Health Savings Account

 

 

What is a Health Savings Account (“HSA”)?
 

A Health Savings Account is a savings / checking 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 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 control the money in your HSA. How to spend the money is decided by you without relying on a third party or a health insurer.

 

Benefits of Health Savings Account (HSA):

 

Protection - Save money to pay for high or unexpected medical bills.

 

Affordability – A High Deductible Health Plan (HDHP) means lower insurance premiums.

 

Savings – The ability to deduct your contributions and the tax deferral of account earnings enables you to save.

 

Flexibility – Make contributions anytime during the year and you keep the money from year to year.

 

Portability – The account is owned by you, so you can take it where ever you go.

 

Annual Contribution Levels for HSAs:

§         For 2010, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,050.

§         For family coverage, the maximum annual HSA contribution is $6,150.

§         Catch up contributions for individuals who are 55 or older is increased by statute to $1,000 for 2010 and all years going forward.

§         Individuals who are eligible individuals on the first day of the last month of the taxable year (December for most taxpayers) are allowed the full annual contribution (plus catch up contribution $1000 if 55 or older by year end), regardless of the number of months the individual was an eligible individual in the year. For individuals who are no longer eligible individuals on that date, both the HSA contribution and catch up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.