Can I open my own health savings account if my employer doesn't offer one?

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-eligible health plan, also known as a high-deductible health plan (HDHP). And you can't be covered by other disqualifying coverage as defined by tax laws, such as Medicare, Medicaid, TRICARE or a spouse's health plan that is not an HDHP. Nor can you be eligible to be claimed as a tax dependent in that year.
Contributing to an HSA is worth considering because it can be a powerful savings vehicle as well as a way to help pay for healthcare costs.
— Edward Shehan, senior vice president,
Health Benefit Solutions
Bank of America
There are several reasons to consider an HSA. First, there are the potential tax advantages.Footnote 1 Contributions, up to the annual limit set by the tax laws, can be deducted from your taxable income for federal and most state income tax. Any interest and investment earnings in your HSA accumulate federal income tax-free, and withdrawals for qualified healthcare payments are potentially tax-free.Footnote 1 Withdrawals for anything other than a qualified healthcare payment may be subject to an additional 20% tax, unless an exception applies.
Then there's the flexibility. Unused funds in the account continue to accumulate from year to year, even if you discontinue coverage in an HSA-eligible health plan. And after age 65, you can withdraw funds from the account for nonmedical expenses without paying an additional 20% tax (but the distribution will be subject to ordinary income tax since it is not a qualified healthcare expense).

What are my contribution limits?

For exact limit amounts, refer to our Annual Limits Guide (PDF). If you turn 55 during the tax year or are already 55 or older, you qualify for a catch-up contribution of $1,000 per year.

What expenses can an HSA 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 copayments
  • 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
The Internal Revenue Service publishes a list of qualified medical expenses for HSAs in Publication 969. IRS Publication 969 also cross-references IRS Publication 502, Medical and Dental Expenses for an explanation of various qualified medical expenses. Both publications are available at www.irs.gov. Be sure to check for subsequent legislative updates.
If you want to explore the topic further, you can begin by reviewing the various healthcare options your employer provides to determine whether an HSA-eligible health plan might be right for you if offered. If you decide to enroll in an HSA-eligible health plan, you should also consider opening an HSA and trying 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 a debit card or the option to invest a portion of the account.

Next steps

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.

This material should be regarded as general or educational information on healthcare considerations and is not intended to provide specific healthcare advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.

Footnote 1 You can receive federal income tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax unless an exception applies. Any interest or earnings on the assets in the account are federal income tax-free. You may be able to claim a tax deduction for contributions you or someone other than your employer makes to your HSA directly (not through payroll deductions). In addition, HSA contributions may reduce your state income taxes in certain states. Certain limits may apply to employees who are considered highly compensated key employees. Bank of America [and Merrill] recommends you contact qualified tax or legal counsel before establishing an HSA.

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