Health Savings Account
How It Works
A Health Savings Account (HSA) is available to Consumer-Directed Health Plan (CDHP) members.
HSAs are tax-advantaged accounts that can help retirees save and pay for current or future medical expenses. HSAs also give greater flexibility and control by putting the retiree in charge of how his or her healthcare dollars are spent.
How to use the HSA
Retirees choose whether or not to contribute to the HSA.
TVA will make a contribution to the HSA. In 2013, for a retiree with an individual contract under the CDHP, TVA places $600 in the HSA. For a retiree with a family contract under the CDHP, TVA places $1,200 in the account. Retirees must have opened their account in order for their TVA contribution to be deposited.
It’s easy for retirees to use the money in their HSA. Once retirees have opened their account, a HSA Bank VISA debit card will be issued to them. Checks are also available for a fee. Retirees just pay for qualified expenses directly by using one of these methods or withdrawing money directly from an ATM.
Retirees can use their HSA money to pay for any “qualified medical expense” permitted under federal tax law that is incurred after the HSA is opened. The money can be used to pay for medical expenses for the retiree, his or her spouse, and dependent children. This can occur even if the spouse or children are not covered by the CDHP.
It is the retiree’s decision whether or not to use his or her HSA to pay for current medical expenses, including the CDHP deductible, or save for future expenses such as medical services, Medicare premiums or long-term care insurance.
Qualified medical expense
In order to be considered qualified, the medical expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. This would include office visits, hospitalization or prescription drugs.
Qualified medical expenses are defined in section 213(d) of the Internal Revenue Code, and a list of qualified expenses is available in Publication 502, “Medical and Dental Expenses,” available from the IRS Web site at http://www.irs.gov/.
The retiree as the “account owner” is responsible for documenting how he or she uses his or her HSA. It is very important to understand what the allowable expenses are and be able to support claims with receipts. There is no deadline for paying for an expense from the HSA.
But no matter how old the expense is, the account owner has to be prepared to document it fully if requested to by the IRS in the year it is claimed.
HSA funds cannot be used to pay for expenses incurred before the account was established or opened.
Retirees are required to pay taxes on this money, and they face a 20-percent tax penalty if they use any HSA money for purposes other than to pay for “qualified medical expenses.”
After age 65, the 20-percent additional tax penalty no longer applies.
Each year, retirees will receive a 1099-SA and a 5498-SA statement to assist with income-tax filling.
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.