The HSA belongs to the individual employee on whose behalf it is opened, and is portable to the extent an employee changes jobs, becomes unemployed, etc. HSA funds used to pay for eligible medical expenses are not taxed! Employees can make pre-tax or tax deductible HSA contributions, subject to specified maximums. Employer HSA contributions are exempt from payroll related taxes. Funds remain in the account holder’s control, and NEVER revert to the employer if unused.

In order to establish an HSA and take advantage of the tax savings, a qualified high deductible health insurance plan must be established. The high deductible plan, usually significantly less expensive, and much easier to understand than traditional health plans, acts as a safety net and covers eligible expenses that are beyond the employee's reach.

ADVANTAGES
• Tax deductibility of HSA contributions [Note: contributions are pre-tax or tax deductible.]
• Reduce insurance premiums through the accompanying qualified high-deductible plan.
• Tax-free interest on HSAs account fund build up.
• Funds to pay for qualified medical expenses (including many expenses not covered by traditional insurance plans) through the HSA account.
• Funds available to pay for health insurance in between jobs.
• Funds can be used to supplement retirement without penalty at age 65. Funds can also be used to purchase Long Term Care insurance.
• Generally lower health care out of pocket expenses
• Personal freedom of choice of healthcare provider with lower non network penalties.

HSA CONTRIBUTIONS
• Contributions are limited to 100% of the annual deductible, which for 2007 is $2,850 for INDIVIDUALS and $5,650 for FAMILIES.
• Excess contributions are subject to a 6% excise tax plus ordinary income tax.
• Contribution limits increase each year according to federal law.
• Account holders age 55 and older are allowed to make “catch up” contributions of an additional $800 per year (2007), increasing by $100 each year until 2009 when it will be $1,000.

SUMMARY
HSA’s are the result of the evolution of Medical Savings Accounts (MSA’s) which became available in 1997. Health Savings Accounts (HSAs), which replaced MSAs, are available to virtually anyone, and represent one of the few tax breaks available today for small businesses and the self-employed. There are several advantages of the HSA over other tax favored spending arrangements such as Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs). Key to effective introduction of HSAs and the required high deductible plan is a knowledgeable and experienced benefits broker, who can not only educate the employers, management, owners, etc., but more importantly, the employees who will benefit from this exceptional healthcare financing solution.