Health Savins Accounts

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Health Savings Accounts (HSA)

HSA Health Savings Accounts have two components:
A lower cost, High Deductible health insurance product to cover your larger medical expenses, and a tax favored health savings account.

Tax Savings - An HSA provides you triple tax savings:

(1) tax deductions when you contribute to your account;

(2) tax-free earnings through investment; and,

(3) tax-free withdrawals for qualified medical expenses.

The money you save on premiums can be put into your tax favored savings account, and then withdrawn to help pay your deductible or pay for other qualified medical expenses. Living expenses -- after age 65 -- pay ordinary income taxes. Health premiums when you're between jobs.

Portability - Accounts are completely portable, meaning you can keep your HSA even if you:

Change jobs
Change your medical coverage
Become unemployed
Move to another state
Change your marital status

Ownership - Funds remain in the account from year to year, just like an IRA. There are no "use it or lose it" rules for HSAs.

You own your savings account. Your unspent health care savings roll over year after year. NEVER taxed when used for qualified medical expenses. Your investment is a gross income tax deduction each year. This will lower your yearly income and become a tax advantage for yourself.

According to the Department of Treasury web site:

You can use the money in the account to pay for any "qualified medical expense" permitted under federal tax law. This includes most medical care and services, and dental and vision care, and also includes over-thecounter drugs such as aspirin.

You can generally not use the money to pay for medical insurance premiums, except under specific circumstances, including:

Any health plan coverage while receiving federal or state unemployment benefits.
COBRA continuation coverage after leaving employment with a company that offers health insurance coverage.
Qualified long-term care insurance.
Medicare premiums and out-of-pocket expenses, including deductibles, co-pays, and coinsurance for:

Part A (hospital and inpatient services)
Part B (physician and outpatient services)
Part C (Medicare HMO and PPO plans)
Part D (prescription drugs)

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You can use the money in the account to pay for medical expenses of yourself, your spouse, or your dependent children. You can pay for expenses of your spouse and dependent children even if they are not covered by your HDHP.
Any amounts used for purposes other than to pay for "qualified medical expenses" are taxable as income and subject to an additional 10% tax penalty. Examples include:

Medical expenses that are not considered "qualified medical expenses" under federal tax law (e.g., cosmetic surgery).
Other types of health insurance unless specifically described above.
Medicare supplement insurance premiums.
Expenses that are not medical or health-related.
After you turn age 65, the 10% additional tax penalty no longer applies.
If you become disabled and/or enroll in Medicare, the account can be used for other

You may even invest your money in a variety of mutual funds with the potential for even greater long-term growth (Minimum balance required). A bank account will be set up for paying medical expenses. A debit \ credit card will be given to you and with that you can pay expenses.
Any funds withdraw for non-qualified medical expenses will be taxed at your income tax rate plus 10% tax penalty.
Federal law states that annual contribution limits are $3,00 for singles/$5,950 for families for 2009.
Deposits are $25 minimum and set up on the same payment plan as premiums for the health insurance.

What expenses are qualified for reimbursement from my HSA?
A list of these expenses is available on the IRS Web Site irs.gov . Defined by Section 213(d) of the Tax Code. HSA distributions used for any purpose other than the qualified medical expenses listed will be taxable, and the appropriate tax rules will apply.

Are lump-sum deposits permitted?
Yes. However you must continue your $25 monthly minimum deposit. Lump-sum deposits should be sent directly to your HSA bank.

Who can get an Health Savings Account (HSA)?
Anyone that uses a High deductable Health Plan (HDHP) For 2009, the minimum deductible for HDHPs increases to $1,150 for self-only coverage and $2,300 for family coverage.

* Article Cube HSA
* United States Department of Treasury

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If your are considering retirement, you will need to have about $225,000 to cover your out-of-pocket medical costs. That's how much a typical couple retiring in 2008 will spend on prescriptions, deductibles and Medicare premiums, according to the latest study by Fidelity Investments.

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