What is a Health Savings Account (HSA)?
An HSA account is an IRA-like savings account established for the purpose of paying qualified medical expenses. It allows you to pay for current health care expenses and save for future qualified medical expenses and retiree health expenses on a tax-free basis. The money you invest in an HSA is tax deductible and any earnings on HSA contributions accumulate on a tax-deferred basis. The money in the account can be withdrawn tax free and without penalty at any time to pay for qualified medical expenses. Unused balances roll over from year to year. Before the employee reaches age 65, if money is withdrawn for reasons other than a qualified medical expense, it is taxable and subject to an additional 20 per cent penalty by the IRS. After age 65, there is no penalty for non qualified withdrawals, but the amounts withdrawn are taxable.
A HSA is a tax-exempt account that belongs to you that you can use to pay for health care expenses. The funds may be used to pay for your plan deductible and/or other qualified medical expenses that do not count towards your deductible. HSAs are available to members who enroll in a high deductible health plan that meets the requirements established by the Internal Revenue Service. The features of an HSA include: • Your HSA contributions are tax-deductible. • Interest earned on your account is tax-free. • Withdrawals for qualified medical expenses are tax-free. • Unused funds and interest are carried over, without limit, from year to year. • You own the money in HSA and it is yours — even when you change plans or retire. • Your HSA is administered by a trustee/custodian.
A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account. You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.
Related Questions
- I am enrolling in an HSA (Health Savings Account). Do I enter the employee contribution amount or the employee AND the employer contribution amount in the Annual Pledge field?
- I am enrolling in a HSA (Health Savings Account). Do I enter the employee contribution amount or the employee AND the employer contribution amount in the Annual Pledge field?
- What is a Health Savings Account (HSA)?
