Health Savings Account (HSA) All About HSA’s (Source: US Treasury Dept)

A Health Savings Account (HSA) combines a tax-deferred savings account and a high deductible health insurance policy (HDHP) which is considered ‘Qualified’ by the IRS. The savings account is similar to an IRA which may accumulate interest and is owned by the employee of the sponsoring organization. The high deductible health insurance policy is subject to minimum and maximum deductibles that are set by the IRS for the given year (see the table below for the year 2010).

The savings account can be used to pay for medical, dental, prescription drugs, vision as well as other IRS qualified medical expenses (see the IRS list of qualified medical expenses).

Health Savings Account (HSA) Advantages:

The interest accumulates tax deferred and can be withdrawn tax-free subject to IRS terms.

Insurance premiums are generally much less expensive than fully insured plans.

The contributions are tax deductible.

The funds can accumulate in your HSA and carried over to the next year.

HSA funds can be used for qualified medical expenses tax free (see the IRS list of qualified medical expenses).

There may be investment options associated with an HSA similar to other investments.

Medical expenses within the deductible limit are negotiated on a wholesale basis.

Prescription drugs costs are often subject to discount pricing.

After the age 65, HSA funds taken out for purposes other than medical expenses are taxed as regular income.

HSA Contributions:

* Annual Deductible Limit - Contributions towards the allowable annual HSA allotment are 100 % tax deductible.

The maximum contribution that can be made to an HSA in 2012 for employees with single coverage will be $3,100 up from $3,150 in 2011. The maximum HSA contribution for those with family coverage will rise to $6,250, up from $6,150 in 2011 (see table below):

Year 2012	Minimum Deductible	Maximum Out-of-Pocket	Contribution Limit	55+ Catch-Up Contribution
Single	$ 1,200	$ 6,050	$ 3,100	$ 1,000
Family	$ 2,400	$ 12,100	$ 6,250	$ 1,000