What you need to know
Health Savings Accounts, or HSAs, are like personal savings accounts that are tax-free as long as you use the money to pay medical, dental, vision, and prescription expenses. You control the money in your HSA. The funds can be used to pay current eligible health care expenses, or you can invest your money to use later, such as during retirement.
5 ways you win with an HSA
- Triple tax savings*
- The money you save is tax deductible.
- Your account grows tax-free.
- You don't pay taxes on the money you take out to pay for qualified health care expenses.
* In California and New Jersey, HSA contributions are subject to state tax.
- The money in your HSA is yours. You take it with you if you leave BAE Systems or retire. Unlike a Flexible Spending Account, there is no use-it-or-lose-it rule.
- You can start, stop, or change your contributions at any time. Select an HSA contribution amount during each year’s Annual Enrollment. Change your mind after that? No problem. You can start, stop, or change your payroll contributions at any time.
- Save for retiree health care expenses. According to the Employee Benefits Research Institute, a retired couple could need as much as $350,000 in retirement just to cover the gap in health care expenses not covered by Medicare. Your HSA can help you pay for health care costs in retirement not typically covered by Medicare, such as dental, vision, and hearing expenses, and long-term care insurance premiums and services.
Setting aside money specifically for future health care expenses means you won’t have to tap into other taxable income (such as your 401(k) Savings Plan balance) to cover them.
- BAE Systems will contribute incentive dollars if you participate in the Wellness Incentive Program.
How the HSA is funded
You can contribute, too
You can add your own pre-tax* contributions to your account, too. The IRS limits how much can be contributed to your account each year from all sources. If you are or will be age 55 during the year, you can contribute an additional $1,000. Here’s how the math works for 2021:
|Individual coverage||Family coverage|
|Your 2021 maximum contribution||Under age 55: $3,200
Age 55+: $4,200
|Under age 55: $6,400
Age 55+: $7,400
|Wellness Incentive Program awards||$400||$800|
|2021 IRS maximum||Under age 55: $3,600
Age 55+: $4,600
|Under age 55: $7,200
Age 55+: $8,200
* HSA contributions and earnings are not subject to federal taxes; however, a few states treat the contributions as taxable income. Those employees residing in California and New Jersey will have applicable state taxes withheld from their contributions each pay period. Employer wellness incentives to the HSA are also subject to state taxes in these two states.
Note: If you are married and your spouse is also enrolled in an HSA, your combined HSA contributions may not exceed IRS limits.
Using your HSA
Manage your account online through Smart-Choice Accounts, a website you access through BenefitsNavigator that lets you check your balance, submit a claim for reimbursement, check claim reimbursement status, etc., online at any time.
Pay for expenses directly from your HSA with your Smart-Choice card (a debit card) that you’ll receive shortly after enrolling. After receiving medical services, you will receive an Explanation of Benefits from Cigna showing the portion of the provider’s bill that you’re responsible for paying. You can use your Smart-Choice card to make a payment directly from your HSA to the provider.
Tip: Keep receipts for any expenses you pay with your HSA. A good practice is to store them with the same year’s tax return information, in case you are audited by the IRS.
The fine print about HSAs
Restrictions on Flexible Spending Accounts (FSA) participation
While enrolled in an HSA-compatible plan, you can participate only in a Limited Purpose Health Care FSA that can be used to pay only dental and vision expenses, not medical expenses.
Medicare and TRICARE
If you plan to enroll or are currently enrolled in Medicare, or enrolled in TRICARE, you are not eligible to contribute to an HSA. However, you are eligible to enroll in a full Health Care Flexible Spending Account (FSA) instead of a Limited Purpose FSA. This means that you will be able to use your FSA funds for qualified expenses such as medical, dental, vision, and prescriptions.
In addition, since you are not eligible for a Health Savings Account (HSA), any wellness incentives that you earn through the medical plan will be deposited into a Health Reimbursement Account (HRA). The HRA is managed by the BAE Systems Benefit Center and allows you to reimburse yourself for qualified medical expenses.
Be advised, that if you are enrolled in Medicare or TRICARE the only option for you is to participate in the HRA. This includes your spouse regardless of their eligibility for Medicare and TRICARE.
As a reminder, HRA balances roll over every year; however, you will forfeit any remaining funds if you leave BAE Systems.
If you are not eligible to participate in an HSA due to being enrolled in Medicare or TRICARE, you must contact the BAE Systems Benefit Center. To update your eligibility or if you have questions, call the BAE Systems Benefit Center at 1-888-900-4223. Representatives are available between 8 a.m. and 8 p.m. Eastern Time, Monday through Friday (excluding holidays).
Make sure you use your HSA only for qualified expenses for you and eligible family members. If you use your HSA to pay nonqualified expenses, you’ll pay taxes plus an additional 20% penalty if you’re under age 65.
You can use your HSA balance to pay for expenses for yourself and certain family members (for example, a child who can be claimed as a dependent on your tax return). Keep in mind that while you can cover adult children (up to age 26) on your health plan, they may not be considered dependents for HSA purposes, and you might not be able to use your HSA balance dollars to pay for services provided to that child.
Withdrawals after age 65
After you reach age 65 or become disabled, you may withdraw money from your HSA for nonmedical purposes without penalty. These withdrawals will be subject to normal income taxes.
The HSA is not part of BAE Systems employer-sponsored benefit plans and is not subject to the Employee Retirement Income Security Act of 1974 (ERISA). The HSA is provided to you solely for your convenience.