Commercial Insurance
Group Benefits
Health Savings Accounts
What is an HSA?
Health Savings Accounts
are tax-advantage medical
savings accounts. The funds
contributed to the account
are exempt from income tax
at the time of deposit.
These funds are allowed to
be used to pay any medical
related expenses such as
co-payments, prescriptions,
etc. As long as the funds
are used for medically
related expenses they are
not taxed. HSA’s are owned
by the individual which is
different from an HRA
(Health Reimbursement
Arrangement), owned by the
company.
How does it work?
An HSA is very similar to
an IRA. Funds used for
medically related expenses
are not taxed. Funds
withdrawn for any other
purposes are subject to a
10% penalty and income tax
if withdrawn prior to the
age of retirement. An HSA
provides tax advantages if
the funds are withdrawn for
other than medical expenses
after the age of retirement.
The 10% penalty is waived
after the age of 65, and the
money is only subject to
income tax, the account has
grown tax deferred (similar
to an IRA).
Deposits into the HSA may
be contributed by anyone.
Employers are subject to
non-discrimination laws and
therefore; must maintain
equality when contributing
to their employees funds.
Full time and Part time
employees may be treated
differently, as well as,
employees and their
dependents. However, if
contributions are made
through a Section 125 plan,
non-discrimination
regulations do not apply.
All deposits into the HSA
become the property of the
individual owning the HSA.
For 2009, the total
annual contributions allowed
are: $3000 for an individual
or $5950 for a family.
How do you withdraw the
money?
Most HSA’s work like a
checking account for
withdraws. The individual is
provided with a Debit card
and/or checkbook.
What are the Benefits?
- Premiums are typically
lower than a traditional
health insurance plan.
- The out of pocket maximum
expense is typically lower
than a traditional plan.
- Medical expenses can be
paid on a pre-tax basis.
- Funds roll over year
after year, unlike a
Flexible Spending Account.
- Funds in the HSA grow
through investment earnings.
- HSA’s are portable – if
you change jobs, your
medical coverage, become
unemployed, move out of
state, etc. the HSA remains
with you.
- No “use it or lose it”
rules.
[ back ]
|
