Health Savings Accounts Information And Facts
Rhonda Strump

Defined Tag: Health Savings Accounts.

A health savings account, or HSA, is a tax deferred savings account that is available to US citizens enrolled in a high deductible health plan. The funds added to the account are not subject to federal income tax at the time of deposit and are to be used for qualified medical expenses. There are some things you need to know.

People under the age of 65 that are enrolled in a qualifying High Deductible Health Plan (HDHP) can open an HSA. High Deductible means until you have accumulated at least the minimum deductible, listed below, of out of pocket medical expenses that year for yourself as an individual or your family the policy will not begin. Other disability, dental, vision and long-term care is allowable. You may not be covered by another policy that isn't a qualified high deductible health plan.

A high deductible health plan is one that meets the following criteria as of the 2008 tax year:
1 Minimum deductible for a single person $1100
2 Minimum deductible for a family $2200
3 Max out of pocket expenses for a single person $5600
4 Max out of pocket expenses for a family $11200

If you meet the above requirements, you can open a health savings account plan at any time. The maximum amount you may deposit for the 2007 tax year is $2850 for a single and $5650 for a family. All deposited funds are the property of the policyholder. Deposits may be made through employer payroll deduction or by any individual.For taxpayers age 55 or over, an additional $800 may be deposited.

These funds may be withdrawn penalty free for qualified medical expenses incurred after the HDHP deductible is met. Any funds not withdrawn or used within the year are carried over to the next year. This is where an HSA offers the benefit of compounding interest that is accrued tax free. Withdrawals can be made several ways. Some HSA’s include a debit card; some include checks while others utilize a reimbursement program similar to many medical insurance policies.It must be noted that the policyholder is required to keep adequate documentation of qualified medical expenses paid for with HSA funds. Otherwise, the IRS can deem withdrawals unqualified and penalize the policyholder. Withdrawals made for non-medical reason are subject to income taxes and a 10% penalty. This penalty is waived for those over the age of 65 or persons disabled at the time of the withdrawal.

Qualified withdrawals include coinsurance and deductibles as well as other expenses not covered by standard medical insurance like dental, vision, durable medical equipment and chiropractic costs.

How and where to open an HSA:
If you decide to open an account on your own, you can find a list of Health Savings Account Providers offering eligible plans in your state easily online. Policies from different HSA providers in most states can be researched and compared on the internet with just the click of a mouse. Or, you can locate a local agent who knows what is available in your area.

If you are opening an account through your employer, you might have seen an HSA eligible option during open enrollment. If not, talk to your benefits manager and ask if HSA plans will be included in the future. Choosing an HSA could significantly lower your premiums and your employer may fund part of the account for you, possibly even offering a 401(k) style match.

Whatever you do, be sure you do the homework and know what you are doing. Should you have questions or need help don't hesitate to contact a financial advisor or insurance agent. Also, keep the documentation of expenses paid for through withdrawals from the account. A Health Savings Account can be a wise investment and hedge for your future.

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