Health Savings Account

Health Savings Account or HSA is a type of medical savings account that is available to US taxpayers who are under a High Deductible Health Plan. To qualify, the minimum deductible amounts to $1,100 per individual and $2,200 per family. This account acts like an insurance and savings deposit in one. It prepares the depositor for any unexpected medical costs. This savings account consists of contributions that are made by either an employer or his employee. Health Savings Accounts is a part of Medicare bill that is signed by then President Bush on December 8, 2003. It primarily aims to aid individuals to save for any future medical and retiree expenses tax free.

Health Savings Accounts are tax benefited therefore allowing people to save more money in anticipation for any possible health expenses that may be incurred in the future. This means that the deposits placed in HSAs are deductible from the individual's income taxes therefore reducing the tax burden and earning more money. With this, people with HSAs maximize their tax benefits by depositing more funds in their HSAs. Furthermore, depositors can save themselves from paying high cost premiums of traditional health care insurance.

Health Savings Account has other several features. Depositors can also use their HSAs for medical services provided from foreign countries. Dental and Vision care that are not cosmetic in procedure are qualified medical expenses. HSA funds may also be used to pay for medical expenses of the family members of the depositor. HSAs are portable which means even if the depositor changes job, his accounts will still remain. It also has a better functionality than IRAs and 401(k)s. Depositors who are already enrolled in an HMO or a PPO may switch to an HDHP and would be saving up to 50% of the premiums. Depositors who cease to have an HDHP coverage may continue to use the money in their HSAs tax free. The funds in the accounts automatically roll over and will remain intact until used. However, they may no longer be eligible to contribute during the months when they are not covered by an HDHP. If the depositors regain the plan coverage, they may continue to contribute.

HSAs are not health insurance policies. They are considered addendums or supplements to an HDHIP or high deductible health insurance policy. To avail of this account, depositors should look for plans that are available locally, such as in banks and investment fees. Employers can also provide this type of account, so it's best to communicate with them. Individuals can apply any time while employers can only avail of the HSAs during open enrolment periods. HSAs can also be opened by any custodian or trustee.

A final reminder: depositors will be charged with a ten percent penalty if they withdraw funds from their HSA for reasons other medical expenses. This will apply until the depositor reaches the age of 65. And beyond that age, depositors won't be paying for penalties but will still be mandated to pay for taxes.