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 PayMaster > Services > Insurance > Health Savings Accounts
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Through our banking partner, PayMaster can provide your company with a Health Savings
Account (HSA). A HSA is a portable savings account that allows your employees to set
aside money for health care expenses tax-free.
In order for your employee to qualify for a HSA they must have a high deductible health
insurance plan. The minimum deductible to qualify in 2010 is $1200 for individuals and
$2400 for families. (In 2011 and beyond, the minimum deductable will remain at $1200 for
individuals and $2400 for families, subject to annual cost-of-living adjustments). High
deductible health plans usually cost less than traditional health care insurance, so the
money that you save on insurance can therefore be put into your Health Savings Account.
Money in an HSA rolls over from year to year (there is no “use it or lose it”). Your HSA
is owned by you, not your employer, and you control the money in your HSA. You decide how
to spend the money and what types of investments to make with the money in the account in
order to make it grow. Many people compare an HSA to a "medical IRA".
Contributions to HSAs by individuals are tax deductible, even if the taxpayer does not
itemize. Contributions by an employer are not included in the individual's taxable
income. Individuals, their employers, or both can contribute tax-deductible funds each year
up to the amount of the policy's annual deductible, subject to a cap of $3,050 for individuals
and $6,150 for families in 2010. (In 2011 and beyond, the contribution limits will remain
at $3,050 for individuals and $6,150 for families, subject to annual cost-of-living
adjustments). In addition, individuals over age 55 can make extra contributions to their
accounts of up to $1,000 and still enjoy the same tax advantages.
HSA funds can be used to cover the health insurance deductible and any co-payments for medical
services, prescriptions, or products. In addition, HSA funds can be used to purchase
over-the-counter drugs and long-term care insurance, and to pay health insurance premiums
during any period of unemployment. The interest and investment earnings generated by the
account are not taxable while in the HSA. Amounts distributed are not taxable as long as
they are used to pay for qualified medical expenses.
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