HEALTH SAVINGS ACCOUNTS
What is a Health Savings Account?
A Health Savings Account (HSA) is an innovative new option to help you pay less for health care and save money. Participants who establish HSA accounts receive significant tax advantages and affordable health care coverage through a high deductible, HSA qualified health plan. Typically, an HSA qualified plan costs much less than a traditional low deductible health plan.
An HSA has two simple components.
- The first component is the HSA qualified health insurance plan.
- The second component is a unique savings or investment account. Your account funds can be used to pay for healthcare before you reach your health insurance deductible. Account funds can also be used to pay for other expenses such as dental, vision, orthodontics, prescription drugs, and long term care expenses -- all tax-free. These 1099 tax-deductible funds deposited into your HSA can also accumulate tax deferred and do not need to be used to pay for qualified medical expenses.
Background:
Section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, added section 223 to the Internal Revenue Code to permit eligible individuals to establish Health Savings Accounts (HSAs) for taxable years beginning after December 31, 2003.
The major differences of the Health Savings Account (HSA) and Medical Savings Accounts impacting the small group market are:
- Contributions to the HSA account CAN be shared by both the employer and the employee
- The HSA account can be funded up to 100% of the federal limit
BRS will continue to offer the same Blue Cross & Blue Shield of Vermont QUALIFIED plans.
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HSA Main Points:
- Significant savings of health insurance premium.
- Make your own health care decisions.
- Contributions to your HSA account are tax deductible, in the calendar year contributions are made.
- Funds in your HSA earn interest and grow tax deferred
- HSA funds can be used for qualified medical expenses, tax-free for life.
- HSA funds can be invested in mutual funds
- At age 65+, unused HSA funds can be withdrawn for non-medical reasons without penalty. (Similar to an IRA, ordinary income tax guidelines will apply).
