For those of you who have a good grasp of what a health savings account (HSA) is, you can go ahead and scroll to the bottom of the page and check out the new contribution limits.
However, for our friends who are either interested in enrolling in a HSA or are already enrolled and still have no idea how it works, fear not. It’s easy to get confused by all the different terms and rules (even insurance veterans get confused by HSAs and FSAs), so let us help you out!
What is a health savings account and how does it work?
It sounds more complicated than it really is. A HSA is a bank account that you can ONLY use for medical expenses. Think of it as a debit card you can only use at a doctor’s office or the dentist.
It’s important to know that you can only enroll in a HSA if you already have a high-deductible health plan. Once you’re enrolled, you’ll set up how much money you want to contribute to your HSA every pay period. This money comes from you and your employer, specifically your paycheck. It sounds like a bad thing to have it taken out of your paycheck, but that’s one of the major upsides to HSAs. Because it’s taken out pre-tax, you’re getting the most bang for your buck when it comes to medical expenses.
Once your account is all set up, your HSA provider will send you a debit card to use for your medical transactions. You can use this card for the likes of co-pays, over the counter medicine, eyeglasses frames, and a LOT more. (For a full list of approved HSA transactions, CLICK HERE.)
As each week passes, the more your money builds in your bank account. Your HSA card is essentially your medical emergency budget; As long as the cost of your medical expense doesn’t exceed what’s in your account, you’ll be covered! The best part? There’s no “use it or lose it” rule like there is with FSAs. Funds roll over from one year to the next. There is, however, a limit to how much you can contribute to your account every year.
HSA Contribution Limits for 2020
For those of you enrolled in a HSA, you will see a slight increase in the amount of money you can contribute to your account in 2020. Starting next year, you will be able to contribute:
Contribution Limit (Single): $3,550 ($50 increase from 2019)
Contribution Limit (Family): $7,100 ($100 increase from 2019)
Have any questions about HSAs and how they can work for you? Shoot us a tweet at @mgmbenefits on Twitter and we’ll respond to your questions there!