HSAs

Health Savings Accounts (HSAs) are established exclusively for the purpose of paying qualified medical expenses of account beneficiaries who are covered under a high deductible health plan (HDHP). Contributions to the HSA can be made by the employer, the employee, or both. Like an Individual Retirement Account (IRA), an HSA is generally exempt from tax.

Although the legislation enabling HSAs is fresh, the concept of tax preferred savings accounts (such as 401(k)s) has been around for years. With employers ever-pressed by rising health care costs, the time has come for health coverage savings accounts.

Unlike with an HRA, under an HSA, both employers and employees may contribute on a tax-preferred basis. Beyond their tax-deductible nature, other key aspects of HSAs are also decidedly consumer-friendly.

HSAs allow funds portability for employees... unused dollars can be rolled over if the consumer changes employment.

Employees enjoy new alternatives for retirement planning, since unused balances can be carried forward from year to year.

The flexibility of any HSA fund allows employees to spend dollars on the qualified medical expense services they want to use.

The ability to even make withdrawals to pay for non-medical expenses (subject to income tax and an additional tax penalty of 10%).