For those of you offering a High Deductible Health Plan (HDHP) option as part of your employee benefits package, the Internal Revenue Service (IRS) has announced new contribution limits for the 2012 calendar year that you should be aware of.
- For 2012, the annual Health Savings Account (HSA) contribution limit will increase by $50 for an individual with self-only coverage, making the annual maximum contribution $3,100.
- The contribution limit for family coverage will increase by $100, making the annual maximum contribution $6,250. The catch-up contribution for eligible individuals ages 55 and older is still an additional $1,000 annually.
Are your employees taking advantage, or even aware, of the many benefits that come with opening an HSA account? Don’t look past all the tax advantages, although there are many (reduce your federal income taxes, adjusted gross income and state income taxes), but funds in an HSA account can also be used to pay for a list of items that you may be surprised by, without the need for a doctor’s prescription. Qualified medical expenses are eligible for reimbursement through your HSA as long as they are not reimbursed through insurance or other sources.
Examples of qualified medical expenses:
- Breast Pump – includes the cost of the breast pump and supplies that assist lactation
- Childbirth classes – limited to expenses incurred by the mother-to-be. The classes must address specific medical issues, such as labor, delivery procedures, breathing techniques and nursing
- COBRA premiums
- Dental treatment – includes fees paid to dentists for x-rays, models and molds, fillings, braces, dentures, dental implants, etc.
- Fertility enhancement – includes procedures such as in vitro fertilization and surgery, including an operation to reverse prior surgery that prevented the person operated on from having children
- Hearing aids – including repairs and batteries
- Lasik eye surgery
- Long-term care insurance premiums
- Medicare Part A and B, Medicare HMO, and employer-sponsored retiree health insurance premiums
- Nursing home – the cost of medical care for an employee or for an employee’s spouse or dependent, including meals and lodging in the home, as long as the main reason for being there is medical care
- Pregnancy test kit
- Stop-smoking programs – drugs that do not require a prescription, such as nicotine gum or patches, that are designed to help stop smoking are not reimburseable
- Sterilization – includes medical expenses for the cost of legal sterilization
- Vision care – including eyeglasses, contact lenses, eye exams, contact lens solutions, etc.
- Weight-loss program – includes treatment for a specific disease diagnosed by a doctor (such as obesity, hypertension or heart disease) and membership fees in a weight reduction group
The examples and requirements stated above are subject to change by the IRS. For a more comprehensive list of medical expenses that are both eligible and ineligible, please refer to Publication 502 by the IRS.
Reiteration of New Changes Effective January 1, 2011:
- The limitation that only prescription medications prescribed from a doctor are eligible to purchase using funds from an HSA account; over the counter drugs are no longer eligible unless they have been prescribed by a doctor.
- The penalty for using HSA funds for non-eligible purposes before age 65 has increased to 20%, where the penalty was previously 10%. This penalty does not apply once the HSA account owner turns 65 years old.
We deal with and answer questions related to High Deductible Health Plans and Health Savings Accounts on a daily basis. Should you, or your employees, have any questions related your HDHP or HSA, please don’t hesitate to call our office.