What are health savings accounts (HSA)?

Health savings accounts (HSAs) are tax-favored savings arrangements for individuals and families covered by high deductible health insurance plans. HSAs were created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and became available January 1, 2004.

 

HSAs allow for tax-deductible contributions and tax-free distributions if distributed amounts are used to pay for qualified medical expenses. Qualified medical expenses include expenses incurred by spouses and dependents even if they are not eligible for an HSA. Although employers may contribute to an employee’s HSA, each HSA is owned and controlled by the individual, not the employer.