If you elect Option C under the Medical Plan, you can contribute to a Health Savings Account (HSA). An HSA is similar to a Health Care FSA, but has some important differences. There is no use-it-or-lose-it feature, allowing you to save the money to pay for eligible health care costs when you need it most, whether that’s this year, a few years down the road or after you retire.
An HSA also has triple-tax savings:
- Pre-tax contributions lower your current taxable income
- Tax-free growth, even on investments
- Tax-free distribution means you don’t pay taxes when you use HSA dollars to pay for eligible health care expenses
You own the money in your HSA, and it’s portable and investable (for amounts over $500). However, you cannot use your preelected HSA funds for eligible expenses until you have actually contributed the money into your HSA account. You cannot use your preelected HSA funds for eligible expenses until you have actually contributed the money into your HSA account.
And if you’re looking to further maximize your tax savings, you may open a Limited Purpose FSA for eligible dental and vision expenses (Option C participants only).
In accordance with IRS limits, you may contribute up to the following amounts:
Health Savings Account
- Individual coverage:
- 2017: $3,400
- 2018: $3,450
- Family coverage:
- 2017: $6,750
- 2018: $6,900
- If you are age 55 or older, you may make an additional catch-up contribution of $1,000 annually until you become eligible for Medicare.
Limited Purpose FSA (for dental and vision expenses only): $2,600 ($2,650 in 2018)