LCPS offers a High Deductible Health Plan (HDHP) as one of the medical plan options for employees. One of the features of the HDHP plan is enrollment in a Health Savings Account (HSA). If you enroll in the HDHP you will also be provided with a Health Savings Account (HSA), in your name. Funds in this account can be used to pay qualifying out-of-pocket medical expenses, for you and your eligible dependents, this year or in the future. LCPS will make the first contribution to this account, contributing $1,000 if you elect employee only coverage and $2,000 if you elect employee plus one or more dependent(s). You can then contribute pre-tax money into this account to help build your balance for eligible expenses.
What is a Health Savings Account?
A Health Savings Account (HSA) is a tax-favored account used in conjunction with an HSA-compatible health plan, such as an HDHP. You save money tax-free to cover current or future eligible out-of-pocket medical expenses that are not paid for by your health plan such as plan deductibles, coinsurance and eligible prescription, dental and vision expenses.
Why have an HSA?
So you can save money on healthcare by using tax-free funds to pay for qualified medical expenses for you and your eligible dependents. You can use your HSA funds whenever you need them, now or in the future. Plus, the account is yours to keep. Even if you change jobs, retire or change your health insurance plan.What are the tax advantages of an HSA?An HSA provides triple tax savings by reducing your taxes. Here's how:
- Contributions to your HSA can be made with pre-tax dollars, which reduces your taxable income
- Any after-tax contributions that you make to your HSA are tax-deductible
- HSA funds earn interest tax free and when used for eligible healthcare expenses, withdrawals are also free from tax
Who is eligible for an HSA?
An employee who:
- is covered only by a qualified high-deductible health plan (HDHP);
- is not covered by any other health coverage (ex. Medicare, Tricare or spouses non-HDHP medical plan or spouses full-purpose Flexible Spending Account); and
- is not claimed as a dependent under someone’s tax return (spouses filing jointly is okay).
An HDHP without HSA option is available for employees who want the HDHP without the HSA. Contact Employee, Health, Wellness and Benefits for more information.
What is a qualified medical expense?
You can pay for a wide range of qualified medical expenses with your HSA, including many that are not covered by your health plan. Qualified medical expenses are any expenses you or an eligible dependent incurs for healthcare services, medical equipment or prescribed medications including:
Qualified medical expenses are those incurred by the following persons:
- Health plan deductibles and co-insurance
- Dental care
- Vision care
- Prescription medications
- Over-the-counter medications prescribed by your doctor
- Certain medical equipment
- You or your spouse
- All dependents you claim on your tax return
- Any person you could have claimed as a dependent on your return or as otherwise allowed by the IRS
Generally, a dependent child must be younger than 19 years old or be a student and younger than 24 years old, or any age if permanently and totally disabled, to be considered a dependent for tax purposes. This differs from the age limits on our medical plans.
Visit www.irs.gov or consult with your tax advisor for more information.
How can I contribute or make changes to my HSA?
If you are enrolled in the HDHP you can choose to contribute pre-tax money to your HSA by payroll deduction. You will be offered the opportunity to make an election in Oracle Self Service when you first enroll and during the annual open enrollment period. You can also start, stop or change your payroll deduction amount at any time by completing and submitting an HSA Change Form. Changes will begin within one to two pay periods following submission of the form and will stay in place until changed by you. It is your responsibility to determine whether you are eligible to make contributions to an HSA and to ensure you do not exceed the IRS maximum annual contribution limit.What is the maximum that I can contribute to an HSA in a calendar year?The annual maximum for 2024 is $4,150 for Employee Only coverage and $8,300 for Employee + 1 or more dependent. You must include the LCPS contributions ($1,000 or $2,000) in these maximum amounts. Employees age 55+ can save an additional $1,000 per year in catch-up contributions. These maximums may be prorated if you do not remain covered by the HDHP for the entire plan year.
What happens to funds in my HSA if I don’t use them this year?Unused HSA funds roll over year to year; there is no "use it or lose it" penalty. Funds that are rolled over continue to grow and earnings are tax-free. You can continue to use these funds for eligible expenses even if you change plans. At age 65, you will have the freedom to use your HSA funds for any purpose without penalty, on a taxable basis. This makes funding your HSA a great way to save for retirement as well!
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