A Health Savings Account (HSA) is a tax-advantaged personal savings account designed to provide funds to pay qualified medical expenses, including health insurance deductibles and co-payments. An HSA is available to eligible individuals only in conjunction with a high-deductible health plan provided by an employer or purchased by an individual.

The tax benefits of an HSA are significant. Your contributions to a Health Savings Account are tax deductible on an "above the line" basis, resulting in a dollar-for-dollar reduction in adjusted gross income. What might this mean to you? For example:

If your employer contributes to your HSA, those contributions are not taxable income to you and are not subject to withholding.

Funds in an HSA can be invested, with earnings not subject to income tax so long as they remain in the HSA.

Distributions from an HSA may be made at any time. If used to pay for qualified medical expenses, the distributions are not subject to federal income tax. If used for non-medical expenses, HSA distributions are considered taxable income to you and are subject to a 10% penalty tax if you are under age 65 when the distribution is taken.

• The high-deductible health plan provides protection against the financial impact of a serious illness or injury.
• Tax-deductible savings are set aside today in a Health Savings Account to pay for future health care expenses, including the high-deductible health plan's deductible and out-of-pocket expenses.
• You own your Health Savings Account and you decide how to invest your HSA contributions.
• You control when and how HSA funds are spent.
• As needed, tax-free HSA distributions can be used to pay for qualified medical expenses not covered by the high-deductible health plan.
• If you need little or no health care, the unspent funds remain in your HSA and accumulate tax free.
• You can spend the funds in your HSA as you choose. In fact, if not needed to pay future medical expenses, HSA funds can be withdrawn and used for any purpose (subject to income tax and a 10% penalty tax if under age 65).
• Funds may be rolled over (transferred) tax free from one HSA to another HSA.
• You may be able to roll over funds from an unused flexible spending account (FSA), health reimbursement account (HRA) or an IRA into an HSA, making additional funds available on a tax-advantaged basis to pay the plan's deductible or qualified medical expenses not covered by the high-deductible health plan.