Fundamentals & Regulations Flashcards

Who is eligible to open a Health Savings Account (HSA)?

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.

What is the primary advantage of contributing to an HSA?

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.

What happens to unused HSA funds at the end of the year?

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.

Which of the following expenses is NOT eligible for HSA reimbursement?

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.

What happens if HSA funds are used for non-qualified expenses before age 65?

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.

Can HSA funds be used to pay for health insurance premiums?

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.