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Health Savings Account - Frequently Asked Questions

What is an HSA?
A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan.

Who is a qualified HSA trustee or custodian?
Any insurance company or bank. Kinderhook Bank is qualified to offer HSAs.

Who is eligible to have an HSA?
"Eligible individuals" are any individuals who: are covered under a high deductible health plan on the first day of the month; are not covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain limited types of coverage); are not entitled to benefits under Medicare (generally, has not yet reached age 65); and may not be claimed as a dependent on another person's tax return. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

May a husband and a wife have a joint HSA?
No. Each spouse who is an "eligible individual" and wants to make contributions to an HSA must open a separate HSA. Thus, only one person may be the account beneficiary of an HSA. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

If an employee begins HDHP coverage mid-month, when does the employee become an eligible individual? (For example, coverage under the HDHP begins on the first day of a biweekly payroll period.)
Under section 223(b) (2), an eligible individual must have HDHP coverage as of the first day of the month. An individual with employer-provided HDHP coverage on a payroll-by-payroll basis becomes an eligible individual on the first day of the month on or following the first day of the pay period when HDHP coverage begins. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

How does an eligible individual establish an HSA?
No permission or authorization from the IRS is necessary to establish an HSA. Simply complete an HSA account application and submit at any branch. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

How can I access funds from my HSA account?
You can access funds from your HSA account from any of the following options:

  • Checks: You can use a check to either pay for services provided or reimburse yourself. All withdrawals are classified as normal distributions.
  • Distribution Request Form: Withdrawals may be made at any branch location using an HSA Distribution Request Form. You may use this form to reimburse yourself for expenses you have already incurred or withdraw for non-qualified medical expenses. The type of withdrawal and conditions that may apply are detailed on the Distribution Request Form.
  • Telephone Transfer: Contact us by calling 518-758-6467 to transfer funds directly to your Kinderhook Bank checking account. This will allow you to reimburse yourself for expenses incurred.


Are there any type of fees associated with an HSA at Kinderhook Bank?
Yes, there will be an annual fee of $25.00 assessed to each HSA on December 31st of each year. All other normal account fees apply. Please see our Service Charge Disclosure for all applicable fees.

Will I receive a statement showing the activity in my HSA account?:
Yes, you will receive a monthly statement electronically through our Online Banking System. You will also receive an annual statement summarizing all activity for the year electronically through our Online Banking System. Once you have established your HSA Account, please be sure to enroll in Online Banking at www.yourkindofbank.com to receive your statements.

What types of insurance and other coverage can I have and still participate in an HSA?
Worker's compensation, property insurance, insurance for a specific disease, insurance that pays a fixed amount per day of hospitalization, dental, vision, long term care, and accident and disability are all permitted coverage's with an HSA. You cannot be enrolled in Medicare or be a dependent on another person's tax return to qualify for an HSA Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

May an otherwise eligible individual who is eligible for Medicare, but not enrolled in Medicare Part A or Part B, contribute to an HSA?
Yes. Section 223(b) (7) states that an individual ceases to be an eligible individual starting with the month he or she is entitled to benefits under Medicare. Under this provision, mere eligibility for Medicare does not make an individual ineligible to contribute to an HSA. Rather, the term "Entitled to benefits under" Medicare means both eligibility and enrollment in Medicare. Thus, an otherwise eligible individual under section 223(c)(1) who is not actually enrolled in Medicare Part A or Part B may contribute to an HSA until the month that individual is enrolled in Medicare. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

Can a spouse or dependent have any other insurance other than another qualified HDHP without causing the account holder to be ineligible to contribute to an HSA?
A spouse or dependent can have other types of insurance coverage without making the individual ineligible to contribute to an HSA. For example, if one spouse has self-only HDHP coverage and the other spouse and dependent children are covered under an HMO, the first spouse could establish an HSA and use it to pay for HMO-related out-of pocket expenses for the other spouse and kids. However, if the first spouse has "family HDHP coverage", at least one other person in the family could not have other coverage except HDHP coverage, otherwise it would not be family (spouse + 1) coverage. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

What is a qualified medical expense?
Covered items are defined by IRS code 213 (d) and listed in IRS publication 502. Save all of your receipts for qualified expenses, it is up to you to have supporting records for the IRS indicating how the funds were used. Please see your tax advisor if you have questions about qualified medical expenses for an HSA.

