Health Savings Accounts

What is an HSA?

The concept of HSAs combines an affordable qualified HDHP and a tax-favored HSA. The combination results in savings through lower healthcare premiums and a reduction in taxable income. The HSA grows tax-free, and if the HSA funds are used for eligible medical expenses, the account holder never pays taxes on those funds.

Before an HSA can be established, a qualified HDHP must be in place to cover the individual or family. The Internal Revenue Service (IRS) determines the guidelines for an HDHP each year. The current requirements of an HDHP are as follows:

2006 2007 Minimum Deductable Minimum Deductable $1,050/single $2,100/family $1,100/single $2,200/family Maximum Out-of-Pocket Maximum Out-of-Pocket $5,250/single $10,500/family $5,500/single $11,000/family

Any individual/employee is able to have an HSA so long as their HDHP meets the IRS requirements to be a qualified HDHP.

HSA Advantages:

HSAs offer unique benefits:

		Lower premiums with a HDHP over a traditional HMO or PPO plan
		Flexibility in funding and contributions
		Contributions are 100% tax-deductible
		Tax-free distributions for various medical services and expenses
		Funds grow on a tax-deferred basis
		Funds roll over from year to year, and funds used after age 65 are able to be used tax-free eligible medical expenses or at the normal tax rate for any other reason
		The HSA is portable and owned by the account holder
		Over the life of an HSA, an account holder could save thousands of dollars in taxes.