An HSA (Health Savings Account) works similarly to a personal savings account and can be started by an employee, an employer, both, or an individual who is self-employed. An individual must be enrolled in an HSA qualified medical plan either through an employer group, or on the individual/family market to be eligible to open and contribute to the HSA. The healthcare savings plan operates just like a savings account. There has to be money in it in order for money to be withdrawn. And if an employee has an HSA at one job, and decides to switch to another job, that person’s account goes with them.
If you’re under the age of 65, an HSA is tax free, as is the money you withdraw in order to pay for medical expenses. Once you have reached age 65, the terms of the plan change, and you are permitted to withdraw the funds for any reason. Any money withdrawn for purposes other than managing healthcare expenses will be subject to taxes. All money used for healthcare purposes are not taxed, even after age 65.
- More direct control of costs for company health insurance benefit programs
- Reduced health insurance premiums on high deductible plans
- Reduced worker’s compensation and social security tax based on gross payroll
- Tax-free way to accumulate wealth and manage health expenditures
- Contributions not subject to withholding for income tax or employment taxes
- Funds may be used for a variety of medical services that may not be covered by traditional health plans
HSA Quick Facts