Health Savings Account (HSA) continued
HSA ADVANTAGES AND HOW DOES THE HSA PLAN WORK? 1. The contributions are made to the HSA by the City of Pearland. The City of Pearland’s 2020 contribution is $500 for single coverage for the year and $1,000 for Employee & Spouse/Child(ren) or Family. You can also elect at Open Enrollment to make your own additional contribution to the HSA which would be taken out of your paycheck on a pre- tax basis. That money is available to pay for the qualifying medical expenses throughout the year. 2. When you need medical care and visit the doctor, emergency room or hospital, you will be responsible for the full cost of the visit (minus any network discounts). You can use the HSA account funds to pay for that visit at the time of the service, you can reimburse yourself at the end of the year or you can choose to pay for the visit out of pocket and let the HSA funds grow. 3. Unused HSA contributions carry over from year to year and remain in the HSA for the following year’s medical expenses. CHANGES TO YOUR HSA WHEN YOU REACH 65 At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense. Withdrawals made for other purposes will be subject to ordinary income taxes. HEALTH INSURANCE PREMIUMS At age 65, you can use your HSA to pay for Medicare parts A, B, D and Medicare HMO premiums tax-free and penalty- free. You cannot use your HSA to pay for Medigap insurance premiums. If your Medicare premium is automatically deducted from your Social Security check, you simplify reimburse yourself directly from your HSA for the Medicare premiums paid from your Social Security payment. CONTINUED ELIGIBILITY FOR AN HSA Most Americans become eligible for Medicare at age 65. Americans that begin receiving Social Security benefits prior to age 65 are automatically enrolled in Medicare at age 65. Participation in any type of Medicare (Part A, Part B, Part C - Medicare Advantage Plans, Part D, and Medicare Supplement Insurance -Medigap), makes you ineligible to contribute to an HSA. However, you can continue to use your HSA for qualified medical expenses and for other expenses for as long as you have funds in your HSA. LOSS OF ELIGIBILITY IN MONTH YOU TURN 65. You lose eligibility as of the first day of the month you turn 65 and enroll in Medicare. STOPPING MEDICARE TO RECLAIM HSA ELIGIBILITY If you signed up for Medicare Part A and now want to decline it, you can do so by contacting the Social Security Administration. Assuming you have not begun receiving Social Security checks this will reestablish your eligibility for an HSA. If you have applied for or have begun receiving Social Security, you cannot opt out of Medicare Part A without paying the government back all the money you received from Social Security payments plus paying the government back for any money Medicare spent on your medical claims. This action will also stop future Social Security payments (until you reapply and start this cycle over again). SPOUSE UNDER AGE 65 If your spouse is under age 65 that may provide an avenue for continued HSA contributions. An employer; however, cannot make HSA contributions into the HSA of an employee’s spouse.
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