HSA Glossary of Terms

These definitions are provided for your convenience as a reference while learning about HSAs and MSAs and filling out the forms we have for you. This is not an exhaustive list, but you may find it useful.

ACH monthly: Your MSA contribution can be transferred automatically once per month from your bank to HSA Bank™ with your authorization.  Online transfers also available.

ACH 15th and end of the month: Your HSA/MSA contribution can be transferred twice per month, once on the 15th and again on the last day of the month, from your bank to HSA Bank with your authorization.  Online transfers also available.

Amendment to an existing HSA/MSA: Changing your name due to marriage or legal decree, or changing the designation of beneficiary.

Check Images: You have the option to use checks for taking normal distributions from your HSA/MSA. HSA Bank will not return the actual checks to you for your records, but instead uses equipment to capture pictures, or "images", of your cancelled checks and prints these images ten to a page and can include these check images with your monthly bank statement.

Contribution for tax year: Contributions for tax year 2003 must be received by HSA Bank between January 1, 2003 and April 15, 2004.

Death: If you are requesting a distribution as a beneficiary, you must furnish to the Trustee, Custodian, or Issuer, an original death certificate to verify your entitlement to receive the distribution.  This verification should be used by surviving spouse beneficiaries claiming ownership of an HSA/MSA. Death distributions to non-spouse beneficiaries are generally includable in ordinary income.

Disability: You may take a distribution due to disability only if the disability renders you unable to engage in any substantial gainful activity and it is medically determined that the condition will last continuously for at least 12 months or lead to your death. Disability distributions may be subject to ordinary income tax.

Eligibility Dates for Contributions: Your maximum HSA/MSA contribution is prorated per year based on the number of full months that your QHDHP was in force. For example if your HDHP took effect October 12, 2003 and remained effective through year-end 2003, your maximum contribution for 2003 would be based on two months (November 2003 and December 2003) and your maximum contribution for 2004 would be based on twelve months (January 2004 through December 2004).

Excess Contribution Removal: If you have made an excess contribution to your HSA/MSA, you must generally take the appropriate steps to remove the contribution. Depending on when you take the necessary corrective action, you may have to pay the IRS additional taxes and penalties. 

Excludable Account Holder: The HSA/MSA contribution for a family Qualified High Deductible Health Plan may divided between husband and wife. Therefore, two separate HSA/MSA’s may be established. If the family contribution is split into two HSA/MSA accounts, one of the HSA/MSA’s should be designated "excludable".

QHDHP: Qualified High Deductible Health Plan (QHDHP) means, as defined in IRC Section 223,

IN GENERAL. --The term 'high deductible health plan' means a health plan-- which has an annual deductible which is not less than--'(I) $1,000 for self-only coverage, and ''(II) twice the dollar amount in subclause (I) for family coverage, and ''(ii) the sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits does not exceed-- ''(I) $5,000 for self-only coverage, and ''(II) twice the dollar amount in subclause (I) for family coverage.

MSA or HSA: MSAs and HSAs are trust or custodial accounts which are created exclusively for the benefit of the account holder and which is generally used to pay qualifying medical expenses. If you are eligible, contributions can be made to your account by either you or your employer. Qualifying distributions from your account are tax-free. 

Qualified Medical Expenses:  Go to page 4 of the IRS Publication 502

Internal Revenue Code (IRC) Section 220 (c)(2): Disclaimer: This text is current as of 04-01-98 and is provided for your general information only. For legal advice please consult a competent attorney or accountant

Normal Distribution (withdrawal): Distributions for any reason other than removal of an excess contribution, death, disability, or a prohibited transaction are deemed Normal Distributions. Normal Distributions received for payment of a qualified medical expense are excludable from your gross income. Distributions which are not used to pay qualified medical expenses will be includable in your gross income and may be subject to an additional penalty tax.

Power of Attorney (POA): Since regulations require that only one individual own the HSA/MSA account, the accountholder may want to authorize their spouse through power of attorney to write checks or use their debit card.  Either indicate that you would like power of attorney on your application or contact us.  If POA is requested on the original application the check order (if applicable) will include both the account holder and authorized individual's name.  Likewise, if two debit cards are requested, the account holder's name will appear on one card and the authorized individual's name will appear on the second card.

Previously Uninsured: Neither the accountholder nor the accountholder's spouse had any health plan coverage at anytime during the previous 6 month period before coverage under the high deductible health plan began.

Prohibited Transaction: If you have performed a prohibited transaction as defined in Internal Revenue Code Section 4975 (c), you may be subject to an IRS penalty. If the prohibited transaction is not timely corrected, an additional penalty may be imposed.

Rollover Timeliness: The funds you receive from the distributing HSA/MSA must be deposited into another HSA/MSA within 60 days after you receive them. When counting the 60 days, include weekends and holidays. There are generally no exceptions to the 60 day rule and the IRS cannot grant extensions. Receipt generally means the day you actually have the funds in hand. For example, the 60 days would begin on the day following the day you pick up the check from the Trustee or Custodian or you receive the check in the mail.

Rollover 12 month Restriction:  You are entitled to one distribution per year per HSA/MSA which may be rolled over. Twelve (12) months pass after receipt of one distribution which you roll over before you may take another distribution from the same HSA/MSA to roll over. The focus is on distributions out of an HSA/MSA. An HSA/MSA is created by executing a plan agreement, not by depositing a contribution into a separate investment within an existing HSA/MSA. You are entitled to roll over the same assets once in a twelve (12) month period. Twelve (12) months must elapse between the time you receive a distribution of the assets to be rolled until you receive another distribution of those same assets for rollover purposes.