Health Savings Accounts
Funds in the account can grow tax-free through compounded earnings, just like an IRA!
- About HSAs
- What is an "HDHP"?
- Tax Advantages
- Current Earnings Rate
- Contribution Limits
- Eligible Medical Expenses
- Eligible Over-theCounter Drugs
- Ineligible Medical Expenses
- Ineligible Over-the-Counter Drugs
- Frequently Asked Questions
- Contact Us for More information
About Health Savings Accounts (HSAs)
A Health Savings Account, or HSA, is a tax-exempt account with a financial institution in which funds accumulate to pay for medical expenses. HSAs were created in response to the rising cost of health care and to give the consumer back the control of their health care costs. HSAs also give financial incentives for employers of all sizes to provide health insurance and for individual consumers to own health insurance. HSAs allow you to enjoy tax reductions while having affordable health insurance premiums.
Health Savings Accounts (HSAs) were created by Public Law 108-173, the "Medicare Prescription Drug, Improvement and Modernization Act of 2003" signed into law on December 8, 2003. Health Savings Accounts will change the way millions meet their health care needs because they are designed to help individuals save for qualified medical and retiree health expenses on a tax-advantaged basis.
Any adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA. To encourage saving for health expenses after retirement, individuals age 55 and older are allowed to make additional catch-up contributions to their HSAs. Once an individual enrolls in Medicare they are no longer eligible to contribute to their HSA. Amounts contributed to an HSA belong to the account holder and are completely portable. Funds in the account can grow tax-free through investment earnings, just like an IRA.
Funds distributed from the HSA are not taxed if they are used to pay qualified medical expenses. Unlike amounts in Flexible Spending Arrangements that are forfeited if not used by the end of the year, unused funds remain available for use in later years.
Click here for current deposit rates.
Tax Advantages
Midland National Bank's Health Savings Accounts offer a variety of tax benefits:
- Funds grow on a tax-deferred basis, and if the funds are used for an eligible medical expense, the funds are tax-free
- Contributions are 100% tax-deductible
- Funds roll over from year to year. Any funds used after age 65 may be used tax-free for eligible medical expenses. Funds used for any other reason will be taxed according to your normal tax rate.
Contribution Limits
Health Savings Accounts (HSA) provide tax benefits for the funds that you contribute. However, the Internal Revenue Service limits the amount you are able to contribute to an HSA for each tax year. If you contribute more than the IRS allows, you could incur tax penalties. To avoid making excess contributions, be sure to coordinate your contributions with others being made to your account by an employer or other third-party.
What are the Contribution Limits?
The Internal Revenue Service (IRS) reviews and determines the HSA contribution limits on an annual basis. An account holder is able to contribute 100% of their qualified High-Deductible Health Plan (HDHP) deductible, up to the IRS contribution limit. The limits for 2006 are listed below. An additional catch-up contribution is available to individuals over the age of 55 who are not enrolled in Medicare.
2008 IRS Contribution Limits
An accountholder is able to contribuite 100%* of their qualified HDHP deductible, up to the IRS contribution limit. This limit is subject to change each year.
| Single Policy | $2,900 |
| Family Policy | $5,800 |
| Catch-up (55 or Older) | $900 |
2009 IRS Contribution Limits
An accountholder is able to contribuite 100%* of their qualified HDHP deductible, up to the IRS contribution limit. This limit is subject to change each year.
| Single Policy | $3,000 |
| Family Policy | $5,950 |
| Catch-up (55 or Older) | $1,000 |
*Contributions in the first year are prorated, thus dividing the maximum contribution by 12 and multiplying the number of months remaining in the year.
Eligible Medical Expenses
Eligible medical expenses are defined as those expenses paid for care as described in Section 213(D) of the Internal Revenue Code. The IRS has also allowed some over-the-counter drugs to qualify as eligible medical expenses.
Midland National Bank has provided the following lists to help you determine whether an expense is or is not eligible. The lists are supplied with the understanding that Midland National Bank is not engaged in rendering tax advice. These lists are to serve as a quick reference only. For more information, refer to IRS Publication 502 or contact a tax professional.
Eligible Medical Expenses (For HSA Distributions)
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Eligible Over-the-Counter Drugs (For HSA Distributions)
- Antacids
- Allergy Medications
- Pain Relievers
- Cold medicine
- Anti-diarrhea medicine
- Cough drops and throat lozenges
- Sinus medications and nasal sprays
- Nicotine medications and nasal sprays
- Pedialyte
- First aid creams
- Calamine lotion
- Stop-smoking programs
- Wart removal medication
- Antibiotic ointments
- Suppositories and creams for hemorrhoids
- Sleep aids
- Motion sickness pills
Ineligible Medical Expenses
- Advancement payment for services to be rendered next year
- Athletic club membership
- Automobile insurance premium allocable to medical coverage
- Boarding school fees
- Bottled water
- Commuting expenses of a disabled person
- Cosmetic surgery and procedures. Cosmetics, hygiene products and similar items
- Funeral, cremation, or burial expenses
- Health programs offered by resort hotels, health clubs, and gyms
- Illegal operations and treatments
- Illegally procured drugs
- Maternity clothes
- Non-prescription medication
- Premiums for life insurance, income protection, disability, loss of limbs, sight or similar benefits
- Scientology counseling
- Social activities
- Special foods and beverages
- Specially designed car for the handicapped other than an autoette or special equipment
- Swimming pool
- Travel for general health improvement
- Tuition and travel expenses a problem child to a particular school
- Weight loss programs
Ineligible Over-the-Counter Drugs
- Toiletries (including toothpaste)
- Acne treatments
- Lip balm (including Chapstick or Carmex)
- Cosmetics (including face cream and moisturizer)
- Suntan lotion
- Medicated shampoos and soaps
- Vitamins (daily)
- Fiber supplements
- Dietary supplements
- Weight loss drugs for general well being
- Herbs
Would you like more information about HSAs?
Please contact our Customer Service Department or call us at (316) 283-1700. We'll be glad to
answer your questions.
