How does a HSA work?
A HSA works in conjunction with high deductible health insurance. Your HSA money can be used to help pay the health insurance deductible and qualified medical expenses not covered by the health insurance, including dental and vision. Your HSA account earns tax-free interest and, in some plans, can be used for different types of investments such as mutual funds or money market accounts. An HSA is typically administered by a bank as trustee or custodian. If your employers offers a Section 125 plan (also known as a “cafeteria plan”) that allows you to contribute to your HSA account through payroll deductions, you will avoid paying the employee share of the federal & FICA tax on the amount you contribute. You also will reduce your tax liability and payments.
