Health Savings Accounts
We all need health insurance and we all would like to save money and reduce taxes. Health Savings Accounts can help with all of those objectives.
Created by federal law in 2003, Health Savings Accounts (HSAs) are tax advantaged personal savings accounts to be used for medical expenses. Congress’s objectives in creating these accounts were to encourage all individuals to have medical insurance, save for current and future medical expenses, reduce the overall costs of medical care and have individuals take ownership of managing their medical expenses. In many ways, HSAs for medical expenses are like IRAs for retirement expenses.
A Health Savings Account works in conjunction with a High Deductible Health Plan
A "High Deductible Health Plan" (HDHP) is a specific type of health insurance policy generally does not cover the first several thousand dollars of health care expenses. These HDHPs are usually available at lower costs than traditional health insurance policies. You must have an HDHP to be eligible for a HSA. HSA accounts are not available for those enrolled in Medicare.
In 2010, the deductible must be at least $1,200 for individuals or $2,400 for families and the annual out-of-pocket expenses cannot exceed $5,950 for an individual or $11,900 for a family, including the deductible and co-payments (but not premiums).
Individuals can buy high-deductible policies on their own or through their employers. You should speak with your employer or insurance provider to see if your health insurance plan qualifies.
Benefits of a Health Savings Account
With this type of arrangement, you establish a HSA with a financial institution, make tax deductible contributions to the HSA and use funds from the HSA to pay medical expenses that are not covered by your HDHP. Funds within the HSA grow tax free until withdrawn and are never taxed as long as they are used for qualified health care expenses. Distributions that are not used for qualified expenses are subject to regular income tax and a 10% penalty.
Using a Health Savings Account
HSAs are available from many financial institutions. They often work like an interest bearing checking account with a debit card to use to pay medical expenses. There are also HSAs available from some investment firms and mutual fund companies that enable you to invest the funds within the HSA.
The amount you can contribute to an HSA and take as a tax deduction is set by the IRS. The limits are not impacted by your income level, type of income or whether you itemize deductions or not. For 2010, the limit is $3,050 for individuals and $5,950 for those with family coverage. In addition, an individual age 55 and above can make an extra contribution of $1,000. If both spouses are 55 or over, the extra contribution limit is $2,000.
Once you establish and fund an HSA, you take distributions from it to pay or reimburse qualified health care costs that are not covered by your insurance. The definition of qualified health care costs is similar to what the IRS uses for determining an expense qualifies as an itemized deduction for your tax return.
Key Points to Consider
- The combination of an HSA and an HDHP requires you to pay the first several thousand dollars of medical costs.
- Compare the cost of an HDHP with your existing medical insurance plan. If you decide to switch to an HDHP, do not cancel your existing insurance until you are approved for the new plan.
- Establish an HSA with an institution that provides the type of features you want. Consider the convenience of a debit card to pay expenses and how you want the funds invested.
- Keep good records because they must be used to support the deduction on your tax return.
- The tax rules can be complex and you may want to consult your tax advisor to learn how an HSA would work in your situation.
The end result of this type of arrangement is that you have medical insurance to cover large expenses, you get a tax deduction for your contributions to the HSA, HSA funds grow tax free and you have funds available for current and future medical expenses that are not covered by insurance.
What is a Routing Number?
FAIRWINDS' routing number (263181368) is used to identify FAIRWINDS Credit Union from other financial institutions and in no way identifies you or your accounts to others.
A routing transit number (RTN) is a nine digit bank code, used in the United States, to facilitate the sorting, bundling, and shipment of paper checks back to the drawer's (check writer's) account.
The RTN is also used by Federal Reserve Banks to process Fedwire funds transfers, and by the Automated Clearing House (ACH) to process direct deposits, bill payments, and other such automated transfers.
What can I do with my Relationship Rewards points?
Relationship Rewards provide you the opportunity to enjoy special member benefits including:
- Buying down the interest rate on a loan.
- Increasing your rate on a new CD.
- Reducing service charges on additional products and services.
How do I send or receive a wire?
To send a wire from FAIRWINDS, please provide the following:
- Name, address and routing number of financial institution receiving the wire
- Account number for the receiving account
- Name and address of receiving account holder
There is a $20.00 service charge for an outgoing domestic wire from a personal account and a $25.00 service charge for an outgoing wire from a business account.
