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A Health Savings Account (HSA) is a tax-favored savings account that is used in conjunction with an HSA-compatible high-deductible health insurance plan to make healthcare more affordable and to save for retirement. By offering HSA-compatible high-deductible health insurance plans to their employees, employers may be able to reduce their monthly premiums since the premium for these plans are typically lower than a PPO or HMO plan with a lower deductible.
HSAs are similar to IRAs, but even better:
Pre-tax money is deposited each year into an HSA and can be easily withdrawn at any time with no penalty or taxes to pay for qualified medical expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.
Any HSA funds not used each year remain in the account, and earn interest tax-free to supplement medical expenses at any time in the future.
Like an IRA, the account belongs to the employee, not the employer. But unlike an IRA, an employer CAN contribute to an HSA.
For more details on HSAs, please click here.
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