October is a popular month for benefit enrollment. An increasing number of employees are electing high deductible medical insurance plans that are coupled with a health savings account.
You are highly incentivized to contribute to a health savings account as contributions are tax-deductible and qualified distributions are tax-free. Open enrollment gives you the opportunity to specify the amount you would like to contribute from each paycheck in the coming year.
The contribution limit for 2016 depends on the type of coverage. For an individual, the maximum contribution is $3,350. For a family the limit is $6,750. An additional “catch-up” contribution of $1,000 can be made by account owners ages 55 and older.
Please note that the health savings account limits mentioned above include both employee contributions and and employer contributions. For example, John, age 40, has family coverage. His contribution limit is thus $6,750. If his employer contributes $1,000, John can only personally contribute $5,750 via payroll.
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