Health Savings Accounts were created by the "Medicare Prescription Drug, Improvement and Modernization Act of 2003" and signed into law on December 8, 2003.

HSA's are individually owned accounts where contributions pay for current and future medical expenses. Unlike Flexible Spending Arrangements, HSA's are fully vested and any unspent amount remains in the account from year to year.

Are you Eligible?

Individuals may be eligible if they:

  • Are covered by a High Deductible Health Plan (HDHP) that does not pay for any 1st dollar medical expenses except preventative care;
  • Are not enrolled in Medicare or Tricare;
  • Do not possess an FSA or HRA; and
  • Cannot be claimed as a dependent.

Eligible individuals might possess other limited healthcare coverage including specific disease, accident, disability, dental, vision or long term care insurance, Drug Discount cards, and VA benefits eligibility .

There are also certain conditions such as "limited purpose" and "post deductible" in which FSA's and HRA's can be paired with HSA's.

To qualify as a HSA-eligble HDHP, the plan must meet the following requirements for 2015

Minimum Deductible



Maximum Out of Pocket



To qualify as a HSA-eligble HDHP, the plan must meet the following requirements for 2016

Minimum Deductible



Maximum Out of Pocket



Contributions: Rules and Options

Contributions can be made by the individual, the employer, or both in the following ways:

  1. The individual can make tax deductible contributions even if he/ she does not itemize deductions;
  2. The employer can make contributions that are not taxed to either party; and
  3. Employers sponsoring cafeteria plans can allow employees to contribute untaxed salary through salary reduction.

The maximum annual contribution is the IRS standard. However, if you are over 55 and not enrolled in Medicare, you are eligible for an extra 'catchup' contribution amount as shown below:


Contribution Limits 2015

Tax Standard Limit Add. Catchup
Year Single Family Contribution
2015 $ 3,350 $ 6,550 $1,000

Contribution Limits 2016

Tax Standard Limit Add. Catchup
Year Single Family Contribution
2016 $ 3,350 $ 6,750 $ 1,000
Flexible Distributions are tax free if taken for qualified medical expenses. The distributions can pay for expenses for the person covered by the HDHP, his /her spouse, and any dependents, even if not covered by the HDHP.

Distributions are not required to pay medical expenses but those that do not are taxed as income with a 10% penalty tax unless the individual is disabled, over 65, or deceased.

Tax free distributions typically cannot be used to pay for other health insurance.

Exceptions include COBRA continuation coverage, any healthcare if the individual is receiving unemployment compensation, Medicare premiums and out-of-pocket expenses, and qualified long term care insurance premiums.

Taking Control!

The most notable benefit of HSA's is the individual's newfound control over his/ her healthcare spending.

With respect to HSA's, the individual decides:

  • Whether and how much to contribute;
  • How much to use for medical expenses;
  • Which medical expenses to pay for from the account;
  • Whether to use the account money now or save it for future expenses;
  • Which company will hold the account; and
  • What type of investment to grow the HSA.

Employers cannot restrict what the distributions are used for or any rollover from job to job.

Other Considerations

  1. HSA account holders should still keep their receipts to prove:
    1. To the IRS that tax free distributions were for medical expenses; and
    2. To the insurance company that the HDHP deductible was met.
  2. Mistaken distributions can be returned by April 15th of the following year if accompanied by clear evidence of the mistake.
  3. The estate treatment of an HSA:
    1. If married, it remains an HSA, and ownership is transferred to the spouse.
    2. If unmarried, it is no longer an HSA and is subject to taxes before being distributed to heirs.

Forming Health Savings Accounts


An individual must establish an HSA with an approved institution such as a secured bank, credit union or trust company. Joint HSA's are not allowed.


An HSA can be established as early as the effective date of HDHP coverage.

How does it work?

HSA Trustees will report all distributions annually to the individual. However:

  • It is the individual's responsibility to determine if distributions are used for medical expenses; and
  • The individual reports the amount used for medical expenses on his/her tax return.

Rules and Regulations

  1. One rollover per year from another MSA or HSA is permitted following IRA rollover rules.
  2. Direct Trustee to Trustee transfers of HSA amounts are not subject to rollover restrictions. There is also an allowable onetime only Trustee to Trustee transfer from an individual's IRA to his/ her HSA.
  3. Employers can transfer funds (one time only) from an FSA and/ or HRA to an HSA for employees switching to coverage under an HSA compatible health plan.
  4. Contributions to HSA's in excess of limits must be withdrawn (along with a pro rata portion of income earned) or be subject to an excise tax.

Join the Farmers National Bank HSA Family Today!

You can establish an account today by contacting us in person at:

Any full service Farmers National Bank location

Or by phone at:(859) 236 2926

It's as easy as:

1) Fulfilling the minimum balance (only $50!) 2) Paying a onetime startup fee (only $25!)

We offer a tiered rates method based on your daily account balance. The interest will be compounded monthly and credited to your account.

There is also a $2 maintenance fee per statement cycle. There will also be a $3.00 monthly paper statement fee if the customer does not enroll in e-statement delivery.

For your convenience:

A debit card is free to HSA participants!

Health Savings Account - Certificates of Deposit

Also available is a HSA Certificate of Deposit. Please see a bank representative for further details.

More information

For more information about health savings accounts and related IRS forms and publications and technical guidance, please visit the IRS webpage at http://www.irs.gov/pub/irs-pdf/p969.pdf.

Establishing a Health Savings Account (HSA) will allow you to save for future medical and retiree health expenses on a tax advantaged basis

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