HSAs - FAQs

Here are some frequently asked questions regarding Health Savings Accounts:

Is an HSA account right for me?
If you and your family are relatively healthy an HSA might be a good option for you. Your annual health care expenses may be low enabling you to save for expenses that arise later. If your family requires a lot of medical care, an HSA may not be the right choice.

How does an HSA work?
It's like a personal savings account, but money can only be used to pay for qualified medical expenses.

Who can set up an HSA?
You can start an HSA through a bank or other financial institution. Some insurance companies offer this as an option or your employer may offer an HSA option.

To qualify for an HSA, you must be under age 65 and carry a high-deductible health insurance plan (premiums are typically lower). You can use your HSA to pay eligible expenses not covered by your plan.

What counts as a high-deductible health plan?
The IRS decides each year what amount qualifies as a high-deductible health plan. Check the Treasury's Web site (http://www.ustreas.gov/offices/public-affairs/hsa/).

Can you withdraw money from HSAs for non-medical expenses?
If you withdraw funds from an HSA for non-medical expenses before you turn 65, you have to pay taxes on it as well as a 10 percent penalty. You can still withdraw money tax-free from an HSA for medical expenses after you turn 65.

Where can I get more information?
I Googled “Health Savings Account” today and got 496,000 hits. Just be cautious and recognize that companies pay lots of money to land on the first page for one of these searches. If they paid money for it, they have something to sell…

In conclusion, this is a subject worth a few hours of your time. Research it carefully. Talk to your tax advisor. Talk to your banker. Make your decision carefully because you could save a lot of money or lose some money on this one.