Health Savings Account (HSA)

An HSA, administered by Optum Financial, is like a 401(k) for healthcare, yet the HSA tax benefits are far greater. It is a tax-favored, interest-bearing account that active State employees can use to pay for qualified medical expenses, now, or in the future. Active State employees who qualify (see Qualifying for an HSA below), can save, or invest the account funds. Paired with the Consumer Driven Health Plan (CDHP), an HSA is a powerful financial tool that gives you more control of your healthcare decisions. An HSA offers triple tax saving:

1. Pre-tax or tax-deductible contributions
   
2. Tax-free interest or investment earnings
   
3. Tax-free distributions, when used for qualified medical expenses

The State will contribute a third of the deductible to an active State employee's HSA. Maximum HSA contributions (Employer + Employee):

Active State employees can make tax-free withdrawals to pay for qualified medical expenses, for you and your eligible dependents. HSAs are portable. Unlike an FSA, there is no "use-it-or-lose-it" rule with HSAs. Unused contributions remain in the account each year, earning tax-free interest. If the employee invests HSA funds, those funds remain in the investment account. HSAs offer the potential for long-term, tax-free savings that can be used for future healthcare expenses including; out-of-pocket expenses after retirement, Medicare, and long-term care (LTC) premiums, up to IRS limits and certain LTC expenses. There are no income limitations.

Qualifying for an HSA
To be an eligible individual and qualify for an HSA, you must:

• Be covered under a high deductible health plan
• Have no other health coverage (except what is permitted under other health coverage: 
  https://www.irs.gov/publications/p969#en_US_2019_publink1000204039)
• Not be enrolled in Medicare. This includes Part A
• Not be claimed as a dependent on someone else’s tax return