Health Savings Accounts
When considering health care benefits, you may want to look at the Health Savings Account (HSA). This portable health care account rolls forward and can be offered through a Section 125 Plan.
HSA participants must be covered by a high-deductible health plan (HDHP). Employers of any size can set up an HSA plan, and contributions may be made through the employer's cafeteria plan.
HSAs reimburse the same expenses as a health flexible spending account (FSA), without the "use-it-or-lose-it" consequences when the plan year ends or the participant changes jobs. In addition, HSA earnings accumulate tax free.
HSA contribution limits are as follows:
- For single coverage, a maximum of $3,400
- For family coverage, a maximum of $6,750
- Individuals age 55 and older can contribute an additional $1,000 on a pre-tax basis.
If funds accumulated in an HSA are used for anything other than eligible medical expenses, the account beneficiary is required to pay taxes, plus a 10% penalty. However, there is no penalty for distributions following disability, death, or retirement (at Medicare eligibility age).