Consumer Directed HealthSelectSM Health Savings Accounts
A health savings account (HSA) is a tax-advantaged medical savings account you can contribute to and draw money from to pay for certain medical expenses tax-free. HSAs can be used for out-of-pocket medical, prescription drug, dental and vision expenses.
HSAs are “tax-advantaged” or “tax-free” in that they can help you save on taxes. There are three ways an HSA can help you save on taxes:
An HSA can lower your taxable income because contributions to the account, up to a certain amount, are made with tax-free dollars. If you’re an active employee, the contributions can be deducted from your paycheck before taxes are taken out. If you’re an active employee or a retiree, you can make contributions directly to your account and then deduct those contributions when you file your income tax return.
Any interest and investment earnings your HSA realizes are not taxed.
You do not have to pay taxes on any withdrawals from your HSA that are used to pay for qualified medical expenses.
Both HSAs and health care FSAs help lower your taxable income by letting you save money tax-free to pay for qualified health expenses. But there are some important differences. With an HSA:
You must be enrolled in a high-deductible health plan, like Consumer Directed HealthSelect.
The State of Texas will make monthly contributions to the accounts of eligible employees and retirees.
You own your account, so you keep your funds even if you change health plans or go to a different job. (NOTE: If you leave state employment, you will be responsible for paying the monthly HSA administrative fee on your HSA. The fee will be deducted from your remaining balance each month.)
All the money in your account carries over from year to year, so you can choose to save the money for qualified health expenses in the future.
You don’t need approvals for reimbursements or withdrawals. Just keep in mind that if you use the money for anything but qualified health expenses (as defined by the IRS), you could have to pay taxes on that money, as well as a penalty to the IRS. (It’s still important to keep your receipts for the health costs you pay for with HSA funds, in case you need to prove to the IRS that you spent your funds on eligible expenses.)
You have access only to the money that’s in your account.
Employees can change their pre-tax paycheck contributions at any time during the plan year.
The annual maximum contribution to an HSA is higher than the annual maximum contribution to an FSA. The IRS sets the annual maximums for both HSAs and FSAs. For current HSA maximums, see the chart under the question "How much can I contribute to my HSA?" below.
You can contribute to an HSA if you’re working or retired (but not enrolled in Medicare).
To enroll in an HSA, or make or get contributions to an HSA, you must be enrolled in a high-deductible health plan (HDHP) like Consumer Directed HealthSelect and you must not be enrolled in Medicare. You cannot enroll in, make contributions to or accept contributions to an HSA if:
- You are covered by any other non-HDHP, such as a spouse’s plan, that provides any benefits covered by your HDHP with Consumer Directed HealthSelect. Exceptions include coverage like vision or dental.
- You are claimed as a dependent on someone else’s tax return.
- You receive benefits under TRICARE or TRICARE for Life.
- You have a health care flexible spending account (health care FSA), like a TexFlex health care account, in the same plan year. For information about enrolling in Consumer Directed HealthSelect if you have funds remaining in a TexFlex health care flexible spending account, please see "Can I keep TexFlex health care flexible spending account if I switch to Consumer Directed HealthSelect?" below.
If you’re thinking about enrolling in Consumer Directed HealthSelect, you should carefully review IRS rules or talk to a financial or tax advisor to make sure you’re eligible to enroll in or make or accept contributions to an HSA.
Optum Bank administers the HSAs.
When you make the election to enroll in Consumer Directed HealthSelect through your online ERS account, there will be a link to the Optum Bank site (http://optumbank.com/texasers) on which you can open your HSA. If you don’t open your HSA through your ERS online account, Optum Bank will send you information about opening an account after you enroll in Consumer Directed HealthSelect.
ERS, your benefits coordinator, Optum Bank or Blue Cross and Blue Shield of Texas will not open your account for you. The State of Texas will make contributions only to Optum Bank HSAs.
It’s important to open your Optum Bank HSA as soon as possible, so you can begin getting the state’s contribution as soon as possible. In addition, you can use your HSA funds to pay only for qualified medical expenses you incur after your account has been opened.
