Important: Please share with employees
While the Patient Protection and Affordable Care Act of 2010 (PPACA ) allows parents to add their dependent children (up to age 26) to their health plans, the IRS has not changed its definition of a dependent for health savings accounts. This means that a person could have their 25-year-old child covered on their HSA-qualified high-deductible health plan, but not be eligible to use their HSA funds to pay for medical bills for that 25-year-old.
Reimbursements issued in violation of this rule will be taxed and could be subject to the 20 percent HSA penalty for an early withdrawal. For all HSA plans, group or individual, the IRS definition of a dependent is used when determining whether a dependent qualifies and how benefits are administered for dependents. The account holder must be able to "claim" the child/relative as a dependent on their tax return, and, if they cannot, they are not allowed to spend HSA dollars on services provided to that child/relative. The IRS defines a qualifying child dependent as follows:
-- Daughter, son, stepchild, sibling or stepsibling (or any descendant of these)
-- Has same principal place of abode for more than one-half of taxable year
-- And not yet age 19 (not yet age 24 if student)
or permanently and totally disabled.
Resources for more HSA Information:
-- Frequently Asked Questions about an HSA: http://www.mycdh.usbank.com/faq.html
-- You can find a list of eligible expenses for using your HSA dollars: http://healthcare.usbank.com/files/content/files/213d_eligible_expense_list.pdf
-- Interactive video on HSA's: http://myusbankhsa.learncdhc.com/
-- IRS Publication 502: Medical and Dental Expenses is a guide explaining eligible expenses for FSAs, HRAs, and HSAs: http://healthcare.usbank.com/files/content/files/p502_-2010.pdf
-- IRS Publication 969: Provides a guide to HSA and other tax-favored health plans: http://healthcare.usbank.com/files/content/files/p969_-02010.pdf
-- SEHP Website: www.kdheks.gov/hcf/sehp