Health Savings Accounts with over 5% Taxable Equivalent Yields

Health Savings Accounts (HSAs) are designed to help individuals enrolled in a HDHP (High Deductible Health Plan) save money for current and future health care expenses. Money can be set aside in a HSA pre-tax and the money is controlled by the account owner. While it is possible to invest the funds in mutual funds or stocks, many banks across the country are also offering HSA accounts. A HSA account at a bank will pay interest at a market rate, which right now is between 1% and 3% at most banks. One exception would be National Bank of Kansas City which is offering a 4% rate on health savings accounts on all account balances over $1. Because the money is invested pre-tax the effective rate of return when compared to other taxable investment can be over 5% depending upon the owner’s tax bracket. The Treasury Department has announced the new maximum annual contribution and out-of-pocket spending limits for Health Savings Accounts as posted below:

New Annual Contribution Levels for HSAs:

• For 2009, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,000.
• For family coverage, the maximum annual HSA contribution is $5,950.
• Catch up contribution for individual who are 55 or older is increased by statute to $1,000 for 2009 and all years going forward.
• Individuals who are eligible individuals on the first day of the last month of the taxable year (December for most taxpayers) are allowed the full annual contribution (plus catch up contribution, if 55 or older by year end), regardless of the number of months the individual was an eligible individual in the year. For individuals who are no longer eligible individuals on that date, both the HSA contribution and catch up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.

New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:

For 2009, the maximum annual out-of-pocket amounts for HDHP self-coverage increase to $5,800 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $11,600.

Minimum Deductible Amounts for HSA-Compatible HDHPs:

For 2009, the minimum deductible for HDHPs increases to $1,150 for self-only coverage and $2,300 for family coverage.