Health Savings Accounts

An Eastern Connecticut Savings Bank Health Savings Account (HSA) is a special tax-advantaged savings account designed to cover current and future qualifying medical expenses for individuals and families covered by a high deductible health plan. Because it matters to you, it matters to us.

Our HSA is an interest-bearing account with lots of features to help you manage your health care dollars. Our tiered rate structure means that the interest you earn on your funds increases automatically as your balance increases. Click here to view our current rates.

Some of the great features include:

• No set-up fees
• No monthly or annual service charge
• Unlimited check writing
• FREE HSA Debit Mastercard®
• FREE Online Banking and Bill Pay
• FREE 24-Hour Telephone Access
• FREE monthly statement with a FREE e-Statement option

1. What is an HSA?

   Health Savings Accounts or HSAs were created by the Medicare law signed by President Bush on December 8, 2003 to help individuals save for current and future qualifying medical and retiree health expenses on a tax-free basis. The HSA owner makes decisions regarding contributions and distributions, allowing more control over how your health care dollars are spent. Unspent dollars may accumulate year after year.

2. What are HSA Benefits?

   HSAs can provide significant federal tax benefits to eligible individuals. Not only can HSAs provide tax benefits related to paying qualified medical expenses, they may also provide benefits similar to many tax-favored retirement plans. A summary of the HSAs advantages include:

   Savings

   • You can save the money in your account for future medical expenses and grow the account through investment earnings. 

   Control

   • You make all the decisions about contributions and distributions, allowing you more control over how your health care dollars are spent.

   Ownership

   • Funds remain in the account from year to year, just like an IRA. There are no "use it or lose it" rules for HSAs.  

   Federal Tax Benefits

   • HSA contributions, by employer or employee, are excluded from taxable income.
   • HSA earnings are tax deferred.
   • HSA assets are never taxed if used for qualified medical expenses. 
   • Unused HSA assets may be used for retirement, however, they will be subject to a 10 percent penalty until the HSA account beneficiary turns age 65, and if not used for medical expenses, they will be subject to federal income taxes.
3. Who is eligible to participate?

   You are an eligible individual if:

   • You are covered under a High Deductible Health Plan 
   • You are not also covered by any other health plan that is not a High Deductible Health Plan 
   • You are not enrolled for benefits under Medicare 
   • You can not be claimed as a dependent on another person’s tax return

   Contributions can be made by you, your employer, or both. However, the total contributions are limited annually.

   These conditions are subject to change. For more information, please go to http://www.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx

4. What are qualified medical expenses?

   In order for HSA assets to retain their tax-free status, they may only be withdrawn or used for certain expenses. Some common expenses include:

   • Actual medical expenses, including doctor visits, prescriptions, transportation to get medical care, and dental care 
   • Long-term care insurance 
   • Healthcare coverage as well as insurance premiums when unemployed 
   • Certain continuation-of-benefit healthcare coverage 
   • Certain health insurance after age 65 

   Nonqualified uses of HSA assets are subject to taxation and a 10 percent penalty unless the HSA account beneficiary is age 65 or older, dies or is disabled.

5. High Deductible Health Plans (HDHPs)

   You must have coverage under an HSA-qualified "high deductible health plan" (HDHP) to open and contribute to an HSA. Generally, this is health insurance that does not cover the first dollar of medical expenses. Federal law requires that the health insurance deductible be at least:

   * $1,300* -- Self-only coverage
   * $2,700* -- Family coverage

   In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

   * $6,750 * -- Self-only coverage
   * $13,500* -- Family coverage

   *2019 amounts; HDHP and contribution limitations are revised each year to reflect cost-of-living increases.

6. HSA Contributions

   2019 Health Savings Account Contribution Limits*

   You can make a contribution to your HSA each year that you are eligible. For 2019, you can contribute up to $ $3,500 if you have Self-only coverage and $7,000 if you have Family coverage.

   *2019 amounts; HDHP and contribution limitations are revised each year to reflect cost-of-living increases.

7. Catch-up Contributions

   Individuals age 55 and older can also make additional "catch-up" contributions. The maximum catch-up contribution is as follows:

   * 2009 and after: $1,000

   Catch-up contributions are available for eligible spouses as well. Contributions can be made as late as April 15th of the following year.

8. What happens to my HSA when I die?

   If your spouse becomes the sole beneficiary of the account, your spouse can use it as if it were his/her own HSA. If you are not married, the account will no longer be treated as an HSA upon your death. The account will pass to your beneficiary or become part of your estate (and be subject to applicable taxes).

9. Do HSAs require reporting?
   • HSA holders must report all contributions and distributions on their individual tax returns. 
   • Employer contributions are reported on a business tax return, as well as on the W-2 form of any employee receiving an employer contribution.

   All contributions and distributions from an HSA are also reported by the custodian or trustee where the HSA is held.

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