Health Savings Accounts

Many small to mid-size companies are converting their traditional company health insurance plans to Health Savings Accounts. A Health Savings Account (HSA) is set up to exclusively pay for qualifying medical expenses. A Health Savings Account must be used in conjunction with a high deductible health insurance plan which costs less than traditional plans with a lower deductible. Employees and the employer may contribute to the plan. If the company has a Cafeteria Plan, then contributions by the employee and the employer can be 100% tax free (not subject to federal, state, social security or Medicare taxes). Additionally, employees are eligible to contribute amounts to the account at any time during the year, up to annual limits. Participants in an HSA are not eligible to participate in Flexible Spending Accounts. Any amounts in an HSA account at year end are eligible to be rolled over to the following year and remain in the HSA account, tax free, as long as the participant remains in the HSA plan. If the participant terminates their participation in the HSA, any unspent funds in the HSA account can be rolled to an IRA and remain tax free.