Health Savings Account (HSA)


What Is an HSA?

An HSA is a tax-advantaged account that allows you to save money for qualified medical expenses for this year and the future. To qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP).

Your HSA is managed by Optum Bank. Watch the introductory video below and review the HSA FAQ to learn more about how an HSA works with the State medical plans.

Why Should I Use an HSA?

  1. You get a discount on your health care expenses
    When you use your HSA, it's like using a 25–35 percent coupon for your health care expenses* since HSA contributions are tax-deductible. For example, suppose you recently visited your dentist and received a $400 bill. When you pay with your HSA, you are saving between $100 and $140 dollars based on your tax rate.
  2. The State puts money towards your HSA
    The State contributes up to $1,500/$3,000 for individual/family coverage each plan year**, and you can make pre-tax payroll deduction contributions as well.
  3. TRIPLE tax advantage
    An HSA is one of the only taxings vehicle that allows you to make payroll contributions tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and withdraw funds income tax-free for qualified medical expenses.
  4. You get to keep the money in your HSA, no matter what
    HSA funds not spent during the plan year carry over to subsequent plan years, and they are yours to keep even if you change jobs or health plans, or retire.
  5. You can invest your HSA dollars (tax-free!)
    Once your HSA reaches the investment threshold of $2,000, you may choose to invest a portion of your HSA dollars in mutual funds. Remember – any investment earnings such as interest or dividends are income tax-free.
  6. You can use your HSA for anyone in your family
    You can use your HSA to pay for the qualified medical expenses of anyone you claim on your taxes, even if you're only enrolled with single coverage. This is a great way to plan for unexpected medical expenses for the whole family.

* Based on a 25–35 percent combined payroll and income tax rate.
** Contributions are made biannually with half deposited on January 1 and the other half deposited on July 1. The State’s HSA contributions are NOT pro-rated for employees that enroll after those dates.

HSA Details

Watch the video below for an overview on how to manage your HSA funds. Explore the tabs below for more details.

In order to open and contribute to an HSA, you must meet all of the following conditions:

  • You must be covered by an HSA-qualifying high deductible health plan (HDHP);
  • You must not be covered by any other health plan that is not a HDHP (this includes a general purpose health care FSA);
  • You must not be enrolled in Medicare, TRICARE or TRICARE for Life;
  • You must not be claimed as a dependent on someone else’s tax return; and
  • You must not have not received VA benefits within the past three months, except for preventive care (this exclusion does not apply if you are a veteran with a disability rating from the VA).
Contribution Limits

The IRS sets annual limits on how much you and your employer can contribute to your HSA. If you exceed these limits, you may be liable for IRS tax penalties unless you remove excess contributions before you file your taxes. (If you need to remove excess contributions, please contact Optum Bank.)

2019 Limits* 2020 Limits*
Individual coverage $3,500 $3,550
Family coverage $7,000 $7,100
Additional catch-up contribution for age 55 and over $1,000 $1,000

* Includes any contribution from the State. For example, if you have individual coverage and the State contributed $1,500 to your HSA, you have $3,500 - $1,500 = $2,000 available to contribute on your own for 2019.

Did you know? If you do not contribute up to the max for the tax year, you can make additional contributions up until the tax filing deadline in the following year. Coordinate additional contributions at optumbank.com.

Opening and Contributing to Your HSA

The more you contribute to your HSA today, the more you have for health expenses tomorrow and retirement in the future. Know the limits that apply to you and consider contributing up to the max.

  1. Opening your HSA
    If you enroll in the Anchor Choice Plan with HSA, you will automatically have an HSA opened with Optum Bank. The State’s annual contribution to your account will total $1,500 for individual coverage or $3,000 for family coverage.* (Non-classified college employees: If you enroll in the Choice Plus Plan with HSA, in order to receive State contributions, you must complete and submit the Optum Bank HSA Application)
  2. Contributing to your HSA
    To make additional voluntary contributions, please complete and submit the HSA Employee Payroll Deduction Authorization Form. You may adjust your HSA contribution amount at any time by submitting a new form.

