On May 2, 2013, the Internal Revenue Service (IRS) announced higher limits for 2014 contributions to Health Savings Accounts (HSAs) and for out-of-pocket spending amounts under the high-deductible health plans (HDHPs) which accompany them.
Why should you enroll in a Health Savings Account?
Contributions to the HSA are 100% deductible up to the limit for that year.
Withdrawals to pay qualified medical expenses, including dental and vision, are not taxed.
Interest accumulate tax-deferred, and if used to pay for qualified medical expenses, are tax-free.
• Always there
Unlike a flexible spending account (FSA), unused dollars in your HSA aren’t forfeited at the end of the year. That money continues to grow tax-deferred and is available into perpetuity.
For 2014 the Health Savings Account contributions which combine the employee and employer contributions are $3,300 for an individual and $6,550 for a family.
Deductibles for High Deductible Health Plans, which are the required health plan in order to be eligible for a Health Savings Account, remain the same for 2014. The individual minimum deductible is $1,250, and $2,500 for a family plan.
The maximum for a High Deductible Health Plan out-of-pocket amount (deductibles, co-payments and other amounts, but not premiums) has increased for 2014. The HDHP maximum for an individual plan increased to $6,350, likewise the family plan maximum increased to $12,700.
People under age 65 who use Health Savings Account funds for non-qualified medical expenses will be charged a penalty of 20 percent of the funds used for such expenses. Funds spent for non-qualified purposes are also subject to income tax.
The maximum amount of dollars permitted to be contributed to an employee’s Flexible Spending Account, per the Internal Revenue Service's guidelines is $2,500.
Also, per IRS regulations, an employee may not have a Health Care Flexible Spending Account if they also are enrolled into a Health Savings Account.