Principal® HSA Basics
HSAs are still a relatively new concept in the world of health benefits.
How HSAs work
People covered by a qualified high deductible health plan can contribute funds to an HSA. Those funds can be withdrawn for qualified medical care or to apply to deductibles.
HSA funds are “triple-exempt” from taxes:
- Contributions are not subject to federal income tax.
- The funds can grow tax-free; they earn interest or other investment returns without tax.
- Withdrawals are not taxed federally if used to pay for qualified medical expenses.
In addition, unused balances in the HSA carry forward to future years and there is no limit on growth much like a 401(k). There is no use-it or lose-it component to an HSA like there is with some other products such as flexible spending accounts (FSAs).
Who is eligible?
Most people can participate in an HSA by meeting a few simple requirements.
- You must be covered under a qualifying HDHP
- You cannot be covered under any medical insurance that is not a qualifying HDHP, and you cannot be covered as a dependent under someone else’s non-qualifying insurance.
- You can have insurance coverage or other arrangements for accidents, disability, dental care, vision care, and long-term care. Coverages such as liability, worker’s compensation, property and casualty, insurance for specific diseases, or insurance that pays a fixed amount per day of hospitalization are all permitted.
- Upon enrolling in Social Security Medicare, you can no longer make HSA contributions. If you have an existing HSA, you can still use the money you already have contributed.
- Want to find out if you’re eligible? Try our HSA calculator!
What are the advantages to you?
You can use some of the money you once spent on health coverage as you see fit. The HSA funds belong to you, and they’re portable from job to job or into retirement.
By making good health and health care choices you can make the best use of your own money. You may even be able to save it and let it grow! This can help drive long-term health care cost control.
How can HSA funds be used?
HSA funds can be used to pay your deductible or other out-of-pocket qualifying medical expenses as outlined in Section 213(d) of the Internal Revenue Code. These are the same medical expenses the IRS has determined are deductible for income tax purposes.
For more information
- Are you interested in setting up an HSA? If so, call 800-826-2364, Monday - Friday, 7 am-7 pm, CST.
- Learn about the Principal HSA top features
This material is a summary of Health Savings Accounts and High Deductible Health Plans. It is not a complete statement of the provisions or requirements of HSAs and HDHPs. It is intended to provide accurate and authoritative information in regard to the subject matter covered. The accuracy of the information is not guaranteed and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is not a marketing opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. High Deductible Health Plans and custodial services for Health Savings Accounts offered by Principal Life Insurance Company. Bank products and services provided by Principal Bank, Member FDIC, Equal Housing Lender. HSA monies held in a Principal Bank account are FDIC insured. Securities offered through Princor Financial Services Corporation, 800/247-4123, member SIPC. HSA monies held in an account at Princor Financial Services Corporation are not FDIC insured, have no bank guarantee and may lose value. Principal Life, Principal Bank, and Princor® are members of the Principal Financial Group, Des Moines, IA 50392.
