Definitions for "Health savings accounts"
Keywords:  hsa, unused, deductible, spent, ira
A tax-free account that can be used by employees to pay for qualified medical expenses. Contributions do not have to be spent the year they are deposited. Money in the account earns interest and accumulates tax free, so the funds can be used now and in the future. If an employee leaves the job, he or she can take the account with him or her and continue to use it to pay for qualified healthcare expenses. To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance (does not apply to specific injury insurance and accident, disability, dental care, vision care, long-term care), is not eligible for Medicare and can't be claimed as a dependent on someone else's tax return.
An HSA is a tax-advantaged account created for the benefit of an individual covered under a high-deductible health plan. To be eligible, an individual must be covered by a "high-deductible" health plan (as defined by the HSA statute), and not be eligible for other general medical coverage. Contributions to the HSA can be made by the employer, the employee or both. Contributions are deductible if made by the employee, and are excludable from income and wages (for employment tax purposes) if made by an employer. Earnings grow tax-free and distributions for qualified medical expenses (defined under Section 213(d) of the Internal Revenue Code) are tax-free. Unused HSA funds can be carried over from year-to-year, are portable, and can be used into retirement.
These health insurance plans provide incentives for individuals to replace high premium, low-deductible policies with affordable, high deductible catastrophic coverage. Premiums for this coverage are lower and the savings may be used to fund a tax-preferred medical savings account from which you can pay on a pre-tax basis for qualified medical care and expenses, including annual deductibles and co-payments.