| |
 |
Tipsheets
Health Savings Accounts
(HSAs)
A health savings account (HSA) is an alternative to traditional
health insurance. HSAs allow employees and/or employers to set aside
pre-tax income to cover out-of-pocket costs such as deductibles, co-pays, or
coinsurance. HSAs must be combined with a
qualified high-deductible health plan (HDHP)
with a minimum deductible of $1,050 for an
individual or $2,100 for a family. Although there is no maximum
deductible for an HDHP, total costs to the
insured cannot exceed $5,250 for an individual or $10,500 for a family.
HSAs are owned by the employee and go with the
employee if he/she changes jobs. Unspent money in an HSA rolls over from year to year.
What HSAs Offer Employers
HSAs offer companies of
any size an alternative to traditional health care. Businesses may deduct
contributions to HSAs and their accompanying
HDHP, just like traditional health insurance.
- HSAs offer employers
with limited funds the ability to purchase an HDHP for employees and encourage
them to make regular tax-free contributions to an HSA to fund their health care costs up to the
deductible.
- Even though an employer is not required to
contribute to an employee's HSA, if the employer
does make an HSA contribution, it must make the
same contribution for all employees.
- Provided the money is spent on qualified medical
expenses, defined in section 213(d) of the Internal Revenue Code, there are
federal and state income tax savings and payroll tax savings (FICA) for an
employer.
What HSAs Offer Employees and Self-Insured
Individuals
HSAs offer employees or
purchasers of individual health plan policies:
- Affordability—HSAs generally cost less than traditional health plans
because the underlying HDHPs often cost less. Even with employees contributing
to their HAS, the overall cost of an HS/HDHP plan will often be less than a
traditional health insurance plan.
- Flexibility—An indivdual can
use the money in his or her HSA to pay for
current medical expenses (including those not covered by insurance) or save the
funds for future needs such as:
- health insurance
or medical expenses if the person becomes unemployed
- Medical expenses after retirement (but before
Medicare)
- Out-of-pocket costs when covered by
Medicare
- Long-term care expenses and insurance
- Savings—The money contributed
to the account can be invested to increase the individual's earnings.
- Control—The individual
decides:
- How much money to put into the
HSA
- Whether to save the HSA funds for future expenses or use them to pay
current medical expenses
- Which medical expenses to pay from the
account
- Which company will house the account
- Whether to invest any of the money in the
HSA
- Which investments to make
- Tax Benefits—HSAs provide triple tax savings:
- Contributions to the account are tax
deductible
- Earnings through investments are tax-free
- Withdrawals for qualified medical expenses are
tax-free
- Portability—The individual
keeps the HSA even if he or she:
- Switches jobs
- Changes medical coverage
- Moves to another state
- Becomes unemployed
- Changes marital status
- Ownership—Money contributed
to the HSA belongs to the account holder.
Back to top
|
