What is an HSA account?
A Health Savings Account (HSA) is a personal savings account that works in tandem with an HSA-compatible health plan, such as a high deductible health plan (HDHP). If you work at Wells Fargo, this means you must be enrolled in the Wells Fargo HDHP to be eligible for an HSA (meaning that Wells Fargo does offer HSA accounts). You can use the money you contribute to your HSA to pay for qualified medical expenses now, or you can save and build your balance to use later or in retirement tax-free.
The major advantage of an HSA over a flexible spending account (FSA) or health reimbursement account (HRA) is that you own the account. You can keep and use the money in your HSA, even if your employment status changes.
Pros and Cons of Having an HSA Account
While having an HSA sounds great, there are both benefits and drawbacks that come along with having a HSA.
In order to help you make a more informed decision, some of the major ones are listed below:
- Making contributions will reduce your taxable income, resulting in savings when tax time comes around
- Funds in your HSA can be invested, once you reach the investment threshold of $2,000
- All accrued interest and capital gains are non-taxable, so long as you use HSA funds for qualified medical expenses
- In order to have an HSA account you need to be enrolled in a High Deductible Health Plan
- To fully make use of your HSA, you must make contributions – some folks might not have room in their budget to do so
- High Deductible Health Plans come with increased financial risk to the insured
What is a Health Reimbursement Account (HRA)?
While evaluating the Wells Fargo HSA, it’s important to understand the Wells Fargo Health Reimbursement Account (HRA) as well before you decide on a medical plan. If you enroll in the Copay with HRA medical plan, it has an associated HRA to help you pay for eligible medical expenses.
The HRA account is funded by Wells Fargo when you (and your spouse) complete certain health and wellness activities. If you don’t use all of your HRA dollars in a given year and you remain enrolled in the Copay Plan with HRA, the unused HRA dollars roll over into the next year. However, if you are terminated or leave Wells Fargo, you forfeit the money in your HRA.
Choosing Between a Low or High Deductible Health Plan
Figuring out which plan fits your needs, without paying for too much coverage is certainly daunting.
As a Wells Fargo employee, you can select from 5 different HSA account plan option offers:
- Lower use Plan with HSA
- Higher Use Plan with HSA
- Narrow Network plan with HSA
- Copay plan with HRA
- Narrow Network Copay Plan
For 2022, the Wells Fargo high deductible health plans (HDHP) family plans have deductibles ranging from $3,300 to $5,700 (in-network). The two low-deductible health plans (LDHP) that are offered have deductibles of $1,000 and $1900, respectively.
The HDHP have lower premiums, so they seem more affordable at first. However, when using these plans, you take on more financial risk if you run into major healthcare expenses, which would mean higher out-of-pocket costs.
Below are the out-of-pocket maximums for each of the five Wells Fargo medical plans:
|Lower Use Plan with HSA||$9,975|
|Higher Use Plan with HSA||$6,650|
|Narrow Network Plan with HSA||$5,000|
|Copay Plan with Health Reimbursement Account||$6,650|
|Narrow Network Copay Plan||$5,700|
Generally, the more you anticipate spending on medical expenses, the less advantageous a lower premium HSA plan becomes.
For example, an HDHP plan might make sense if:
- You’re young and healthy
- You don’t expect to use your insurance often (i.e. you only need routine care, generic prescription drugs, or preventive care).
- You want to open a Health Savings Account so that your money can grow tax-free into retirement.
- You can’t afford the premiums on the LDHP options
On the other hand, an LDHP might be better if:
- You’re older or are in poor health.
- You expect to use your insurance often
- You want to limit your risk to high medical bills, should something unexpected happen
- You can afford paying the higher upfront premiums
If you’d like a more customized comparison of the plans, we’ve created a spreadsheet for you to download and enter your anticipated medical costs so that you can see an estimate of your total costs (medical premiums plus out-of-pocket costs).
What Are Qualified Medical Expenses?
To help you determine whether an expense qualifies for tax-free reimbursement through your HSA, Internal Revenue Code Section 213(d) states that eligible expenses must be made for “medical care.” This is defined as amounts paid for the “diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.”
Some things that are often charged to HSA’s are:
- Ambulance services
- Artificial limb or prosthesis
- Dental treatment
- Contact lenses
- Doctor’s fees
- Hearing aids and hearing aid batteries
- Hospital services
- Laboratory fees
- Prescription medicines or drugs
- Nursing home
- Nursing services
How Do I Make Contributions to My HSA?
There are three ways to contribute to your Wells Fargo HSA Accounts:
- Payroll deductions: You can have a set amount deposited (pre-tax) to your HSA from every paycheck.
- Online deposits: You can make a one-time or recurring contribution to your HSA from a checking or savings account.
- Mail: You can mail a check with a contribution/deposit form available at optumbank.com.
