Health Savings Accounts

A Health Savings Account (HSA) is a tax-favored account set up exclusively to pay certain medical expenses of the account owner, spouse, and dependents. Health insurance coverage must be provided under a high-deductible health plan.  Contributions to the account are tax deductible and growth inside the account is not taxed.  Withdrawals from the account to pay medical expenses are tax-free.

Key Points About HSAs

Eligibility: To be eligible for an HSA you (1) must be covered by a high-deductible health plan; (2) not be covered by another health plan that is not a high deductible plan; (3) not be entitled to Medicare benefits; and  (4) may not be claimed as a dependent on someone else's tax return.

2008 Maximum Contributions:	Individual - $2,900
	Family  -     $5,800
The "Catch Up" Provision allows individuals over age 55 to contribute an additional $900 in 2008.   For family's with 2 individuals over age 55, both parties may contribute the additional $900, however, both must have their own account. Required Policy Features:

Type	Minimum Deductible	Maximum Out-of-Pocket
Single	$1,100	$5,600
Family	$2,200	$11,200

Distributions from an HSA: Funds distributed to pay for qualified medical expenses are generally tax free. Funds distributed for other purposes are taxed as ordinary income. A 10% penalty tax would also apply, unless a distribution is made because of death, disability, or the owner has reached age 65.

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