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A Health Savings Account (HSA) is a new form of consumer directed health coverage pairing a high-deductible health plan with a tax-free savings account for medical expenses. They are designed to reduce healthcare insurance costs for employers and employees.
With the cost of employee benefits rising, small businesses are being squeezed to find new ways of reducing their healthcare contributions. An HSA offers a new viable alternative. |
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 Used in combination with a high-deductible health plan.
Contributions are not includible in gross income – they are tax-free.
Help employees become better health care consumers.
Payouts for qualified medical expenses are tax-free.
Savings are owned by the individual and can move from employer to employer.
Can "roll over" year-to-year to create a sizable retirement nest egg.
Accumulated interest and dividends are tax-free or tax-deferred.
Contributions by employers are exempt from payroll taxes.
"The better rainy day fund" health care savings plan.
HSA accounts are individual owned, they rollover from year to year and earn interest tax free and, the account is owned by an individual (not an employer), so the individual decides:
Whether he or she contributes
How much to use for medical expenses
Which medical expenses to pay from the account
Whether to pay for medical expenses from the account or save the account for the future
Who can purchase an HSA?
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Anyone with a high deductible health insurance plan –individuals, employers and employees. (Certain exceptions apply, including Medicare.) |
Who can contribute to an HSA?
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Individuals, employers and their employees. There are no restrictions. |
What can HSA funds be used for?
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The funds belong to the individual or employee. Funds can be withdrawn for any purpose, however, if not withdrawn for qualified medical expenses by someone under age 65, the amount withdrawn is taxable and subject to a 10% penalty by the IRS. After age 65, there is no penalty for non-qualified withdrawals but amounts are taxable. |
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