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Health Savings Account

Health Savings Accounts (HSAs) were created by Congress to combat rising medical costs by providing an incentive for more consumers to pay for current health expenses and save for future qualified medical expenses. An HSA is an IRA-like account that is designed exclusively for covering medical expenses incurred by the account beneficiary and his or her dependents, and works in conjunction with a High Deductible Health Plan. You may contribute either all or a portion of the amount of your health plan deductible into a tax-advantaged Health Savings Account.

Eligibility

An HSA account can be established by anyone who meets the following criteria:

Currently has a qualified High Deductible Health Plan (HDHP)
Has no other first-dollar medical coverage
Is not enrolled in Medicare
Cannot be claimed as a dependent on someone else’s tax return
Could not have received Veteran’s Affairs medical benefits within the past 3 months
Does not have a Flexible Spending Account (FSA) or a Health Reimbursement Account (HRA)

What Qualifies as a High Deductible Health Plan (HDHP)?

A qualified HDHP must meet specific requirements. The 2008 requirements for the plan to be considered are:

Minimum deductible: $1,100/individual coverage and $2,200/familiy coverage
Maximum Out-of-Pocket (including deductible): $5,600/individual coverage and $11,200/family coverage

(High Deductible Health Plan minimum and maximum limits are subject to annual cost-of-living adjustments.)

Contributions

Members can make tax-deductible contributions and also receive tax-free employer contributions to their HSAs each year eligibility requirements are met. Maximum HSA deposit limits are determined by the type of insurance coverage (either individual or family coverage) under the HDHP.

The maximum 2008 contribution limits are:

$2,900 for individual coverage
$5,800 for family coverage

(Maximum limits are revised each year to reflect cost-of-living adjustments.)

You may also make a prior-year contribution. The deadline to make a contribution for the previous year is April 15th (excluding tax extensions and federal holidays). Employer contribution deadline is the end of the employer’s fiscal year for which it is being made.

There is no "use it or lose it" rule! Therefore, the funds remaining in the HSA roll over from year to year.

Catch – Up Contributions

Are you getting a late start on opening your HSA? In addition to the standard HSA contribution limits, you may contribute an additional amount known as a 'catch-up contribution” if you have attained age 55 in the year for which the contribution is being made. The catch-up contribution limit for 2008 is $900 and increases in increments of $100 per year until 2009 when it reaches $1,000.

Tax Benefits

You do not have to itemize your HSA contributions to receive the tax-advantaged benefits for medical expenses. The contribution can either be made pre-tax through a Section 125 plan, or it can come right off the top as an above-the-line deduction from your gross income. The tax benefits include the following:

Your contributions are tax-deductible.
An employer’s contributions to your HSA are tax-deductible to the employer and do not increase your reportable
The earnings are
Funds distributed for a qualified medical expense incurred by you, your spouse, or any dependent may be withdrawn tax-free and penalty-free at any

Once you turn 65, you can withdrawal funds with no penalty regardless if you use the funds for medical expenses or not. Each year that you withdraw funds from your HSA, IRS Form 8889 must be completed and filed with your taxes.

Accessing Your HSA Funds

Your Arkansas Federal HSA offers several convenient methods for accessing your funds at any time. You will receive a Health Savings Account debit card that can be used to make your qualified medical purchases or payments. Where debit cards are not an option, you can pay for services and products with an HSA check. In addition, your HSA funds can be accessed at any of our branches or by calling our Call Center at 501-982-1000 or 800-456-3000.

What is a Qualified Medical Expense?

A qualified medical expense is an amount that is paid for certain types of medical care for you, your spouse, or any dependent of the account owner (but only such amounts that are not covered by another insurance or health plan).
A qualified Medical Expense includes, but is not limited to:

Diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body.
Transportation primarily for, and essential to, medical care for the above.
Qualified long-term care services
Dental, vision, and other services that may not be covered under the HDHP.

NOTE: For a complete list of qualified medical expenses, visit www.irs.gov, publication 502.

Penalties

HSA distributions that exceed the amount you have spent on qualified medical expenses are subject to federal income taxes and a 10% IRS penalty. The 10% IRS penalty does not apply if the account owner is disabled, has reached the age of 65, or if a distribution has been made after the account owner’s death.

Dividends

Dividends are calculated on your daily balance, paid, and compounded monthly. Arkansas Federal pays a higher dividend rate than most financial institutions. Since we have no stockholders, our profits are returned to our members in the form of higher dividends!

Your Money is Safe Here

At Arkansas Federal, we are absolutely committed to the protection of our members' funds. Our professional management team ensures that your funds are safeguarded at all times. Each account is insured up to $350,000 ($100,000 by the National Credit Union Administration [NCUA], a U. S. Government Agency, and an additional $250,000 by Excess Share Insurance, Inc.)

How to Open a Health Savings Account

A Health Savings Account may be opened at any Arkansas Federal branch office or by contacting the Call Center at 982-1000 in central Arkansas or 800-456-3000 outside central Arkansas.