Spending Accounts (HSA, HRA, and FSA Accounts)

An HSA can be a powerful savings tool: not just for health expenses, but also for retirement.

Considerations

First of all, it’s your account. It doesn’t matter how long you stay at Waters, or where you go next. The account stays with you. And the money in it has THREE tax advantages*:

• It isn’t taxed going in! Your contribution to the account is taken from your paycheck, before federal taxes are calculated.
• Any earnings or interest can grow tax free! Once you contribute over a certain amount – $500, for your plan – you can choose to invest that money in Fidelity’s mutual funds.)
• It isn’t taxed if you take it out to pay for qualified medical expenses! It doesn’t matter when you take it out: in 6 days, or 60 years. As long as it’s used to pay for qualified medical expenses, you can use it federally tax-free.

If that weren’t enough, you can withdraw the funds when you reach retirement age and use the money in any way you want. Currently, that age is 65. (When you withdraw after retirement, and it isn’t for health care, it is taxed as regular income.)

*With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.

Requirements

Not just anyone can open an HSA. If you enroll in the Copay and Deductible medical plan, you are not eligible for an HSA or HRA. If you will be covered on one of the other two medical plans, which are HSA eligible, it is your responsibility to determine whether you are eligible for an HSA Account, under the IRS rules. For example, in accordance with IRS regulations, to open and contribute to an HSA Account, you must not have access to funds in a General Purpose Health Care Flexible Spending Account (you or your spouse’s). You must be enrolled in a qualified high deductible health plan (both of Waters deductible HSA eligible medical plans are), have no other health coverage (including Medicare or Medicaid), and you cannot be claimed as a dependent on someone else’s tax return. (See the HSA regulations set by the IRS here: https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204025.) 

Depending on which plan you choose, you could have the option to choose the HSA or the HRA.

Even if you are eligible for an HSA, you will have the option of opening an HRA (or Aetna HealthFund Account, which we will go over below) with an optional General Purpose Health Flexible Spending Account (or FSA) instead.

If you need access to those funds at the beginning of the year to help with big out-of-pocket costs that you don’t have saved up in your HSA, or you can’t go on a payment plan for—say, for example, an expensive prescription you need to purchase in January—this option is there to help you.

If you don't need early access to those funds, or if you already have the money saved up in your current HSA, an HSA might work for you. HSAs let you keep your contributions year over year, and may offer a few other benefits that an HRA-FSA combo wouldn’t.

You can find the HRA (Aetna HealthFund Account) regulations set by the IRS here: https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204194.

Funds in an HSA can be withdrawn without penalty in two ways:

1. Tax-free, to pay for qualified medical expenses including prescription, dental, and vision expenses. To be clear, qualified expenses is a pretty strict list. (“Needing” to go on a cruise to lower your stress won’t make the cut.)
2. Taxed as normal income, if withdrawn during retirement for non-health-related reasons. To see a list of qualified expenses, take a look at the HSA summary HERE, or go to the actual creator of the list, the IRS.gov, Publication 502.

You’ll also have to be careful of WHO you spend the funds on. You can’t use your HSA account to pay for the expenses for non-tax-eligible dependents. These may include:

• Domestic partners
• Tax-independent children under 26
• Divorced or legally separated spouses
• Your grandchild or your partner’s grandchild (unless you are the legal guardian of the grandchild)

If you withdraw the funds without following the rules above, you’ll pay income tax on the amount you withdraw, as well as a 20% penalty fee (if under 65 years of age).

Now, if you do open an HSA, there are other accounts you cannot open. If you have an HSA, you cannot have an HRA (Health Reimbursement Account, also known as an Aetna HealthFund Account), or a General Purpose Health FSA. You can only combine an HSA with a Limited Purpose Health FSA. Limited Purpose Health FSAs can be used for dental and vision expenses, so you don’t have to use up your HSA for those, and instead save your HSA for medical including prescription, and even save as much of your HSA as possible for later years, even for retirement. Per IRS rules, even if your spouse has their own General Purpose Health FSA, you can NOT have an HSA Account.

Depositing Funds

Here’s how money can be deposited into an HSA:

• First, after you enroll in a Waters eligible High Deductible Health Plan and you elect to contribute to an HSA, go to Fidelity’s NetBenefits.com to complete the opening of your new HSA account, if you don’t already have an account open. (You can do this immediately after completing enrollment.)
• Waters takes it out of your paycheck, pre-tax (and you can change the amount you contribute at any time during the year). This reduces the tax you would otherwise owe on the amounts contributed on your own to an HSA through after-tax contributions.
• You can deposit money into your account, post-tax outside of payroll contributions.
• Waters will deposit $200 for employees enrolled with Employee Only tier for medical, or $400 for all other tiers (prorated for new hires during the year). If you participate in the Waters Wellness Now program with Personify Health you can earn additional company incentive contributions into your account (see the Wellness section for more).

Contribution Limits

There are yearly limits to how much you and Waters may contribute to the account each year, per the IRS.

The HSA limits for 2025 are:

• As an individual: $4,300
• As a family: $8,550 (The IRS considers it family coverage if you cover at least one other person besides yourself on your medical plan.)

And if you happen to be 55 or older in this year, you can deposit an extra $1,000 in catch-up contributions. (Even if you turn 55 on December 31st, you can still add that extra $1,000 during the year.)

How to Pay Qualified Expenses Using Your Health Savings Account

There are three ways:

1. You use your Fidelity HSA Debit Card.
2. You pay the expenses yourself and then reimburse yourself by linking your personal bank account with your Fidelity HSA account and electronically transferring the exact amount for reimbursement.
3. You send money from your HSA directly to the provider, using the claim sync-up feature called “Track and Pay.” This feature is offered to you by Fidelity, on NetBenefits.com, after you complete your HSA account setup on that web site. (You’ll set up the account after you first elect to contribute money to an HSA account on NetBenefits.com.)

Just remember, if you use the debit card or reimburse yourself, it’s your responsibility to ensure that you are only using your HSA Account to pay for IRS qualified eligible expenses – otherwise you could be subject to a tax penalty.

A note about administrative services…

Fidelity provides administrative services for the HSA. You can access your HSA account on the same web site NetBenefits.com and phone number 1-800-835-5095 as all of your other Waters US benefits.

Having your HSA with Fidelity offers:

• A clear and simple tool to pay your eligible medical expenses, straight from your HSA Account (on Fidelity’s NetBenefits.com)
• Easy access to all of Fidelity’s mutual funds, to invest your HSA account money (once your account balance is $500 or more)
• Consultative help and assistance to help you understand the HSA, with Fidelity licensed representatives–as you have come to experience with Fidelity’s 401(k) service.

Check out this Health Savings Account (HSA) Summary