HSA Contributions and WithdrawalsContributions. The amount an individual or family may contribute to the HSA is determined by the federal government and may change. The 2005 yearly limits are set at the amount equal to the insurance plan’s deductible or $2,650 for individual coverage and $5,250 for family coverage, whichever is less. (Contribution limits are different in Georgia).
Contributions can be made for any full calendar month provided the HSA owner’s HDHP coverage was in effect on the first day of that month. Excess contributions, if not withdrawn, may be taxed at the owner’s current tax rate plus an excise tax of 6%.
Withdrawals. The HSA owner decides where to spend HSA health-care dollars within guidelines established by the federal government. Visits to physician offices, dental care, nursing care, psychiatric care, and chiropractic care are examples of eligible expenses listed in IRS Publication 502, which is available at the IRS Web site, www.irs.gov.
If funds are withdrawn for unqualified expenses, those funds can’t be deducted from taxable income, and, if the HSA owner is under the age of Medicare eligibility, a 10% penalty may apply. Cosmetic surgery, nutritional supplements, and childcare are examples of unqualified expenses.
The HSA owner is responsible for determining if an expense qualifies according to federal government rules and can be paid with HSA funds.
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* Requires an application that goes through an underwriting process, which could be declined. Do not cancel any existing health coverage until you are certain of acceptance and approval.
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