What is a Health Savings Account (HSA)?

Discover a Savings Account That Acts Like a Retirement Plan for Health Care

A Health Savings Account (HSA) is the best of a Flexible Spending Account and Health Reimbursement Arrangement combined. An HSA allows for contributions to be made on a pre-tax basis by an employee or their employer. These tax-deductible contributions can be used for current and future qualified medical and retiree health care expenses. Your employees decide the amount that should be deducted, pre-tax, from their payroll check. The main advantage of making pre-tax contributions is the FICA and Medicare Tax deduction, which amounts to a savings of 7.65% for you and your employees.

See How an HSA Can Help You Manage Increasing Health Care Costs

Health care savings accounts were created to help give control back to consumers and lower health care costs. The money can remain in an HSA account and earn interest (tax-free) until your employees need it... whether that is next month, next year or in 10 years. At the age of 65, the account can be used as retirement savings or continue to be used for medical expenses. Anyone can contribute to an employee's Health Savings Account... including spouses, relatives, and friends. Any unused balance in the account will be rolled forward to the next year.

How Does a Health Savings Account Work?

Check Out the Many Benefits of a Health Savings Account:

• Seamless integration through PrimePay payroll services
• HSA funding can come from employers, eligible individuals or both
• A Health Savings Account is a tax-exempt account owned by the employee/individual
• To be eligible, employees must be participating in a statutorily defined high deductible health plan (HDHP) and are not covered under any other health plan
• HSAs may be offered under an employer's cafeteria plan... allowing employees to contribute to an HSA with pre-tax salary deductions
• Unused contributions can rollover from year to year and are not lost if an employee moves from one employer to another

Employees may contribute the annual maximum amount to their HSA as determined by the IRS. The contribution limit for 2009 is $3,000 for individuals and $5,950 for families. Over time, if an employee doesn't have a lot of medical expenses and contributions are made regularly to their HSA, the account can accumulate significant assets that can be used for future health care expenses tax-free or used for retirement on a tax-deferred basis.