Health Savings Accounts (HSAs)

A Health Savings Account (HSA) is a tax-exempt account created exclusively to pay for the qualified medical expenses of the account holder and his or her dependents. To qualify for an HSA, individuals must have a High Deductible Health Insurance, meaning a plan that requires a certain amount of money up front before coverage kicks in.

Unlike other medical savings accounts, the money in an HSA does not have to be used in the same calendar year in which it was saved, allowing the account holder to save for medical expenses down the road. And the tax advantages are substantial. Employers with a cafeteria plan receive FICA tax savings while their employees’ contributions through the cafeteria plan are pre-tax.