What is a Health Savings Account?
An HSA is a tax-advantaged person savings or investment account intended for payment of medical expenses that may be established in combination with an HSA- eligible high deductible health plan.
An HSA has two main components:
A high deductible health insurance plan – for 2009 the minimum individual deductible is $1150 and the minimum family deductible is $2300.
A separate account where funds are deposited and withdrawn to pay for qualified medical expenses. Funds can be deposited by the employer, the employee/account holder and/or family members. The funds deposited by the employer are fully vested to the employee when they are received. There is no "use it or lose it" provision.
HSA plans have a component that encourages employees to compare prices for some services or prescription drugs. The emphasis is on promoting competition within the healthcare market.
Maximum funding limits for HSA plans for 2009 is:
$3000 for an individual
$5950 for a family
"Catch-up" contributions are allowed for individuals 55 and older.
Allowable medical expenses for HSA plans can be found in IRS Publication 502
If an employee leaves the account is fully portable
Click here for the US Treasury Department Pamphlet on HSA plans (pdf)
