Health savings account

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Health Savings Account

A form of health insurance in which a policyholder makes tax-free contributions to a special account that can be used for present and future medical expenses. Health savings accounts may be purchased individually or through an employer, but, in order to qualify for one, a policyholder must have an insurance policy with a high deductible. A health savings account may be used in order to offset the high deductible on one's other insurance policy. One does not pay taxes on withdrawals from a health savings account, unless one withdraws funds for a non-medical reason, in which case there may also be a penalty, depending on the age of the policyholder.

Health savings account (HSA).

A health savings account is designed to accumulate tax-free assets to pay current and future healthcare expenses. To open an HSA, you must have a qualifying high deductible health plan (HDHP) either through your employer or as an individual.

If you have an employer's plan, your contributions to the HSA are made with pretax income, and your employer may contribute as well. If you have an individual plan, you may deduct your contributions in calculating your adjusted gross income (AGI).

Congress sets an annual limit on the amount you can contribute to an HSA, which you set up with a financial institution such as a bank, brokerage firm, insurance company, or mutual fund company that offers these accounts.

No tax is due on money you withdraw from the HSA to pay qualified medical expenses such as doctor's visits, hospital care, eyeglasses, dental care, and medications for yourself, your spouse, and your dependants.

Any money that's left over in your HSA at the end of the year is rolled over and continues to accumulate tax-free earnings, which you can use for future healthcare costs.

Once you're 65, you can use the money in the HSA for non-medical expenses without paying a penalty, but you'll owe income taxes on those withdrawals. If you are younger than 65, you can also spend from your HSA on non-medical expenses, but you'll owe income taxes plus a 10% tax penalty on the amount you take out.

References in periodicals archive ?
By expanding HSAs to allow participation among Medicare enrollees, more seniors will have the option to reap a potentially lucrative tax break.
McKechnie, executive director, HSA Council, at the American Bankers Association, says, "Every day, 10,000 people become eligible for retirement, and some portion of those people have an employer HSA and want to keep contributing to it because they're going to work longer.
This provides employers that sponsor HSA qualifying insurance plans with unique insights that enable them to develop better targeted and personally relevant communications to help employees save more for their health care expenses and make better health care decisions.
Chad Wilkins, executive vice president of Webster and president of HSA Bank, will present at the conference from 8:45 a.m.
At the end of 2016, more than 90 percent of HSAs held funds that rolled over to the next year.
(2004) assessed the fit of the Dartmouth HSAs for pediatric patients in California and found that they were not appropriate for all age groups and service types.
While conventional strategies typically call for making employer-sponsored 401(k) funding a client's top priority, many clients may wish to reconsider this strategy and consider the potentially significant benefits of moving health savings account (HSA) funding to the top of the list.
Now that high deductibles and HSAs are becoming more common, I suspect a lot of employers are trying to educate themselves and their employees about what is a very different way of thinking about health insurance.
Heinrich argues that the AHCA proposal to increase the maximum HSA contribution limit would do little good for ordinary families, because ordinary families have no way to max out their HSAs, even under the current limits.