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What is a Health Savings Account (HSA)?

A Health Savings Account is a tax-exempt account that you can use to pay or reimburse yourself for certain medical expenses you incur.

HSAs are employee-owned accounts, meaning the funds in the HSA remain with the employee and will carry over from one year to the next (i.e., will not be forfeited unless there is no account activity for a 3-year period then the funds will be considered abandoned per NRS 120A.500 and subject to forfeiture by the State). Contributions to the HSA grow tax free and are portable. When an employee retires or terminates employment, the employee keeps the funds in the HSA. The employee can continue to use the funds in the HSA for health care and other qualified medical expenses after employment ends.

There are limits on the amount an eligible individual can contribute to an HSA based on the employee’s coverage tier. For example, “self-only” or “Family” coverage.

  • Self-only coverage means an eligible individual (employee)
  • Family coverage means an eligible employee covering at least one dependent (whether that dependent is an eligible individual (for example, if the dependent has Medicare) if that other person is claimed on your tax return and not claimed as a tax dependent on someone else’s return.

You must be an eligible individual to qualify for an HSA. Employees may not establish or contribute to a Health Savings Account if any of the following apply:

  • The employee is covered under other medical insurance coverage unless that medical insurance coverage: (1) is also a High Deductible Health Plan as defined  by the IRS; (2) covers a specific disease state (such as cancer insurance); or (3) only reimburses expenses after the Deductible is met;
  • The employee is enrolled in Medicare;
  • The employee is enrolled in Tricare;
  • The employee is enrolled in Tribal coverage;
  • The employee can be claimed as a dependent on someone else’s tax return unless the employee is Married Filing Jointly;
  • The employee or the employee’s Spouse has a Medical Flexible Spending Account (excludes Dependent Care or Limited Use Flexible Spending Accounts);
  • The employee’s Spouse has an HRA that can be used to pay for the medical expenses of the employee; The employee is on COBRA; or
  • The employee is retired.