What is an HSA?
An HSA is a tax-exempt Health Savings Account (similar to an IRA) which can only be opened when paired with an HSA qualified health plan. The account and all funds in the account are owned by the employee.
Why an HSA?
- Contributions to an HSA can be made by anyone and are either made pretax or are tax deductible.
- Money taken out of your paycheck by your employer for the account isn’t taxed.
- Money put into the account that’s already been taxed (for example, money that was a gift), is tax deductible.
- Any balances in the account are not taxed when used to pay for qualified medical expenses. Additionally, interest on the HSA grows tax deferred.
- Note: Tax advantages vary by state.
- Employees can open an HSA in any month and still have the ability to make the maximum annual contribution to the account, regardless of the effective date. Restrictions apply. Consult your financial advisor.
- Funds roll over at the end of each year and belong to the employee, even when changing employers or switching to a different high-deductible health plan.
- Employees select how their HSA funds are spent and invested. Funds can also be accumulated to enhance a retirement portfolio.
An HSA qualified health plan can be paired with an HRA: special considerations may apply.
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