Can I open a Healthcare Savings Account (HSA) with Northern Bank?

 

Yes, Northern Bank offers HSAs that make it easy and convenient for you to pay for qualified healthcare expenses.   For more information, see the additional information below:

What is a HDHP and why do I need one? 

A high-deductible health plan (HDHP) is health care coverage where you are responsible for paying for your qualified medical expenses up to the in-network deductible. The deductible on these plans will be higher and HSA funds may be used to pay these expenses. Contact your health care provider for assistance in determining if your HDHP meets the requirements for an HSA.

 

Who is eligible to open and contribute to an HSA?

Individuals who are covered under a high-deductible health plan (HDHP) and can answer “no” to the following questions:

  • Do you have other health coverage (except permitted coverage)?
  • Are you enrolled in Medicare?
  • Are you claimed as a dependent on another person’s tax return?

 

What are the advantages of an HSA?

  • Contributions made through payroll deductions are on a pre-tax basis. 
  • After-tax contributions to your HSA are deductible on your federal tax return.
  • It is a means to save for future medical expenses while earning tax-deferred interest.
  • HSAs are flexible and do not have to be used before year-end. They are portable and remain yours even if you change health care plans, or employers.


How can I make contributions to my HSA?

Funds can be transferred from your Northern Bank checking or savings account for current year contributions. Current year contributions can also be made through your employer with payroll deductions. 


Can I transfer funds from my IRA to my HSA?

You may make a one-time only (for life) distribution from your traditional or Roth IRA to fund your HSA. This HSA contribution is considered a regular, current-year contribution and cannot exceed your contribution limit for the year. 


Which contribution tax year should I choose?

You are eligible to open and contribute to an HSA if you meet the criteria listed under “Who is eligible to open and contribute to an HSA”. Prior year contributions are allowed January 1 – April 15 each year, and should be accompanied by a Contribution Instruction form.


How many beneficiaries should I designate? 

You can choose not to designate any beneficiaries, however, we recommend you designate at least one primary beneficiary. Due to potential tax implications, you are encouraged to consult your tax or legal professional.


What is the difference between a primary and contingent beneficiary?

A primary beneficiary receives account assets in the event of your death. A contingent beneficiary only receives assets if the primary beneficiary cannot. It's important to keep your beneficiaries up to date. Beneficiaries typically change after a marriage, birth, divorce or death in the family. 


When can I take distributions from my HSA?

You may take a distribution from your HSA at any time, even if you are not currently eligible to make contributions to your HSA. HSA distributions used exclusively for reimbursement of qualified medical expenses are not included in gross income for the year of the distribution. Distributions not used for medical expenses or rolled over, may be subject to an additional 20% tax. Due to potential tax implications, you are encouraged to consult your tax or legal professional.


Can I use my HSA funds to pay for medical expenses of my spouse and dependents?  

Yes, funds from your HSA can be used to pay the qualified medical expenses for yourself, your spouse, and your dependents. 


Can I pay out-of-pocket for eligible expenses rather than using my HSA funds?

You always have the option to choose when to use your HSA dollars. You may pay for qualified medical expenses using after-tax funds, allowing your HSA balance to grow tax-deferred. If you may also pay out-of-pocket and elect to reimburse yourself with HSA funds.

 

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