Health Savings Accounts are individual savings accounts that you can use to pay for qualified health care costs tax free. An HSA provides you with a triple tax benefit. The money goes into the account tax free, comes out tax free and earns interest tax free. Plus, any unused funds rollover from year to year and continue to earn interest tax-free.
Benefits of HSA’s
HSA’s were created by the Medicare Prescription Drug Improvement and Modernization Act of 2003. This type of an account is a tax-free savings account that employees use in conjunction with a High Deductible Health Plan (HDHP) to pay for qualified medical, dental, and vision expenses.
Employees can use their funds to help pay for these qualified out-of-pocket expenses until their deductible is met. Once the deductible is met, the employee’s insurance coverage will begin to pay and any remaining qualified out-of-pocket expenses incurred may be reimbursed through the employees HSA.
HSA’s are 100% tax deductible. Money going in and money going out is not taxed as long as it is for qualified expenses. These expenses are similar to those that qualify for flexible spending arrangements.
HSA’s are owned by the individual, not the employer. If an employee leaves the district/employer they can take the HSA funds with them or roll it over into another HSA plan. The employee can also switch insurance companies and not have to switch HSA carriers, creating a convenient and hassle free situation for the employee.
The funds in a HSA will rollover from year to year and the neat thing about these accounts is they earn tax free interest! That’s right, tax free contributions, tax free growth, and tax free distributions! Account owners can also have an investment option based on their account balance.