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SEPTEMBER 18, 2020

Can I open my own Health Savings Account if my employer doesn't offer one?

Answered by
Edward Shehan
Senior Vice President, Health Benefit Solutions, Bank of America
Yes, you can open a health savings account (HSA) even if your employer doesn't offer one. But you can make current-year contributions only if you are covered by an HSA-qualified health plan, also known as a high deductible health plan (HDHP). For more information, refer to our Contribution Limits and Tax Reference Guide (PDF). And you can't be covered by other disqualifying coverage such as Medicare, Medicaid, TRICARE or a spouse's health plan. Nor can you be claimed as a tax dependent in that year.
An HSA is worth considering because it can be a powerful savings vehicle as well as a way to help pay for health care costs. First, there are the tax advantages. Contributions can be made pre-tax, making them exempt from federal and most state income tax; any interest and investment earnings in your HSA accumulate tax-free. And withdrawals for qualified health care payments remain tax-free.
Then there's the flexibility. Unused funds in the account continue to roll over from year to year. And after age 65, you can use funds from the account without penalty for nonmedical expenses.
What are my contribution limits?
For exact limit amounts, refer to our Contribution Limits and Tax Reference Guide (PDF). If you turn 55 during the tax year or are already age 55 or older, you qualify for a catch-up contribution of $1,000 per year. As far as balances, there are no limits or thresholds you need to maintain.
What expenses can an HSA can cover?
HSA funds can be used for:
  • Qualified out-of-pocket medical expenses you incur that are not covered by your health plan
  • Medical, dental or vision coinsurance and co-payments
  • Prescription drugs
  • Prescription eyewear and supplies (eyeglasses, goggles, safety glasses, sports eyewear, sunglasses)
  • Some medical treatments not covered by your insurance, such as visits to a chiropractor
You can begin by reviewing the various health care options your employer provides to determine whether an HSA-qualified health plan might be right for you. If you decide to enroll in the plan, you should also open an HSA and try to contribute as much as you can up to the annual limit. HSAs are available from a variety of institutions, but it's worth noting that not all HSAs are created equal; some providers have additional fees for the debit card or the investment portion of the account.
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Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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