If you’re an active employee, you can have contributions taken from your paycheck pre-tax and deposited in your HSA. You can set up automatic paycheck contributions through your ERS OnLine account or with help from your HR or Payroll department. These contributions will typically be in your HSA within two or three weeks after your paycheck is issued to you.
If you’re an employee or retiree, you can deposit money directly to your account, post-tax. The contributions can then be claimed as deductions when you file your annual tax return.
It’s up to you, as the account holder, to make sure the total deposits to your HSA don’t go over the IRS’ annual maximum for the calendar year. If you go over the annual maximum, you could have to pay taxes on the additional deposits, as well as a penalty to the IRS.
Yes. The State of Texas will contribute to eligible employees’ and retirees’ Optum Bank HSAs on a pre-tax basis. The Plan Year 2024 state contribution amount for eligible employees and retirees is $45 per month ($540 per year) for an individual account or $90 per month ($1,080 per year) for a family account. A member will get the state's contribution only if he or she opens an HSA with Optum Bank.
In general, an employee or retiree is eligible to get the state's contribution to an HSA if they get the state’s contribution to their health insurance premium and are not eligible for Medicare. Active employees can check with their HR department to make sure they're eligible to get the state’s HSA contribution. Retirees can contact ERS. You also should review IRS regulations, or talk to a financial or tax advisor to make sure you’re eligible to open an HSA under IRS rules.
Yes. You can accept contributions from sources other than yourself or your employer, as long as you’re enrolled in a qualified HDHP (like Consumer Directed HealthSelect). For example, a family member could deposit money to your HSA to help you pay for an upcoming procedure. It’s up to you to make sure the total amount deposited throughout the year doesn’t go over the IRS’ annual maximum.
Funds are available once they’re deposited in the HSA. Funds cannot be spent before they’re actually in the account, or you might incur a fee for insufficient funds. This is different from a health care or limited-purpose flexible spending account, which lets you use money upfront that’s pledged to be deposited later. (You can check your HSA balance 24/7 on the Optum Bank website or with the Optum Bank app.)
If you elect Consumer Directed HealthSelect during Summer Enrollment and open your HSA by early September, the first state deposit into the account will typically occur two or three weeks after you get your September 30 retirement payment or your October 1 paycheck.
If you’re an active employee and want pre-tax contributions deducted from your October 1 paycheck, you will need to set up those deductions in August so they can be withheld from your September paycheck (issued October 1). You can set up paycheck deductions in your ERS OnLine account or with help from your HR or Payroll department.
You can fund your HSA all at once or throughout the year.
If you contribute more than the allowable amount to your HSA by accident or because you ended coverage in an eligible health plan, you will have to count the extra amount as taxable income and pay a 6% penalty.
To avoid paying taxes and incurring a penalty, you can fill out an Excess Contribution and Deposit Correction Request Form (available on the Resources section of the Optum Bank website) and submit it to Optum Bank to have excess funds returned to you.
Yes. You own your HSA, so your balances will carry over from one year to the next. And you can take your account with you if you change health plans or even get another job. (NOTE: If you leave state employment, you will be responsible for paying the monthly HSA administrative fee on your HSA. The fee will be deducted from your remaining balance each month.)
In general, you can use your HSA funds to pay for any qualified medical expense incurred by you, your spouse and your eligible dependents – even if they’re not covered by your Consumer Directed HealthSelect plan. Qualified medical expenses are a defined by the IRS. You can find a list of common HSA-qualified expenses on the Optum Bank website. It’s up to the account holder to make sure HSA funds are used for qualified medical expenses.
There could be federal tax penalties for misusing HSA funds. It’s up to the account holder to make sure HSA funds are used for qualified medical expenses. It’s also up to the account holder to understand the annual contribution limits and penalties for exceeding them.
No. Neither Optum Bank nor ERS will approve or deny reimbursements or withdrawals from HSAs. It’s up to the account holder to make sure the funds are used for qualified medical expenses. Be sure to keep your receipts for the health costs you pay for with HSA funds, and receipts for your HSA withdrawals, in case you need to prove to the IRS that you spent your funds on eligible expenses.
