What Are HSAs and Who Can Have Them?
• What is an HSA? An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan. A number of the rules that apply to HSA are similar to rules that apply to an IRA. Thus, if the individual is an employee who later changes employers or leaves the work force, the HSA does not stay behind with the former employer, but stays with the individual. However, because HSAs differ from IRAs in some important respects, taxpayers cannot use an IRA as an HSA, and cannot combine and IRA and an HSA in a single account. • Who is eligible to establish an HSA? An “eligible individual” can establish an HSA. An “eligible individual” means, with respect to any month, any individual who: (1) is covered under a high-deductible health plan (HDHP) on the first day of such month; (2) is not also covered by any oth
