retirees can receive a tax deduction for post-tax contributions on their annual income tax return. Provided all eligibility requirements are met, retirees can begin making contributions to their HSA as soon as the account is established or opened.
Annual contribution limits are mandated by the Internal Revenue Service and are adjusted annually for inflation. In 2015, contribution limits (from all sources) are $3,350 for individuals with individual coverage and $6,650 for individuals with family coverage. Individuals age 55 and older who open an HSA can also make an additional “catch-up” contribution. The catch-up contribution can be up to $1,000.
Retirees can continue to use the funds in their HSA for qualified medical expenses even if they discontinue enrollment in the CDHP in the future. However, since enrollment in a high-deductible plan is required in order to contribute to an HSA, retirees can no longer make contributions to their HSA when not enrolled in the CDHP.
Earning money on your HSA funds
Money in the HSA earns tax-free interest daily. The interest rates can be found on HSA Bank’s website. (Rates and yields are subject to change.)
In addition, HSA Bank offers non-FDIC insured investment options for individuals who wish to invest their HSA funds. HSA Bank’s TD Ameritrade Corporate Services option provides accountholders access to stocks, bonds and over 13,000 mutual funds. Trades can be made online or by phone. HSA Bank does not charge for these services; however, trading fees collected by TD Ameritrade may apply.
HSA Bank’s Mutual Fund Selection option provides you with the option to invest in a variety of mutual funds. You determine the percentage to invest in each fund and which funds to sell first if funds are needed to pay a medical expense. This investment program has an annual fee of $24.00.
You can begin making investments once you have opened both your HSA and a brokerage account, and the initial contribution has been made to the bank account. Retirees will want to choose the method that best meets their investment style.
For More Information
For more information about HSAs, retirees can call HSA Bank at 1-800-357-6246, Monday – Friday, 8:00 am – 10:00 pm ET or visit www.hsabank.com/tva. Questions can be directed to a customer-service representative by phone or e-mail at email@example.com.