Free HSA Fundamentals & Regulations Questions and Answers — Questions and Answers
Question 1: Who is eligible to open a Health Savings Account (HSA)?
- Anyone with any health insurance plan.
- Individuals enrolled in a High-Deductible Health Plan (HDHP). (Correct answer)
- Only individuals over the age of 65.
- People receiving Medicaid benefits.
Correct answer: Individuals enrolled in a High-Deductible Health Plan (HDHP).
To open an HSA, an individual must be enrolled in a high-deductible health plan (HDHP) and not be covered by any other non-HDHP insurance.
Question 2: What is the primary advantage of contributing to an HSA?
- It offers better interest rates than a savings account.
- Contributions, earnings, and withdrawals for medical expenses are tax-free. (Correct answer)
- There is no limit on contributions.
- Funds must be used within the same year they are contributed.
Correct answer: Contributions, earnings, and withdrawals for medical expenses are tax-free.
HSAs offer triple tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.
Question 3: What happens to unused HSA funds at the end of the year?
- They expire and are forfeited.
- They roll over to the next year and continue growing tax-free. (Correct answer)
- They must be withdrawn and taxed.
- They can only be used for non-medical expenses.
Correct answer: They roll over to the next year and continue growing tax-free.
Unlike Flexible Spending Accounts (FSAs), HSA funds roll over indefinitely, allowing account holders to save for future medical expenses.
Question 4: Which of the following expenses is NOT eligible for HSA reimbursement?
- Prescription medications.
- Over-the-counter dietary supplements. (Correct answer)
- Doctor's visit co-pays.
- Eyeglasses and contact lenses.
Correct answer: Over-the-counter dietary supplements.
Qualified HSA expenses include medical, dental, and vision costs. However, over-the-counter supplements and cosmetic procedures are not eligible.
Question 5: What happens if HSA funds are used for non-qualified expenses before age 65?
- They are subject to a 20% penalty and income tax. (Correct answer)
- They are only taxed as ordinary income.
- They are subject to a 50% penalty.
- There is no penalty for early withdrawals.
Correct answer: They are subject to a 20% penalty and income tax.
Non-qualified withdrawals before age 65 are subject to income tax and an additional 20% penalty.
Question 6: Can HSA funds be used to pay for health insurance premiums?
- Yes, for any type of health insurance plan.
- No, HSA funds cannot be used for insurance premiums, except in specific cases. (Correct answer)
- Yes, but only for employer-sponsored plans.
- Only if the premium is less than 10% of income.
Correct answer: No, HSA funds cannot be used for insurance premiums, except in specific cases.
Generally, HSA funds cannot be used for health insurance premiums, except in cases of COBRA coverage, Medicare premiums, or during periods of unemployment.
Free HSA Fundamentals & Regulations Questions and Answers
Who is eligible to open a Health Savings Account (HSA)?