Health Savings Account (HSA)

Benefit Overview

Who Can Participate? High Deductible Health Plan (HDHP) Enrollees Only

Maximum Annual Contribution: $4,150/individual; $8,300/family ($1,000 is added to limit if you are over age 55)

Account Overview: An HSA is what makes HDHP so popular. It helps with your current healthcare expenses and helps you build a safety net for the future. Unused money rolls over at the end of the year, earns interest, and can even be invested like a 401(k). After 65, you can even use the money for non-healthcare expenses (subject to your regular tax rate). You own the account, even if you change jobs. This plan is only available to members of the HDHP. For more information on the HDHP, visit the Compare Medical Plans page

What is an Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax savings account which allows employees to pay for current health expenses and save for future qualified medical expenses on a triple tax savings basis. Funds deposited into an HSA are not taxed, the balance in the HSA grows tax free, and that amount is available on a tax-free basis to pay medical costs. To contribute to an HSA you must be enrolled in a qualified high-deductible health plan (HDHP) and your contributions are limited annually. The funds can even be invested, making it a great addition to your retirement portfolio. 

Watch the Health Savings Account Webinar to learn more!

Why Participate in an HSA?

High deductible health plans typically have lower monthly premiums, but greater out-of-pocket costs. An HSA helps offset those costs and ensure you have money set aside to pay for out-of-pocket healthcare expenses. HSA contributions can be made pre-tax through payroll contributions, or post-tax -- which simply means you can reap the tax benefit when you file your income taxes. Eligible healthcare purchases can be made tax-free when you use your HSA. Purchases can be made directly from your HSA account by using your HSA debit card, or you can pay out-of-pocket and then reimburse yourself from your HSA. In addition, you can earn interest tax-free! Unlike most savings accounts, interest earned on an HSA is not considered taxable income when the funds are used for eligible medical expenses. 

Understanding Eligible Expenses for Reimbursement

Your HSA is meant to be utilized to assist with qualified healthcare expenses. See below for some examples of eligible and ineligible expenses.

Eligible and Ineligible HSA Expenses
Eligible ExpensesIneligible Expenses
  • Copays, deductible payments, coinsurance
  • Doctor office visits, exams, lab work, x-rays
  • Hospital charges
  • Prescription drugs
  • Dental exams, x-rays, fillings, crowns, orthodontia
  • Vision exams, frames, contact lenses
  • Laser vision correction
  • Physical therapy
  • Chiropractic care
  • Medical supplies and first aid kits
  • Prescribed over-the-counter medications
  • COBRA premiums
  • Expenses incurred prior to opening your HSA
  • Cosmetic procedures or surgery
  • Dental products for general health
  • Personal hygiene products

A comprehensive list of eligible expenses can be found at the My SmartCare portal. You can check the eligibility of items by viewing the HSA Eligibility List. You can purchase eligible items on the HSA store. (Links are included below in the references too.)

Can I use my HSA for non-healthcare purchases? If you withdraw money for an unqualified expense prior to age 65, you will be subject to your ordinary income tax, in addition to a 20% tax penalty. You can withdraw the money for any reason without penalty after age 65, but you are subject to the applicable income taxes. 

Using Your HSA

The easiest way to pay for an HSA eligible expense is to use your HSA Benefits Debit Card. Simply swipe it at the register and keep your receipt should claim documentation be required. Visit the Debit Card Registration webpage for information on how to get started with your HSA Debit card. HSA funds can be used to pay for qualified medical expenses of IRS tax dependents, even if the dependent is not enrolled in your HDHP.

HSA Eligibility Requirements

It is your responsibility to determine your eligibility before enrolling. Anyone meeting the following IRS requirements is eligible for an HSA:

  • You must be enrolled in the County of San Luis Obispo qualified Anthem HDHP medical plan
  • You cannot be covered by another medical plan that is not a HDHP
  • You cannot be enrolled in Medicare or TRICARE
  • Other than a spouse, you cannot be claimed on another person's tax return
  • You cannot be covered by a spouse's Healthcare FSA
  • You cannot be active in the military
  • You must be a U.S. resident

HSA Withdrawal Options

  1. You can always withdraw tax-free from your HSA for qualified medical expenses.
  2. If you are under age 65 you can withdraw from your HSA for non-medical expenses, but you will be subject to regular tax rates and a 20% penalty.
  3. I you are over age 65 you can withdraw from your HSA for non-medical expenses, but it will be subject to regular tax rates. There will be no penalty. 

