How to Open an HSA 

Opening an HSA is a great way to save money for your medical expenses while reducing your taxable income. Unlike other savings accounts, this account has massive tax advantages such as not paying taxes on the accounts growth or tax on the withdrawals. Looking into opening an HSA could be a great opportunity for those who wish to better utilize their savings account regarding medical expenses. Here is your step by step guide on how to open an HSA account.

What Is a Health Savings Account? 

A health savings account is a specific type of savings account that is used to cover medical expenses. In comparison to other accounts, HSAs can also be used to invest in mutual funds, stocks, and other investment types.

There are a couple factors that qualify those for opening an HSA, for example one must already be enrolled in a high-deductible insurance plan (HDHP). 

Health Savings Account Rules 

Since health savings accounts are an unique type of savings account, there are more restrictions around who can open this type of account. Firstly, the application must have a high-deductible insurance plan (HDHP).

To determine whether you’re insurance qualifies as a HDHP depends on the IRS, in which they re-define these plans annually. Some employers who offer HDHP additionally offer HSAs. In short, how this savings account works is that your contributions cannot exceed the government’s instated maximums.

Additionally you are given a specific debit card which is linked to your account so that these funds can be more easily accessed in case of a medical emergency. 

Benefits of Opening an HSA 

There are a plethora of pros when it comes to opening a health savings account. No one can expect a medical emergency, but you can put in steps to insure you will be financially sound in case of an unfortunate accident. 

• Tax Advantages: HSA contributions are not linked with your tax burden which can reduce your taxable income. Additionally, there are no taxes on the account’s growth or withdrawals. However, there are two types of contributions such as pre-tax or tax-deductible which depends upon if your employer opened the account for you or not. 
• Wide Variety of Expenses Covered: These medical expenses can span from dental procedures to wheelchairs to veterinary care for guide dogs. This account has an extremely wide range of coverage, and even more when there is a diagnosis from a doctor. Additionally, depending on the plan, some allow groceries to be covered as well. 
• Annual Rollover: Unlike the Flexibility Spending Accounts (FSAs), HSAs offer more flexibility when it comes to rollovers. Usually, this type of account allows up to $550 to be carried over or roughly 2 to 3 months of premiums into the next following year. 
• Debit Card: By having a HSA debit card this allows you to conveniently spend your medical expenses immediately. This card not only gives one the flexibility to pay when needed, but if you pay out of your own credit card the HSA debit card can reimburse you for your expense. 

5 Steps to Opening a Health Savings Account

Now by knowing more about HSAs and the benefits they bring, lets outline the steps on how to open an account. Here we will be elaborating on the 5 simple steps to start your HSA journey. 

Step 1: Check Eligibility

When it comes to opening a health savings account, one should see if they are eligible to have one. What would qualify one as eligible for this account is whether you have a high-deductible health plan (HDHP), have no other health coverage which is not permitted by IRS, or not being claimed as someone’s dependent.

There are a few other factors such as not having a flexible spending account (FSA) or health reimbursement account (HRA). Additionally, you won’t qualify if you have received Veterans Affairs (VA) benefits within the past 3 months, unless this treatment qualifies as preventative care.

In short, overview the terms of opening a HSA to make sure you are within eligibility. 

Step 2: See if Your Employer Offers an HSA

Some employers do offer an HSA plan however one will have to see if they qualify for the account. How an employer can offer this is either by a Section 125 plan or without a Section 125 plan.

Without a Section 125 plan, employers can still make tax-free contributions to an employee’s HSA only if these contributions are similar for all employees. However, even if an employer does not provide an HSA, one can still open an account individually. 

Step 3: Compare Platforms

When looking to open an account, one should consider what they are looking for in a platform. One should consider the annual maintenance fees, what the minimum threshold requirements are, what investment options are available, and what are the investment expense ratios.

By looking into these factors, one can determine whether a platform is a good fit or not. 

Step 4: Apply to Your Desired Issuer

Once answering all of these questions, apply to your desired insurer. By applying to open an account one must provide some personal information.

This includes your social security number, government issued ID, contact information, and employer information. Additionally, one must provide other personal information including their birthday and home address. 

Step 5: Start Making Contributions

Once you are registered and approved by your desired issuer, you can start making contributions. Some platforms require a minimum contribution amount when opening the account, so make sure you provide this sum amount before.

Additionally, for 2021, those who are eligible for this account can contribute up to $3,600 for the year to their HSA. Moreover, the maximum out-of-pocket contribution can not exceed $7,000. 

Why You Should Open an HSA Account with Lively

No one can expect medical emergencies, so why not insure you have the means to cover these expenses? If you qualify, one should open an HSA to ensure their health and medical expenses are under control.

Lively is a great platform that makes opening a HSA a simple process. The platform provides fee-free HSA providers for individuals, no minimum balance requirements, provides many investment options, and setting up an account only takes 5 minutes! Read more here about Lively and how to get started with your account today.

Frequently Asked Questions