Are health insurance premiums qualified medical expenses?
Generally, health insurance premiums are not qualified medical expenses, except for the following: qualified long-term care insurance, COBRA health care continuation coverage, and health care coverage while an individual is receiving unemployment compensation. In addition, for individuals over 65, premiums for Medicare Part A or B Medicare HMA, and the employee share premiums for employer-sponsored health insurance, including premiums for employer-sponsored retiree health insurance can be paid from an HSA. Premiums for Medigap policies are not qualified medical expenses. Please see your tax advisor if you have questions about qualified medical expenses for an HSA.

Must HSA trustees or custodians determine whether HSA distributions are used exclusively for qualified medical expenses?
No. HSA trustees or custodians are not required to determine whether HSA distributions are used for qualified medical expenses. Individuals who establish an HSA make the determination and should maintain sufficient records of their medical expenses to show that the distributions have been made exclusively for qualified medical expenses and are therefore excludable from gross income. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

Can I use my HSA for well visits?
Preventive care such as: routine physicals, immunizations, and well-childcare may not be subject to the HDHP deductible, therefore, you simply pay the co-pay amount from your HSA funds. Please see your tax advisor if you have questions about qualified medical expenses for an HSA.

May an HSA trust or custodial agreement restrict HSA distributions to pay or reimburse only the account beneficiary's qualified medical expenses?
No. The HSA trust or custodial agreement may not contain a provision that restricts HSA distributions to pay or reimburse only the account beneficiary's qualified medical expenses. Thus, the account beneficiary is entitled to distributions for any purpose. Only the account beneficiary may determine how the HSA distributions will be used.

Who may contribute to an HSA?
Any eligible individual can contribute to an HSA. For an HSA established by an employee, the employee, the employee's employer or both may contribute to the HSA of the employee in a given year. For an HSA established by a self-employed (or unemployed) individual, the individual may contribute to the HSA. Family members may also contribute to an HSA on behalf of another eligible family member. Please see your tax advisor if you have questions about whether or not you are qualified to have an HSA.

How much may be contributed to an HSA in a calendar year?
The current maximum you may contribute to an HSA is $3,000 for single coverage or $6,150 for family coverage. You have no obligation to make contributions after the HSA is established.

What are the "catch-up contributions" for individuals age 55 or older?
For eligible individuals (and their spouses covered by the HDHP) age 55 or older by the end of the year who are not enrolled in Medicare, the HSA contribution limit is currently $1000. The allowable catch-up contribution is computed in the same manner as the annual contribution limit.

Is the trustee or custodian responsible for tracking the account beneficiary's age?
Yes. However, the trustee or custodian may rely on the account beneficiary's representation as to his or her date of birth.

Is there a limit on the annual HSA contribution which the trustee or custodian may accept?
Yes. Except in the case of rollover contributions or trustee-to-trustee transfers, the trustee or custodian may not accept annual contributions to any HSA that exceed the sum of 1) the dollar amount in effect (maximum family coverage deductible) plus 2) the dollar amount in effect for catch up contributions. All contributions must be in cash, other than rollover contributions or trustee-to-trustee transfers.

Is the HSA trustee or custodian responsible for determining whether contributions to an HSA exceed the maximum annual contribution for a particular account beneficiary?
No. This is the responsibility of the account beneficiary, who is also responsible for notifying the trustee or custodian of any excess contribution and requesting a withdrawal of the excess contribution together with any net income attributable to the excess contribution. The HSA trustee or custodian is, however, responsible for accepting cash contributions within the limits, and for filing required information returns with the IRS.

What if I use my HSA funds to pay for something other than a medical expense?
You will need to include that amount in your gross income when you file your taxes. It will be treated as regular income and subject to tax as well as a penalty tax if you are less than 65 and not disabled. Please consult your tax advisor.

How are distributions from an HSA taxed?
Distributions from an HSA used exclusively to pay for qualified medical expenses of the account beneficiary, his or her spouse, or dependents are excludable from gross income. In general, amounts in an HSA can be used for qualified medical expenses and will be excludable from gross income even if the individual is not currently eligible for contributions to the HSA. However, any amount of the distribution not used exclusively to pay for qualified medical expenses is includable in gross income of the account beneficiary and is subject to an additional 10% tax on the amount includable, except in the case of distributions made after the account beneficiary's death, disability, or attaining age 65. Consult your tax advisor.

In what form must contributions be made to an HSA?
Contributions to an HSA must be made in cash (check or automated transfer). For example, contributions may not be made in the form of stock or other property. Payments for the HDHP and contributions to the HSA can be made through a cafeteria plan.