Important HSA Information

  • With the HDHP and HSA, you are not eligible to enroll in the Healthcare FSA. If you had a Healthcare FSA the previous year, any roll over funds will be rolled over into a Limited Purpose FSA.
  • You must have funds in your HSA before you can spend them
  • You can change your election amount at any time during the plan year
  • You own the HSA, which means the money in the account is yours to keep and stays with you, even if you change medical plans or leave your employer
  • Withdrawals for qualified healthcare expenses are never taxable
  • Save your receipts because the IRS may audit your HSA transactions
  • Unused funds roll over year to year and once your account balance reaches $1,000 you have the option to invest your funds and accelerate your account savings
  • Your HSA funds are intended for healthcare expenses. However, once you reach age 65 you have the option to use your account for any purpose, without penalty. You will owe income taxes on withdrawals for non-qualified expenses
  • Payroll deductions will not begin until you have successfully opened an HSA bank account. You will receive a notification in the mail from Avidia Bank, the third-party provider for our HSA asking you to take action to open your HSA. Please review the Avidia Bank HSA Welcome Guide
  • If you are nearing age 65 or over age 65, please review the HSA and Medicare FAQ below.


Contact Information

BCC is the third-party administrator for HSA accounts

Phone: (800) 685-6100

Email: [email protected]


Customer Service Center Hours

Monday - Thursday: 5:00am - 5:00pm PT

Friday: 5:00am - 3:00pm PT

The Call Center can assist with questions regarding account balance, claim status, substantiation, debit cards, check reimbursement, eligible expenses, My SmartCare registration, and other general HSA questions. 


No. You are not required to enroll in an HSA when you enroll in a HDHP, but it is highly recommended you do and contribute at least the amount of your deductible in the event you have an unexpected medical expense. You cannot enroll in the HSA if you are not enrolled in the HDHP.

The potential for retroactive Medicare Part A entitlement can complicate HSA eligibility for older Medicare enrollees. When enrolling in Medicare during the three-month period before a 65th birthday, Medicare is effective on the first day of the birthday month. However, if an individual enrolls after that, Medicare Part A is effective retroactively to the first day of the birthday month or 6 months, whichever is less. This can create problems for employees over age 65 ½ that are working (or those who retire) and choose to enroll in Medicare while contributing to an HSA.

Employees (or recent retirees) need to work backwards 6 months or to their 65th birthday to plan HSA contributions accordingly. Note that the retroactive coverage rule only applies to those who receive premium free Medicare Part A (most Medicare enrollees). It is also important to remember that HSA contributions are described as annualized amounts, but they are in fact prorated monthly amounts based on the number of months you are HSA-eligible.

If you contributed to an HSA during the months that were retroactively covered by Medicare, a correction is only required if that resulted in contributions in excess of the prorated limit. Even then, you can generally withdraw the excess contributions (and any net income attributable to the excess contribution) from the HSA without penalty if done by the due date for filing your tax return.

Yes. You will not be subject to the change-in-status rules applicable to other benefit accounts. You will be able to make changes to your contributions through BenXcel.

  1. Login to
    • Visit the Benefits Enrollment and Qualifying Events webpage for help logging into BenXcel. 
  2. Select "Initiate a Qualifying Event."
  3. Choose the "HSA Amount Update" event.
  4. Follow the steps to update your HSA contribution amount.

No, the IRS does not allow you to contribute to both an HSA and a full Healthcare FSA. However, you do have the option to pair your HSA with a Limited Purpose FSA for dental and vision. You can enroll in the regular Dependent Care FSA even if you are enrolled in the HSA. 

For more information on the Limited Purpose FSA.

For more information on the Dependent Care FSA

No. HSA money is yours to keep. Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred.

No, because your contributions roll over year to year, your medical expenses do not have to occur in the same year as your contributions. You can build up your HSA during the years you have low medical expenses to help you out during the years you do have a high volume of medical expenses.

Yes. IRS form 8889 must be completed with your tax return each year to report total deposits and withdrawals from your account. You do not have to itemize to complete this form.

Yes, but not the same expenses for which you have already been reimbursed from your HSA.

Contributions for the taxable year can be made in one or more payments at any time after the year has begun and prior to the individual's deadline (without extensions) for filing the eligible individual's federal income tax return for that year. For most taxpayers, the deadline is April 15 of the year following the year for which contributions are made. 

Yes. Once your HSA cash account balance reaches the minimum amount required by the custodian, you can transfer funds to an HSA investment account. You can choose from a selection of mutual funds and setup an allocation model for future transfers like you would for a 401k plan. 

Yes. You can transfer money between your HSA cash and HSA investment account at any time. 

HSAs are portable and move with you if you change employment. Your HSA belongs to you, not your employer, just like your personal checking account. 

Once you discontinue coverage under the HSA-eligible health plan and/or get secondary health insurance coverage that disqualifies you from an HSA, you can no longer make contributions to your HSA. However, since you own the HSA, you can continue to use the remaining funds for future healthcare expenses. 


Investing Your HSA Funds
HSA Store
HSA Eligibility List
Limited Purpose FSA
2024 Avidia Bank HSA Welcome Guide
2024 HDHP Easy Guide
Debit Card Registration (FSA & HSA)
Submit a Claim for Reimbursement (FSA & HSA)