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1 1 (February 11, 2020)

handle is hein.crs/govcaet0001 and id is 1 raw text is: FF. ' riES- - $r h ,. , February 11, 2020 Health Savings Accounts (HSAs) and Medicare Medicare enrollment impacts an otherwise eligible individual's ability to establish and contribute to a health savings account (HSA). Although Medicare enrollees cannot establish HSAs or make or receive contributions to their existing accounts, these individuals can withdraw any remaining balances in previously established accounts. This In Focus provides an overview of HSA rules and highlights how these rules apply to Medicare enrollees. HSAs are tax-advantaged accounts that individuals can use to pay for unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by insurance). Although eligibility to contribute to an HSA is associated with enrollment in a high-deductible health plan (HDHP), HSAs are trust/custodial accounts and are not health insurance. Individuals are eligible to establish and contribute to an HSA if they meet three requirements in a given tax year: they have coverage under an HSA-qualified HDHP, they do not have disqualifying coverage, and they cannot be claimed as a dependent on another person's tax return. To be HSA qualified, an HDHP must (1) have a deductible above a minimum level (in 2020, $1,400 for self-only coverage and $2,800 for family coverage); (2) limit out-of- pocket expenditures for covered benefits to no more than a maximum level (in 2020, $6,900 for self-only coverage and $13,800 for family coverage); and (3) cover only preventive care services before the deductible is met. Disqualifying coverage is generally considered any other health coverage that is not an HSA-qualified HDHP or that provides coverage for any benefit also covered under an individual's HSA-qualified HDHP. For example, individuals with an HSA-qualified HDHP are not eligible to establish or contribute to their HSA if they also are covered under a spouse's policy that is not an HSA-qualified HDHP. HSA If an individual is eligible to contribute to an HSA anytime during a given tax year, the total amount that individual may contribute (or may have contributed on his or her behalf e.g., by an employer) to his or her HSA is capped. Generally, the maximum amount an individual may contribute to his or her HSA in a tax year is based on the months during the year that he or she was considered HSA eligible; the type of HDHP coverage the individual had during those months (self-only or family); and the individual's age (those aged 55 or older are allowed additional catch-up contributions). For 2020, the maximum annual amount an individual with self-only coverage can contribute to his or her HSA is $3,550 and the maximum annual amount an individual with family coverage can contribute to his or her HSA is $7,100. For those aged 55 or older, the maximum annual amount an individual can contribute to his or her HSA is increased by $1,000. Contribution limits are determined based on the months individuals are considered eligible, and individuals may have lower contribution limits if they were not eligible for the entire year. HW'SA Wtd~st Account holders may make tax-free HSA withdrawals to pay qualified medical expenses for themselves, their spouse, or their dependents. For HSA purposes, qualified medical expenses include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paid for transportation to receive medical care; and qualified long-term care services. Except for limited circumstances, health insurance premiums and over-the-counter medicines are not considered qualifying medical expenses. Withdrawals not used to pay for qualified medical expenses must be included in an individual's gross income when determining federal income taxes and generally also are subject to a 20% penalty tax. Individuals who subsequently become ineligible to contribute to their HSAs retain access to their accounts and may continue to withdraw from their HSAs. HSA Ru,,s,',, Karied Spouses are prevented from having joint HSA accounts (even if the spouses are covered by the same HSA-eligible HDHP). Only one spouse can be listed as the account holder for a given HSA, even though that spouse's HSA may be used to reimburse the medical expenses of either spouse. Nothing prevents each spouse from establishing his or her own HSA, assuming each is eligible. If both spouses are HSA-eligible and at least one spouse is covered by a family coverage HSA-eligible HDHP, then the maximum amount the couple can collectively contribute to its HSA(s) is associated with the family coverage annual limit for that year ($7,100 in 2020). The collective maximum amount is to be split evenly between the spouses' HSAs, unless both agree on a different division. If both spouses are aged 55 or older and eligible to make catch-up contributions, each spouse must make such a contribution to his or her own account; one spouse cannot make catch-up K~:> p\w -- , gnom goo mppm qq\ a , q 'S I 11LULANJILiN,

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