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Heatlh Savings Accounts

What is an 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. 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 an 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:

  • $1250 for individuals

  • $2500 for families

  • Annual out-of-pocket expenses cannot exceed $6350 for individuals or $12700 for families

  • $1300 for individuals

  • $2600 for families

  • Annual out-of -pocket expenses cannot exceed $6450 for individuals or $12900 for families

Who can contribute & how much is allowed?
  • Individuals and/or employers can contribute to HSAs.

  • The maximum annual contribution amount for 2014: $3300 for individuals and $6550 for families.

  • The maximum annual contribution amount for 2015: $3350 for individuals and $6650 for families

  • An additional $1000 catch up contribution is permitted for individuals age 55+.

What are the investment options with an 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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