Key Terms for Health Savings Accounts
A glossary of key terms related to Health Savings Accounts (HSAs).
Health Savings Account Terminology
- Accelerated HSA: The IRS allows employers making pro-rated contributions to accelerate contributions to employees who experience high medical claims, typically early in the year. With this option, the employer would have to set a corporate policy for accelerated contributions and implement the policy equally to all employees. The employer can set its own policy rules, such as allowing accelerated contributions for medical claims only (not vision, dental, etc.) or for claims over $1,000. Zenefits does not currently support Accelerated HSAs.
- Administrator: The point of contact at the company responsible for making decisions and managing the company's Health Savings Account offering.
- Avidia: A Zenefits partner for Health Savings Accounts.
- Claim: Reporting of an eligible service or expense to receive credit and/or reimbursement in conjunction with one's allowed benefit.
- Claim Form: A form that one needs to submit with proof of an expense/service in order for the carrier/provider to process and pay (if applicable).
- Contribution: The amount of money that an employee delegates to be deposited into their Health Savings Account and loaded onto their HSA Bank card for use.
- Deduction: The removal of the allocated contribution from an employee's pay before taxes are taken from it. The funds withheld from the employee's paycheck pre-tax are then loaded onto their HSA Bank card.
- Eligible Expenses: Purchases/services defined by the IRS that receive the tax benefits of an HSA.
- Excise Tax: If money is withdrawn for non-medical uses before the age of 65, there is a 20% excise tax. This is in addition to the individual’s regular state/federal taxes.
- Form-1099-SA: This form is provided for each HSA distribution an employee made in the current tax year. The employee will receive a separate 1099-SA for each type of distribution made during the tax year. The five distribution types are 1) normal; 2) excess contribution removal; 3) death; 4) disability; and 5) prohibited transaction.
- Form 5498-SA: This form provides the employee with all the contributions made to their Health Savings Account in that tax year. HSA providers will supply Forms 5498-SA and 1099-SA to participants.
- Form 8889: This form is used to report HSA contributions, distributions and tax deductions (including contributions made by the employer which are excluded from gross income). The employee will complete this form using IRS Forms 1099-SA and 5498-SA, provided by HSA Bank. It is the employee's responsibility to complete their Form 8889 and file with their tax return.
- High-Deductible Health Plan: A health plan with a high-deductible that is written to be HSA compatible. Not all HDHPs are HSA compatible, and not all employers offering an HSA-compatible HDHP offer an HSA.
- Health Savings Account (HSA): An account comprised of pre-tax funds to be used for health-related services/expenses.
- HSA Bank: A Zenefits partner for Health Savings Accounts.
- Tax-exempt funds: Money contributed to an HSA is pre-tax, and if used for a qualified medical expense it can be withdrawn tax-free.
- Withdrawal: Money can be taken out of an HSA tax free if used for a qualified medical expense. See Excise Tax above for nonqualified distribution. Money can be withdrawn without the excise tax once one reaches age 65.
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