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September 14, 2010
Health Savings Accounts: What You Need to Know Before You Enroll
Employers are moving away from full-replacement benefits toward offering high-deductible health plans to save on their benefit expenses. That makes it more likely that you'll need to understand how to make the most of a Health Savings Account sooner rather than later.
Health Savings Accounts are both savings and investment accounts for medical expenses. Health Savings Accounts work with a high-deductible health plan that typically carries a minimum deductible of $1,200 for an individual and $2,400 for a family.
Here's how it typically works. You enroll in a high-deductible health insurance plan and open a tax-free Health Savings Account at most any bank. You or your employer can contribute tax-free to this savings account, and you can use the funds to help with out-of-pocket medical expenses to offset the high deductible.
If you change jobs or lose your job, all the funds are yours to keep. The balance will keep rolling over from year to year. That's a big difference between an HSA and a Flexible Spending Acccount (FSA). With an FSA, you lose everything still in your account at the end of the year.
Since high-deductible insurance plans seem to be here to stay, why not make the most of their lower premiums and partner them with a health savings account that gives you tax-free interest while making healthcare expenses tax-deductible? HSA for America has a virtual online library that can save you a lot of time by showing you how to set up everything.
Posted by Wiley Long at September 14, 2010 10:52 AM