The Congressional Research Service (CRS) released a report addressing Health Savings Accounts (HSAs). The report summarizes the HSA rules, including eligibility to participate, qualifying health insurance, contributions, withdrawals, and tax advantages.
A health savings account is a tax-favored trust/custodial account that individuals may use to save and pay for unreimbursed medical expenses such as copays, deductibles, coinsurance and services not covered by insurance. A person must be enrolled in a high deductible health plan to be eligible for an HSA.
An HSA has tax advantages. An individual’s contributions to the HSA are made on a before-tax basis through a cafeteria plan or tax deductible if not made through an employer’s plan. Employer contributions to an HSA are excluded from taxable income and from Social Security, Medicare and unemployment taxes. Earnings in the HSA are tax exempt and withdrawals are not taxed if used to pay qualified medical expenses.
An HSA account is an individual account and the account holder keeps access to the account if they change employers, insurers or if they become ineligible to contribute to the HSA in the future.
HSAs are a well received employee benefits. For a copy of the CRS report, click here.
