When you enroll in a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) through FEHB, you unlock a valuable resource to help manage your out-of-pocket medical expenses. Here’s a breakdown of the key benefits.
HSA Contributions
HSAs receive monthly contributions from your plan, funded by a portion of your premium, referred to as a premium pass-through. The total annual contributions vary based on your specific plan and the number of people covered. For self-only coverage, contributions typically range between $750 and $1,200, while contributions for self-plus-one or self-and-family plans generally fall between $1,500 and $2,400.
Optional HSA Contributions
In addition to what your plan contributes, you can add your own funds to your HSA. Self-only participants can contribute up to $4,150 per year, while those with self-plus-one or family coverage can contribute up to $8,300. If you’re 55 or older, you can make an additional $1,000 catch-up contribution each year. These voluntary contributions offer significant tax benefits: contributions can either be deducted pre-tax through payroll or added as a lump sum to be deducted when filing taxes. Plus, the funds grow tax-free and can be withdrawn without tax penalties for qualified medical expenses.
Using Your HSA Funds
Your HSA funds can be used not only to cover the out-of-pocket expenses required to meet your deductible but also for everyday healthcare purchases, such as over-the-counter medications, feminine hygiene products, and allergy treatments. Since the HSA is yours, you can carry it into retirement and use it to pay for Medicare Part B and D premiums, as well as long-term care insurance premiums.
Benefits of an HSA After Age 65
If you need to use your HSA for non-medical expenses before age 65, you’ll typically face a 20% penalty plus regular taxes. However, once you reach 65, the penalty is waived, and withdrawals for non-qualified expenses are only subject to your regular tax rate.
Investment Opportunities with Your HSA
Similar to an IRA, HSAs are managed by financial services companies, allowing you to invest unused funds in a wide array of options—often more than what is available through the Thrift Savings Plan (TSP). Since the HSA belongs to you, it remains in your control even if you change your healthcare plan or leave federal service.
For guidance on maximizing your HSA benefits, consult an FRC® trained advisor to help you get the most out of your account.
