What is an HSA?
Are you enrolled in one of TVA's consumer directed health plans (CDHP)? If so, you have been offered a health savings account (HSA) as part of your TVA Benefits Plan. An HSA is a tax-advantaged savings account that you can use to pay for qualified medical expenses that your CDHP doesn't cover. We've put together a few things you need to know as you decide whether an HSA is right for you.
HSAs are owned and funded by the employee, and employers may also contribute to the HSA. TVA makes annual employer contributions to eligible members who are enrolled in the CDHP plans (Gold or Silver).
With an HSA, you decide how much pre-tax income you want to contribute through payroll deduction, up to the IRS specified limit. When you withdraw from your HSA to pay for qualified medical expenses, you may take it out tax free. The funds in your HSA may remain as cash or you may invest all or some of them. The interest or investment gains your money earns is tax free¹. They're yours for life, even if you change jobs, switch plans, or retire.
How do HSAs work?
If you're thinking about enrolling in one of TVA's CDHPs with an HSA, here's what else you need to know.
How to access your funds and pay for qualified expenses
Once the money is in your account, you can access your funds through a debit card or checks that are linked directly to your HSA account. You can use the funds in your HSA to pay for qualified medical expenses, which are defined by the IRS and include co-payments, medical supplies, prescriptions, and even eyeglasses and dental fillings.
How to save for the future
One of the great benefits of an HSA is that the money that's in your account at the end of the year will be rolled over to the following year. You may choose to save more than what you'll need each year in order to build a long-term savings account for future medical expenses—you can even use them in retirement.
HSAs are portable. If you leave TVA, for any reason, you can take the account and its' funds with you.
What are the benefits and disadvantages of an HSA?
If you're trying to decide if an HSA is the right choice for you to make with your health plan, consider the general benefits and disadvantages involved.
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Benefits of HSA |
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Tax advantages |
You can contribute to the account pretax, up to the annual limit; the interest or other earnings in the account are tax deferred; and the withdrawals are tax free* if you use them to pay for qualified medical expenses. *With respect to federal taxation only. Contributions, investment earnings, and distributions can be subject to state taxation. |
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Retirement savings
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Because the funds in your HSA belong to you and your balance rolls over at the end of every year, you can save money for qualified medical expenses over a long period of time. If you spend HSA funds on nonqualified expenses before age 65 you will incur a 20% penalty. After reaching age 65, HSA owners can withdraw money for purposes other than paying for qualified medical expenses without incurring the 20% penalty. However, these withdrawals are subject to income tax. |
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Contributions |
Contributions remain in your account until you use them. TVA will also contribute to your account as an added and valuable benefit. Once your account is set up, employee may choose to contribute to their HSA accounts through payroll deduction. Here's how:
Click Submit to enter the new HSA contribution amount to be deducted from your bi-weekly paycheck. |
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Accessible and portable |
You can access the funds in an HSA using a debit card². Funds roll over from year to year and are yours to keep, even if you switch jobs or retire. |
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Disadvantages of HSAs |
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Cost |
Even with the benefit of saving in an HSA, it may be difficult to meet the high deductible required by the CDHP plans, especially if you have high medical expenses. |
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Unplanned expenses and penalties |
Non-medical emergencies come up from time to time. If you withdraw funds from your HSA for nonqualified medical expenses before you turn age 65, you'll owe taxes on the money you take out, plus a 20% penalty. |