Health Savings Accounts (HSA) Basics | Saturna Capital

What is a Health Savings Account (HSA)?

A health savings account (HSA) is a tax-advantaged savings account that you use to pay for IRS-qualified health care expenses. Generally, anyone who is covered under a qualified high-deductible health care insurance plan may open an HSA.

HSAs offer attractive tax advantages

  • You and/or your employer contribute pre-tax dollars to your HSA
  • Your interest and investment earnings grow tax-free in your account
  • You may withdraw HSA funds tax-free to pay for qualified medical expenses

Unspent contributions, even those made by your employer, are yours to keep for future health care expenses and/or retirement. Your HSA is portable as the account remains with you regardless of employment.

HSA Eligibility

Individuals under the age of 65 are eligible to contribute to an HSA if they are covered by a qualified high-deductible health plan (QHDHP). Not all high-deductible health plans qualify you to open an HSA. Saturna Capital does not "qualify" account holders. Consult your health plan provider to determine whether your HDHP is a qualified plan or to obtain information about how to enroll in a QHDHP.

Qualified High-Deductible Health Plan Requirements 2019 2020
  Individual Family Individual Family
QHDHP Minimum Deductibles $1,350 $2,700 $1,400 $2,800
QHDHP maximum out-of-pocket amounts¹ $6,750 $13,500 $6,900 $13,800

¹ Including deductibles, co-payments, and other amounts, but excluding premiums. See IRS Publication 969 ( for more information.

Health Savings Account (HSA)


Qualified High Deductible Health Plan (QHDHP)

  • HSA tax advantages, combined with lower QHDHP premiums, keep more money "in your pocket" to pay medical expenses for you and your dependents
  • Contributions and earnings can be invested in mutual funds, money market funds, stocks, bonds, ETFs, and more
  • Unspent HSA savings can be used for your retirement

HSA Contribution Limits

Contributions to your HSA account may be made by anyone (employers, family members, etc.) up to the limits established by the IRS each year. The money in your HSA is yours, even if your employer or someone else makes contributions on your behalf. This makes your HSA portable between jobs. It is your responsibility as the account holder to monitor contributions.

Contributions to your HSA are tax-deductible (for the account beneficiary), even if the account beneficiary does not itemize other deductions. Employer contributions are made on a pre-tax basis and are not taxable to the employee. Employers may offer HSAs through a cafeteria employee benefits plan.

Individuals age 55-64 may make additional "catch-up" contributions of up to $1,000 annually. A married couple can make two catch-up contributions, as long as both spouses are at least 55 and each spouse has established their own HSA account. Catch-up contributions help you accumulate assets to pay medical expenses now or in retirement.

Health Savings Accounts (HSAs) Contribution Limits 2019 2020
  Individual Family Individual Family
HSA Contribution Limits (employer + employee) $3,500 $7,000 $3,550 $7,100
HSA Catch-up Contributions (age 55 and older) $1,000 $1,000 $1,000 $1,000

HSA Distribution

HSA distributions are tax-free if they are used to pay for qualified medical expenses (as defined under Section 213(d) of the Internal Revenue Code). You can reimburse yourself at any time for qualified medical expenses that are incurred after the date your account is established. Be sure, however, to maintain receipts and other records in the event you are audited.

Distributions made for any other purpose are subject to income tax and a 20% penalty.

The 20% penalty is waived

  • In the case of death or disability
  • When distributions are made by individuals age 65 and older

Saturna reports distributions to you and the IRS on Form 1099-SA.

HSA Qualified Medical Expenses

You can use your HSA savings and earnings to pay for qualified medical expenses up to the amount of your deductible. Common allowable expenses include (but are not limited to):

  • Acupuncture
  • Birth control pills
  • Chiropractic services
  • Dermatology treatment
  • Emergency transportation
  • Eyeglasses and contact lens supplies
  • Hearing aids
  • LASIK surgery
  • Nursing homes and care
  • Optometry treatments
  • Orthodontia and dental treatment
  • Orthopedic services (including shoes)
  • Osteopathy
  • Over-the-counter medications (with a prescription)
  • Pediatric services
  • Prescription medications
  • Psychiatric care
  • Psychology services
  • Smoking cessation programs
  • Vaccines
  • Weight loss programs (for medically diagnosed obesity)

The IRS defines allowable expenses. For more information please visit or refer to IRS Publication 502, Medical and Dental Expenses. You may also consult your tax professional.