While the high-deductible health plan, or HDHP, works much like a traditional medical plan, the ability to participate in a health savings account makes it unique. If you choose the HDHP, you are eligible to participate in a special tax-advantaged health savings account, or HSA, that allows you to set aside funds on a before-tax basis to help fund your out-of-pocket costs. The HSA offers several advantages:
If you earn $60,000 a year or less, JHU will make a contribution to your HSA to help offset the higher deductible. The amount of the annual contribution will depend on your pay band as follows:
- <$40K band: $500 single/$1,000 family
- $40–$60K band: $250 single/$500 family
The JHU contribution will be fully funded in January 2020 following Annual Enrollment. If you are newly eligible for coverage and elect the HDHP after Annual Enrollment, the JHU contribution will be prorated.
You can contribute pre-tax dollars
In 2020, up to $3,550 per individual and up to $7,100 per family (including the JHU contribution) can be contributed to your HSA on a pre-tax basis. You can adjust your contribution amount anytime throughout the year.
The HSA is triple tax-advantaged
When considering the HSA, keep these three things in mind:
- Contributions to the account are tax-free.
- Funds, and any applicable dividends or interest, accumulate tax-free.
- And distributions used for qualified expenses are tax-free.
The HSA is yours and is portable
Unlike a flexible spending account, your HSA allows unused funds to roll over from year to year. With the HSA, you can choose to use funds now to pay for eligible expenses, or set aside funds on a pre-tax basis for future use. The choice is yours. It allows you to maximize your savings for when you need the funds most.
In addition, once your HSA balance reaches $1,000, you can choose how to invest your funds—so they can grow over time. And, if you leave the university, you can take your HSA with you.
Think of it as a savings tool for your short- and long-term future. You can use your HSA funds to pay for eligible medical, prescription drug, dental, vision, and other health care expenses that you incur today—or later in life.
Pairing your HSA with the FSA
It's important to note that you cannot participate in both the HSA and a general-purpose health care FSA. However, the university will be introducing a new limited purpose FSA for only HDHP participants. The limited purpose FSA can be used for eligible dental and vision expenses only. The maximum contribution limit is the same as the general-purpose health care FSA limit (new limit to be announced this fall). To maximize your savings and tax benefits, consider participating in both the HSA and limited purpose FSA.