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What is a HSA?
Think of HSAs as medical IRAs. They
are tax-free accounts that individuals with an HSA-compatible
high-deductible insurance policy can fund and use to pay for medical
expenses. Because they are tax-advantaged and balances can accumulate
over time, HSAs can also be used to accumulate wealth. In addition,
HSAs are owned by the individual account holder and therefore
portable.
Since inception in January 2004, HSAs are quickly gaining in popularity
among individuals and employers. Key facts from several recent
studies indicate strong interest:
- Of employers surveyed, 73% said they were
very or somewhat likely to offer HSAs by 2006. Among
those employers, 21% said employees are inquiring about HSAs.
- Among larger employers, 42% of employees
expressed interest.
- Among small business owners, 73% found
the concept of HSAs appealing
- HSAs appeal to all income groups. A study
by e-Health Insurance shows nearly 50% of HSA purchasers make
less than $50,000
Who is eligible for a HSA?
To be eligible for an HSA, the subscriber must be covered only by
an HSA compatible, high deductible health plan and must not be listed
as a dependent on another person's tax return. Individuals age 65
and older are eligible to open an HSA as long as they have not elected
Medicare, Parts A & B.
A high deductible health insurance plan is one with an annual deductible
of at least:
- $1,200 for individuals
- $2,400 for families
- In 2012, annual out-of-pocket expenses
cannot exceed $6100 for individuals or $12100 for families
Who can contribute & how much is allowed?
Individuals and employers can contribute to HSAs. The maximum
annual contribution
amount for 2012: $3,100 for individuals and $6200 for families plus a "catch-up" contribution of $1000 for those employees age 55 or older.
What are the investment options with a HSA?
HSA account holders can invest contributions in passbook savings,
money market funds, mutual funds, stocks and bonds.
How can funds be used?
HSA funds can be used to pay for a variety of health care services,
including many that are not traditionally allowed under other
plans (examples: dental and vision care services, long term care
insurance premiums and medical insurance premiums during periods
of unemployement).
For a complete list, click here for HSA
Facts or visit the Internal
Revenue Service's Publication 502 (2004), Medical and Dental Expenses.
HSA Calculator
Compare the advantages of an HSA to your current
plan with our HSA calculator. Click here to open the calculator.
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