To receive a wire at the credit union, you will need to provide the following:
- FAIRWINDS routing number (263-181-368)
- Name of account holder
- FAIRWINDS account number to receive the funds
There is a $10.00 service charge for an incoming domestic wire to a personal account and $15.00 service charge for an incoming wire to a business account.
*Please verify this information with the receiving financial institution as there may be an intermediary financial instititution involved.
When should I expect my 5498-ESA tax forms?
5498-ESA tax forms will be mailed by April 30th for all Coverdell Educational Savings Account owners who made contributions and/or rollovers into their ESA's in 2011.
5498 and 5498-SA tax forms will be mailed in mid-May for all Traditional, SEP, and Roth IRA owners and Health Savings Account owners who made contributions and/or rollovers into their IRA's and HSA's in 2011.
For questions regarding the 5498 forms please call Member Services at 407-277-5045 or visit your local branch.
When should I expect my tax forms?
FAIRWINDS mails 1099-INT and 1098 tax forms at the end of January. However, if you have e-Statements, these tax forms are available online right now!
Learn more here.
Members will only receive a 1099-INT form if the aggregate earnings amongst the accounts they are tax reported for (the primary owner) have earned at least $10 in interest.
These accounts include:
Savings, checking, money market, certificates of deposit, and US Bonds Redeemed, but do not include IRA accounts. If members have not earned at least $10 in interest, they will not receive a 1099-INT form.
Members will only receive a 1098 Mortgage Interest Statement if they paid $600 or more in interest on their mortgage.
FAIRWINDS mails 1099-R, 1099-Q, 1099-SA, and FMV/RMD statements to members by January 31st each year. We also mail 5498, 5498-SA, and 5498 ESA forms to members by the end of May.
Important information for all MasterCard® and VISA® credit and debit card holders.
You may have seen news stories recently about a potential data breach with MasterCard® and VISA® through a third-party payment processor. While there is no indication that any FAIRWINDS members have been impacted by this event, it is an opportunity to remind all consumers about the importance of being diligent, safeguarding your personal information and monitoring your accounts on a regular basis to minimize the effects of fraud.
Take the few extra steps to proactively protect your accounts. If you believe your credit or debit card information is at risk or unauthorized transactions have posted to your account, contact your financial institution immediately. In addition, you may want to consider looking into an identity theft alert program to keep you informed of activity on your accounts. There are many reputable programs available, including ID Secure. Click here to learn more.
There is an active texting scam occurring in the Central Florida area.
People are receiving a text at random stating their "card has been deactivated." This is a Scam!
Always remember, FAIRWINDS will never ask members to provide confidential information, such as debit or credit card numbers, PINs or Social Security numbers via email, text messages, direct mail or over the phone.
If you feel you are the victim of account fraud or identify theft, act immediately. This should help minimize the damage to your personal accounts and credit rating. Click here to learn more.
What are the 2013 IRA and HSA contribution limits?
Traditional and Roth IRA owners under age 50 may contribute up to $5,500 toward tax year 2013. A $1,000 catch up contribution may be added for Traditional and Roth IRA owners age 50 and over.
2013 SEP contribution limits have increased to a maximum of $51,000 or 25% of the employee's compensation, whichever is less.
HSA owners under age 55 with an individual HDHP (self coverage only) may contribute up to $3,250 toward tax year 2013. HSA owners under age 55 with a family HDHP may contribute up to $6,450 toward tax year 2013. A $1,000 catch up contribution may be added for HSA owners age 55 and over.
When will I receive my 2012 5498 form?
5498, 5498-SA, and 5498-ESA forms report IRA, HSA, and ESA contributions, rollovers, conversions, and fair market value (December 31st balance) information to the IRS and account owners. 5498 and 5498-SA forms are expected to be mailed by Saturday, May 18th.
Please contact Member Services at (407) 277-5045 or visit your local branch if you have questions about your form(s).
How can I make a prior year (2012) contribution to my IRA or HSA?
Eligible prior year (2012) IRA and HSA contributions may be made through the close of business on Monday, April 15th. The IRS requires signed documentation before contributions may be designated for a prior year.
Members can accomplish this by visiting a local branch during business hours or by submitting an e-Signed form through Retirement Central® and click Manage An Account on the left menu.