Guidelines for Using Your HSA

Guidelines for Using Your HSA

Your health savings account (HSA) is offered by your employer in your benefits package — your employer must be contracted with WageWorks in order to have our HSA. Although a WageWorks HSA is part of your employee benefits, you own the account. If you leave your job or retire, your HSA funds are yours to keep.

Having an HSA saves you money in taxes.* You can make pre-tax contributions and use tax-free dollars toward eligible health care expenses that are not covered by your health, vision, or dental plan.

Please review the information below so you are aware of the rules that apply to your HSA.

Establishing an HSA

Setting up an HSA is your choice. If you decide to establish an account, you must meet HSA eligibility requirements created by the IRS, including:

Further details are on our HSA Enrollment page.

HSA Contributions and Maximum Annual Limit

To make HSA contributions, you must continue to meet the requirements listed above. There are three ways to add money to your HSA.

  • Payroll deductions. Tax-free funds are taken out of your paycheck and are deposited into your HSA. This is the easiest way to build up your account. Ask your benefits representative if this applies to your HSA program, and if so, how to sign up.
  • Direct contributions. You can add after-tax dollars to your HSA, and so can your family and friends. These HSA contributions aren’t tax-free, but they can be deducted on your tax return.* Plus, if you’re making a direct contribution from your banking account, you can set it as a recurring option in your online account.
  • Employer contributions. Some employers may choose to add money to your account. If so, those funds can’t be deducted on your tax return.

Each year, the IRS sets a maximum limit for HSA contributions. To see the maximum limit for this year, go to our HSA Contributions page.

The IRS also allows individuals who are age 55 and older to make catch-up contributions. Learn more on our HSA Contributions page.

Growing Your HSA

All HSA contributions go into your HSA Deposit Account. Funds begin bearing interest on day one; interest is accrued daily and paid monthly. Money in your Deposit Account is FDIC insured (up to the maximum amount permitted by law). When you have a specific balance in your Deposit Account, known as a “peg balance,” investment opportunities are available. Learn more on our HSA Investments page.

Your HSA funds roll over from year to year, and there is no “use-it-or-lose-it” rule like you have with an FSA. Even if you no longer meet the requirements to make HSA contributions, you can still use the funds to pay for eligible expenses.

You make the decisions on how to save and when to spend your HSA funds. The longer you leave your funds in your HSA, the more your opportunity to grow your HSA balance increases. However, funds are available if needed for eligible health care expenses.

Eligible HSA Expenses

You can use your HSA funds for hundreds of eligible HSA expenses. These expenses can be for yourself, your spouse, and your tax dependents. Only eligible expenses can be reimbursed tax-free under your HSA as defined by Internal Revenue Code § 213(d).

  • Eligible expenses: Items that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease are generally considered eligible expenses. Transportation for health care is also eligible.
  • Potentially eligible expenses: These expenses require you to retain additional supporting documentation proving a medical need for the service or product. Examples include vitamins used to treat a medical condition or a weight-loss program needed to treat diabetes. These expenses also include over-the-counter (OTC) medicines and drugs that require a prescription from a doctor.
  • Ineligible expenses: Cosmetics, cosmetic surgery, grooming products, and items for general well-being are not eligible expenses.

See a detailed list of eligible and ineligible expenses on our Eligible HSA Expenses page.

Using Your HSA Funds

The easiest way to pay for your eligible HSA expenses is with your WageWorks Visa® Benefit Card. Simply swipe your card at the point of sale. Learn more on our Benefit Card page.

You can also reimburse yourself for any eligible expense that you may have paid for out of your pocket after your HSA has been established.

Example: Let’s say you established your HSA in January and paid out of your pocket for a $200 eligible expense in February. In June of that same year, you decide you want to be reimbursed for the $200 expense. Since the expense was incurred after you set up your HSA and you have funds available, you can log in to your online account and transfer funds from your HSA to your personal bank or savings account.

You can also pay a health care provider from your online account. If you receive a bill from a doctor, chiropractor, or another provider, log in to your WageWorks account and have a check sent directly to the provider. This option can be set as a recurring payment.

Limited-purpose FSA

IRS rules do not allow you to have both an HSA and a general-purpose health FSA because both use pre-tax funds toward eligible medical expenses. To maximize HSA funds, many HSA account holders will also have a limited-purpose FSA, which provides funds to cover eligible vision and dental expenses. If you have both a WageWorks HSA and our limited-purpose FSA, the limited-purpose FSA will pay first. When your FSA funds are depleted, you can decide whether to use HSA funds toward eligible vision and dental expenses.

Important: You cannot “double-dip” and use both FSA funds and HSA funds toward the same eligible expense. In addition, please keep in mind that the IRS use-it-or-lose-it rule applies to limited-purpose FSAs, and you must use the FSA funds during the coverage period. This rule doesn’t apply to your HSA.

Save Your Receipts

Unlike a health FSA or health reimbursement arrangement (HRA), your HSA doesn’t allow you to submit a reimbursement request. You need to save your itemized receipts and other supporting documentation, such as a prescription for OTC medicines. If you are audited by the IRS, you will need this supporting documentation to prove that your HSA funds were used toward eligible medical expenses.

Proper supporting documentation shows specific details related to the health care you received or the item purchased, such as the name of the health care provider or merchant, patient name, date of service or purchase, Rx number, description of service or product, etc. Examples include health plan Explanation of Benefits (EOBs), pharmacy receipts, and itemized merchant receipts. Credit card receipts and canceled checks are not allowed because they don’t have the specific details needed.

Filing Your Tax Return

When preparing to file taxes, you will need to do some work. UMB Bank will help by supplying key IRS forms, but it’s up to you to file your annual federal and state tax returns. Here are the forms you’ll need:

  • IRS Form 5498-SA documents all of the contributions made to your HSA in a tax year. You can find information about your total contributions before tax day by logging into your online account.
  • IRS Form 1099-SA provides you with the total distributions that were made from your HSA. You will receive a separate 1099-SA for any HSA distributions you had in that tax year. If you did not have distributions during the tax year, you will not receive this form.
  • IRS Form 8889 is one that you need to complete. Use this form to report any deductible contributions, report distributions for eligible expenses, and calculate the tax you owe on withdrawals you made for ineligible expenses. Attach your IRS Form 8889 to your IRS Form 1040.

Important: If you use your HSA funds to pay for ineligible expenses, you are responsible for reporting that information to the IRS and paying income tax on the amount. If you are younger than age 65, you must also pay a 20 percent penalty.

For further details about HSA tax reporting, visit the IRS website or talk to your tax advisor.

The Elite Benefit Card is issued by UMB Bank, n.a., pursuant to a license from Visa U.S.A. Inc.

*HSA contributions are deducted before federal and most state taxes. Savings vary depending on your tax bracket. Check with your tax advisor for details regarding your state taxes and your tax savings. Also, talk to your tax advisor to see if you qualify for above-the-line deductions.