When may HSA contributions be made?
Contributions for the taxable year can be made in one or more payments, at the convenience of the individual or the employer, at any time prior to the time prescribed by law typically April 15th, (without extensions) for filing the eligible individual's federal income tax return for that year, but not before the beginning of that year.

How often may HSA contributions be made?
You can contribute as often as you wish.

Is there a deadline for contributions to an HSA for a taxable year?
Yes, contributions should be made to the account by April 15 following the year of the contributions.

What happens when HSA contributions exceed the maximum amount that may be deducted or excluded from gross income in a taxable year?
Contributions by an individual or on behalf of an individual are not deductible to the extent they exceed the limits. Contributions made by an employer to an HSA for an employee are included in the gross income of the employee to the extent they exceed the limits or if they are made on behalf of an employee who is not an eligible individual. In addition an excise tax of 6% for each taxable year is imposed on the account beneficiary for excess individual and employer contributions. However, if the excess contributions for a taxable year and the net income attributable to such excess contributions are paid to the account beneficiary before the last day prescribed by law (including extensions for filing the account beneficiary's federal income tax return for the taxable year, then the net income attributable to the excess contributions is included in the account beneficiary's gross income for the taxable year in which the distribution is received but the excise tax is not imposed on the excess contribution and the distribution of the excess contributions is not taxed. Please consult your tax advisor.

May an individual who has not made excess HSA contributions treat a distribution from an HSA other than for qualified medical expenses as the withdrawal of excess HSA contributions?
No. This withdrawal is deemed a withdrawal for non-qualified medical expenses and is includable in the individual's gross income. Please consult your tax advisor to determine what is best for you in this situation.

Where do pre-tax employee contributions need to go on Form W-2?
All employer contributions to an HSA must be reported in box 12 of Form W-2 with code W. An employer's contribution to an employee's Health Savings Account (HSA) is not subject to income tax withholding, or social security, Medicare, or railroad retirement taxes (or FUTA tax) if it is reasonable to believe at the time of the payment that the contribution will be excludable from the employee's income. Please consult your tax advisor.

Can funds be transferred from a FSA or HRA to an HSA?
Yes. Under the Tax Relief and Health Care Act of 2006, an HSA eligible individual may make a one-time, tax-free transfer from a FSA or HRA to an HSA, called a "qualified HSA distribution". The amount transferred is limited to the lesser of (1) the balance in the FSA or HRA on September 21, 2006; or (2) the balance in the FSA or HRA on the date of the transfer. Also, this one-time transfer must be done on or before December 31, 2011. The transferred amount is treated as a rollover contribution to the HSA and thus does not reduce the HSA eligible individual's HSA contribution limit for the year of the transfer. The amount transferred from the FSA or HRA to the HSA must be made directly by the employer to the trustee or custodian of the HSA. The amount transferred is treated as an employer contribution made to the employee's HSA, and therefore is not deductible by the employee. The individual must remain HSA eligible during the "testing period", otherwise, the transferred amount is taxable and subject to an additional 10% tax for the year the individual ceases to be HSA eligible. This taxation does not apply if the individual dies or becomes disabled. The testing period begins with the month in which the funds are transferred, and ends on the last day of the twelfth (12th) month following such month. Please consult your tax advisor to determine what is best for you in this situation.

Can funds be transferred from an IRA to an HSA?
Yes. Under the Tax Relief and Health Care Act of 2006, an HSA eligible individual may make an irrevocable once-in-alifetime, tax-free "qualified HSA Funding distribution" from an IRA to an HSA, excluding SEP or SIMPLE IRAs. There is no deadline to make this transfer. The amount of the distribution must be made in the form of a trustee-to-trustee transfer from the IRA to the HSA. The amount of the transfer cannot exceed the maximum HSA contribution limit for the year that the amount is transferred. Consequently, the transfer counts towards the individual's total HSA contribution limit for the year depending upon the type of coverage under the HDHP (self-only or family). If the individual has self-only coverage under the HDHP and makes a transfer from an IRA to an HSA, and then changes to family coverage under the HDHP in that same year, an additional transfer can be made to bring the individual up to the amount of the family coverage contribution limit, but must do so in the same year. If the individual ceases to be HSA eligible during the "testing period", the amount transferred is taxable and subject to a 10% additional tax if the individual is under the age of 59 ½ unless the individual dies or becomes disabled. The testing period begins with the month in which the funds are transferred, and ends on the last day of the twelfth (12th) month following such month. Please consult your tax advisor to determine what is best for you in this situation.