Yes. Keeping receipts of your HSA spending is an IRS requirement. Any money that comes out of your HSA must have a receipt showing it was used for a qualified medical expense. Optum Bank has an online receipt vault that can help you manage your receipts.
Yes, you will get a UnitedHealthcare Health Savings Account Debit MasterCard® by Optum Bank after opening your HSA. You can request additional debit cards for your dependents at no cost. You also can request checks at no cost.
No. You can use the funds in your HSA to pay for qualified medical expenses at any time, as long as the expenses were incurred after you opened your account. You must be enrolled in a high-deductible health plan to make or accept contributions to your HSA. But once the money is in your account, you can use it at any time, even if you’re enrolled in another type of health plan.
Your HSA belongs to you regardless of your employment. This means you can take your HSA – including the money contributed by the State of Texas – with you when you leave state employment. Then, you can continue to use the funds and any interest or investment earnings you have accumulated. If you are covered by a qualified HDHP in your new job, you can continue to make tax-free contributions to your HSA.
(NOTE: If you leave state employment, you will be responsible for paying the monthly HSA administrative fee on your HSA. The fee will be deducted from your remaining balance each month.)
Once you are enrolled in Medicare, you can no longer contribute to your HSA. (If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.) After you enroll in Medicare, you may continue to use your accumulated HSA funds. In fact, once you enroll in Medicare, you can use your HSA funds for non-medical expenses without paying a penalty to the IRS, but you will have to pay taxes on funds for non-medical expenses.
No. You must be enrolled in Consumer Directed HealthSelect to open an HSA.
No. Under IRS rules, someone cannot contribute to an HSA and a health care FSA, such as TexFlex, in the same plan year. You can participate in a TexFlex limited-purpose FSA to pay for qualified dental and vision expenses. You also can participate in a TexFlex dependent care FSA.
If you enroll in Consumer Directed HealthSelect for the upcoming plan year (starting Sept. 1) and have $25 (ERS’ minimum amount to carry over) to the IRS-imposed maximum carryover amount left in a TexFlex health care FSA at the end of the current plan year (after Aug. 31), ERS will roll that money into a TexFlex limited-purpose FSA for use on qualified vision and dental expenses. Only people participating in Consumer Directed HealthSelect can participate in the TexFlex limited-purpose FSA.
If you have less than $25 left in your TexFlex health care FSA after Aug. 31, you can roll that money into a TexFlex limited-purpose FSA, but you will have to set up the FSA and transfer the money yourself. ERS will not do it for you. If you have more than the IRS-imposed maximum carryover amount left in your TexFlex health care FSA after Aug. 31, you will forfeit any amount over the carryover maximum.
The state’s contribution will be available once it’s deposited in the HSA. This usually will happen two or three weeks after you get your monthly salary or retirement payment.
Employees and retirees enrolled in Consumer Directed HealthSelect can contribute tax-free funds to their HSAs – up to an amount set by the IRS each calendar year. Please see the table below for 2023 and 2024maximum contributions. These maximums include contributions from all sources, including the State of Texas and the account holder. Only people participating in Consumer Directed HealthSelect can make tax-free contributions or accept contributions to their HSAs.
HSA Calendar Year Contribution Limits (Jan. 1 – Dec. 31)
|Individual account||Family account
(member + one or more dependents)
|Maximum contribution for Calendar Year 2023||$3,850||$7,750|
|Maximum contribution for Calendar Year 2024||$4,150||$8,300|
Members who are 55 years or older can have an additional "catch up" contribution of up to $1,000 per year.
HSA contributions and limits may change from year to year, or based on eligibility requirements and the participant’s age. Maximums are set by the IRS and include all contributions—both pre-tax and post-tax—to an HSA.
Maximum contributions are determined by IRS guidelines. If you go over the annual maximum contribution, you might have to pay taxes on the amount over the maximum and/or a penalty to the IRS.
When savings in your HSA reach more than $2,000, you can decide how to invest any funds over $2,000. Optum Bank has a variety of investment options. Investment earnings and interest aren’t taxed. It’s important to keep in mind that invested funds can lose value.