* Contributions are made biannually with half deposited on January 1 and the other half deposited on July 1. The State’s HSA contributions are not pro-rated for employees that enroll after those dates.

How Much Should You Save?

You can get a personalized estimate of how much you may need to save for medical expenses by talking to ALEX.

Grow Your HSA Dollars

Once your HSA reaches the investment threshold of $2,000, you may choose to invest a portion of your HSA dollars in mutual funds—just like you would with your 457(b). You can choose from a wide variety of mutual funds, and any investment earnings such as interest or dividends are income tax-free.

Visit optumbank.com for more information about investing your HSA, including frequently asked questions and a list of mutual funds that you can invest in.

Getting Started

To start investing your HSA funds, simply follow these steps:

  1. Log in to your HSA at optumbank.com and set up your investment account by choosing the funds you want to invest in.
  2. Indicate the amount you want to transfer into your investment account. The minimum amount that can be transferred at one time is $100. Therefore, you will need to have a balance of $2,100 in your HSA before you can invest (given the $2,000 investment threshold).
  3. You can choose to set up recurring transfers/sweeps. This means that you choose a threshold amount, and any funds over your threshold will automatically be transferred to your investment account.
Interest Rate

Not ready to invest your HSA funds? You can still earn the following interest rates on your non-invested HSA balance:

HSA Balance Annual Percentage Yield
$0–$1999.99 0.05%
$2,000.00–$4,999.99 0.10%
$5,000.00–$14,999.99 0.20%
$15,000.00 and over 0.40%
Tax Advantages

An HSA is a smart way to save for qualified medical expenses because of it is one of the only savings vehicles that allows you to put money in tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and take the money out income tax-free for qualified medical expenses.

HSA tax advantages
Know Your HSA Tax Forms

There are three IRS forms you should be familiar with if you have an HSA:

  1. Form 8889 is filed with IRS Form 1040 of your federal income tax return to report your total HSA contributions and distributions for the tax year. You can get this form by logging in to your account at optumbank.com.
  2. Form 1099-SA provides the total distributions that were made from your HSA during the year. If you had any distributions, Optum Bank will send you this form in January. If you did not have any distributions, you will not receive this form.
  3. Form 5498-SA reports the total contributions made to your HSA for the tax year covered by the form. Optum Bank will submit this form directly to the IRS, as required by law, and also send a copy to you by the end of February. If you make additional contributions for the tax year, which is allowed up until the tax filing deadline, you will receive a second form. These forms are also available online when you log in to your account at optumbank.com.
State Taxes

Contributions, account earnings/interest and distributions for qualified medical expenses are exempt from federal and RI state taxes. As these guidelines can change, it’s important to consult your tax or financial advisor for the latest information.

Know Your Qualified Medical Expenses

To take advantage of income tax-free spending/distributions, you must make sure your HSA funds are spent on qualified medical expenses. Any HSA funds used to pay for goods or services that are not qualified medical expenses are taxable income. And, if you are under age 65, they can be subject to an additional 20 percent tax penalty.

For a complete list of qualified medical expenses, use the Optum Bank QME Search Tool or see IRS Publication 502, Medical and Dental Expenses.

When you make purchases or pay bills with your HSA, be sure to keep your receipts in case of an IRS audit. You can easily upload images of your receipts online at optumbank.com

Correcting Withdrawal Errors

If you mistakenly use your HSA for a non-qualified expense, you can return the funds to your HSA to avoid the penalty. Visit optumbank.com, log in to your account and download the Withdrawal Correction Form. Optum Bank must receive it by April 15 for any withdrawals made in error during the tax year.

See the HSA FAQ to learn more.

Please contact Optum Bank if you have other questions regarding your HSA: