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A Health Savings Account (HSA) is a tax-free savings account that works like an IRA. and it's linked to a high-deductible health insurance plan. Individuals, their employers, or both, can contribute funds each year to the HSA. Contributions, interest and investment earnings are tax-free. The account owner can use the funds for "qualified medical expenses," or simply let the funds grow tax-free through earnings.
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| HSA Benefits for Individuals |
Security - Your high-deductible insurance and HSA protect you against high or unexpected medical bills.
Affordability - You should be able to lower your health insurance premium by switching to a health insurance coverage with a higher deductible. The funds you contribute into your HSA also qualify as a tax deduction on federal income taxes.
Flexibility - You can choose to use the funds in your account to pay for current medical expenses, or save the money for future needs.
Savings - You can grow the money in your account through investment earnings to pay for future medical expenses.
Ownership - Funds remain in the account from year to year, just like an IRA. There are no "use it or lose it" rules for HSAs.
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| Benefits for Employers |
Simplicity - HSAs are self-administered by employees, so you can rest easy knowing that the employees are taken care of.
Employee Satisfaction - Having a Health Savings Account option will enhance your benefits package, attracting prospects and helping to retain current employees.
Choice - You can contribute in a lump sum or any frequency you choose to your employee's HSA; there are no minimum contribution requirements.
Affordability - HSAs can save small business owners up to 40 percent in health care costs through lower premiums.
Tax Advantages - Contributions to an HSA by an employer are exempt from payroll taxes.
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| Commonly Asked Questions about Health Savings Accounts |
Q: Once I open my Health Savings Account, what can I do with the funds? Can I move them at will?
A: Account owners have full control over the account, and can make all decisions about the HSA, including:
- How much money to put into the account & whether to invest any of the money in the account
- Which investments to make
- Which medical expenses to pay from the account
Q: What happens to my HSA if I lose my job?
A: Accounts are completely portable, so you can keep your HSA even if you change jobs, change your medical coverage, become unemployed, move to another state, or change your marital status.
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- All information on this web page is provided by the Small Business Administration. Please visit the SBAwebsite to learn more about the benefits and rules of Health Savings Accounts.
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