Health Savings Account (HSA)
As part of the Brethren in Christ Health Plan, congregations have the opportunity to provide financial assistance for medical expenses incurred by pastors and other church employees through a health savings account (HSA). HSAs are used in conjunction with a high deductible health plan (HDHP). The same plan option must be provided to all employees.
How an HSA works
An HSA is a personal savings account for healthcare, with the funds used to pay deductible expenses. The unused balance in your HSA rolls over from year to year, and the accumulated balance can be used to supplement retirement. You are in charge of your HSA funds and you decide whether to spend from the account for your medical expenses and how much to spend, or whether to spend out-of-pocket and save the HSA money for the future.
The HSA is owned by the employee, and that means you can keep the money in an HSA account even after you leave that job, similar to a 401(k). But you will face a 10% penalty, plus an income-tax bill, if you use any of the money for non-medical expenses before age 65. The whole point of a health savings account is to allow you to use that money on a tax-free basis to pay for your health expenses below your new, higher deductible. Contributions to your HSA are made by your church, but the money in your HSA is your own.
Funding an HSA
Your annual HSA deposit can never exceed the maximum allowable deposit, unless you are 55 or older and are making "catch up" contributions. The maximum amount you can contribute for 2009 is $3,000 for individual coverage and $5,950 for family coverage, excluding catch up contributions for those 55 years and older. These amounts are indexed annually for inflation.
You can fully fund your HSA account on day one of your qualifying high-deductible health plan being in effect, provided you do not exceed the maximum amount. However, the HSA does not have to be fully funded each year. You can make deposits anytime after your HSA is open. If you cancel your high-deductible health plan later in the year, you will have to withdraw some of the contribution from the account.
Churches may select a local back or credit union to manage the HSAs. However, congregational leaders are strongly encouraged to use the Brethren in Christ Foundation. Contact Kim Lehman at 717-796-4788 for assistance in setting up HSAs.
Eligible expenses
Your expenses for being sick aren’t the only ones that qualify for reimbursement. In fact, many routine dental, vision, and preventive care costs are qualified expenses for reimbursement. Health-related expenses eligible for reimbursement from your HSA are defined under Section 213 of the Internal Revenue Code.