You can contribute as often or as much as you wish, as long as the total contributions do not exceed the limits specified by the Internal Revenue Service.
Is There a Limit to How Much I Can Contribute?
The maximum amount the IRS allows you to contribute to your HSA in 2022 is $3,650 for an individual and $7,300 for family coverage, plus catch-up contributions of $1,000 for those 55 and older. HSA contribution limits will increase to $3,850 for individuals and $7,750 for a family in 2023. The catch-up contribution will stay at $1,000 for those 55 and older.
How Do I Access and Manage My HSA Account?
Firstly, you need to register for an account online at optumbank.com. Once registered, you can add your bank account information to deposit funds or receive distributions from your HSA. You’ll also be able to invest your funds using this portal. When setting up your account, be sure to designate a beneficiary for your account as well.
How Do I Access Funds in the Wells Fargo HSA Account In Order to Pay My Medical Expenses?
Your HSA dollars are available to you, as well as your spouse and eligible dependents, even if they’re not covered under your HDHP. You can use your HSA funds to pay for qualified medical expenses incurred by you, your spouse, or your other eligible dependents.
There are a few ways to access your HSA funds to pay for your medical expenses that we’ve listed below:
- Debit Card – Use your Optum Bank debit card to pay any merchant that accepts Mastercard debit cards.
- Online Banking – View recent account activity and pay bills for qualified medical expenses directly to your doctor or other health care providers, all via OptumBank.com.
- Paying with Checks – You may also request HSA checks to use when paying your medical bills. Checks can be ordered online on OptumBank.com.
- Reimbursing Yourself – You may choose to pay for some or all of your medical expenses out-of-pocket, saving receipts to track your qualified expenditures. All you have to do is go to optumbank.com, sign in and select “Reimburse Myself.” You’ll be able to choose to set up an electronic funds transfer (EFT) from Optum Bank to your savings or checking account at another bank or you can ask them to send you a check by mail
Can I Invest My HSA Funds?
You can invest a portion of your HSA funds, via OptumBank.com, once you’ve reached your designated balance of $2,000, often referred to as the investment threshold. Since your HSA account and all the funds in it are yours, your HSA will grow with you, giving you the ability to spend, save, and invest at your own pace.
Sample HSA Growth (Assuming 4% Annual Return)
|Jim and Sue (Age 35)||Kathy & Ken (age 55)|
|Year of retirement||2052||2032|
|Annual HSA contribution||$6,150||$7,150|
|Annual out-of-pocket medical expenses||$1,000||$0|
|HSA contributions saved to use in retirement||$154,500||$71,500|
|HSA investment income until retirement||$134,337||$14,344|
|Total HSA tax savings at retirement||$79,709||$21,461|
|Total HSA balance in retirement||$288,837||$85,844|
Are There Any Tax Benefits to Choosing the HSA Option?
The money you contribute to your HSA is tax-deductible, meaning contributions reduce your taxable income. The chart below shows your potential tax savings when you contribute to an HSA.
|25% federal income tax||-$250||$0|
|Funds left to pay for qualified medical expenses||$750||$1,000|
For a more customized look at your tax savings, Optum Bank has provided a tax savings calculator. Money in your HSA rolls over year to year, and you won’t be taxed on interest or investment gains (even after you retire), so long as you use the money in your HSA for qualified medical expenses.
Can I Use My HSA Funds for Non-Qualified Expenses?
Yes, but you’ll be required to pay income tax and a 20% tax penalty on the amount you use for nonqualified expenses. This 20% penalty is waived on distributions made after your death or disability, or after you’ve reached age 65.
Does Wells Fargo Contribute Money to the HSA Or HRA Accounts?
As a matter of fact, yes! Their contributions are known as health and wellness dollars. You can earn up to $800 for yourself and $800 for your covered spouse by completing a combination of well-being activities offered through the Rally App. These activities must be completed by November 15th to receive the $800 in your HSA or HRA account.
Additionally, for families, Wells Fargo will deposit an additional $1,000 to your HSA if your compensation is less than $45,000 or $500 if your compensation is less than $100,000.
If you choose the Narrow Network Copay plan, you are not eligible for health and wellness dollars nor the one-time employer contribution ($500 or $1,000) so be sure to take this “free money” into consideration when comparing the different health insurance plans.
What Happens to My HSA If I Leave My Employer?
Since your HSA funds are yours, you can continue to use them tax-free to pay or be reimbursed for qualified medical expenses even if you switch jobs, retire, or are no longer covered by an HDHP. However, you will no longer be eligible to add additional funds to your HSA.
Does Wells Fargo Offer HSA Accounts?
To conclude, in this blog we answered the question: “Does Wells Fargo offer HSA accounts?”. They absolutely offer them! Besides HSA accounts, If you are curious to learn more about wealth management, visit Calamita Wealth to access more informational blogs or contact us today to speak to one of our advisors.