[Article 1: HSAs and Retirement]



Overview: reminds employees that HSA funds can be saved and used during retirement.

How you can use your HSA in retirement

A health savings account (HSA) is one option available to help pay for health care expenses in retirement. Some people view their HSA as a secondary retirement account. As we age we’ll inevitably require additional health care, whether it’s a daily prescription or more frequent visits to a primary care physician.

Account holders with an HSA from Optum BankSM, Member FDIC, have access to a helpful tool called the Health Savings Checkup. This tool provides an estimate of health care costs in retirement based on an individual’s situation. The HSA allows account holders to set aside funds to use for those health care costs before they are eligible for Medicare.

Guidelines for HSA contributions during retirement

When you can contribute to an HSA:

• To be eligible to contribute to an HSA, you must be covered under a qualifying, high-deductible health plan (HDHP). Additionally, you must not be covered by any impermissible non-HDHP health coverage.

• If you are covered under an HDHP for the entire plan year when you retire, you can continue to contribute up to the legal limit that applies to you.

• For 2015, you can contribute up to the IRS limits of $3,350 if you have self-only coverage or $6,650 if you have family coverage. For 2016, the IRS limits remain the same for self-only coverage and increase to $6,750 for family coverage.

• If you are age 55 or older, you can make catch-up contributions of $1,000 each year until you enroll in Medicare.

When you cannot contribute to an HSA:

• If you are no longer covered by a high-deductible health plan (HDHP), you cannot contribute to your HSA. However, you can still withdraw money from your account for qualified medical expenses.

• If you are covered by a HDHP for part of the year, your contributions must be made on a prorated basis. For example, if you retire and end coverage with the high-deductible health plan offered by your employer at the beginning of July, you can make six months’ worth of contributions to your HSA ($1,675 for individuals; $3,325 for families).

• If you enroll in Medicare Parts A, B, C, or D, you will not be eligible to contribute to an HSA.

• If you are enrolled in Social Security, you will automatically be enrolled in Medicare Part A, and that will make you ineligible to contribute to an HSA.

• To be eligible to contribute to an HSA, you must be covered under a qualifying HDHP. Additionally, you must not be covered by any impermissible non-HDHP health coverage.

• If you are covered under a HDHP for the entire plan year when you retire, you can continue to contribute up to the legal limit that applies to you. For 2015, you can contribute up to the IRS limits of $3,350 if you have self-only coverage or $6,650 if you have family coverage. For 2016, the IRS limits remain the same for self-only coverage and increase to $6,750 for family coverage. If you are age 55 or older, you can make catch-up contributions of $1,000 each year until you enroll in Medicare.

Simple guidelines to make HSA withdrawals during retirement

After you retire, you can use the funds in your HSA for qualified medical expenses, just as you did before you retired. A qualified medical expense refers to most medical, dental and vision expenses, including but not limited to:

• Routine health care: office visits, X-rays, lab work

• Hospital expenses: room and board, surgery

• Prescription drugs

• Dental care: cleanings, fillings, crowns

• Vision care: eye exams, glasses, contacts

• Copays and coinsurance (the portions of health care bills paid by you)

A list of qualified medical expenses is available at . This list is subject to change and is intended only as a general guideline for covered expenses. A detailed list of qualified medical expenses is available through the IRS Web Site at .

Additionally, you can use your HSA funds for alternative or preventive treatments not normally covered by health plans, including LASIK surgery, chiropractic services, tobacco cessation programs and acupuncture.

What happens if you use your HSA for non-qualified medical expenses?

If you use your HSA funds for non-qualified medical expenses prior to age 65, you will have to pay income tax and a 20% penalty. After age 65, you can use the money in an HSA for non-qualified medical expenses without penalty, but it will be taxed as income. Of course, no matter what age you are, if you use your HSA funds for qualified medical expenses, you will not be taxed.

There are 3 easy ways to make deposits to your HSA

Ready to start saving? Deposits may be made periodically, or in a lump sum, up to the applicable contribution limits. There are three ways you can contribute on an after-tax basis to your HSA. 

• Make an electronic deposit. This is an electronic transfer of funds into your account.

• To use the “Make a Deposit” feature, go to

• Click on “Make a Deposit” to transfer money into your account. You’ll need to include the bank routing/transit number as well as the checking/savings account from which you are transferring funds. You can choose to either make a one-time or a recurring deposit.

• Deposit a personal check. Simply fill out the Optum BankSM, Member FDIC, HSA Contribution/Deposit Form and mail it with a personal check.

• Make an IRA rollover. The IRS allows a one-time rollover from an IRA to an HSA. The IRA transfer is subject to the IRS annual HSA contribution limits.

When you make deposits to your account with after-tax dollars, you will need to take an “above-the-line” deduction on your personal income taxes equal to, but not greater than the amount you contributed to your HSA up to the applicable contribution limits.

There are contribution limits you should be aware of

For 2015, you can contribute up to the IRS limits of $3,350 if you have self-only coverage or $6,650 if you have family coverage. For 2016, the IRS limits remain the same for self-only coverage and increase to $6,750 for family coverage.

Have additional questions? We have resources for you

More information about health savings accounts (HSAs) can be found at . Additional resources that may be helpful to you are available at . If you have questions about your particular situation, please consult a tax or legal professional.

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Health savings accounts (HSAs) are individual accounts offered by Optum BankSM, Member FDIC, and are subject to eligibility and restrictions, including but not limited to restrictions on distributions for qualified medical expenses set forth in section 213(d) of the Internal Revenue Code. State taxes may apply. Fees may reduce earnings on account. This communication is not intended as legal or tax advice. Please contact a competent legal or tax professional for personal advice on eligibility, tax treatment and restrictions. Federal and state laws and regulations are subject to change.

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