HSA’s are special tax favored savings/investment vehicles to fund medical expenses not covered by insurance.  They were created by the Medicare Prescription Drug, Improvement, and Modernization Act passed in December of 2003.  It took the IRS most of 2004 to promulgate regulations, and for insurance companies to iron out details surrounding the companion health insurance policies with which HSA’s are paired. 
 

Health Savings Accounts are modeled after Individual Retirement Accounts (IRA’s).  Money for medical expenses can be deposited tax free, it can grow tax free, and it can be spent for medical expenses tax free.  And unlike older medical reimbursement accounts, there is no “use it or lose it” catch.  The money can stay in an account that you own until you need it.  This feature makes the HSA especially valuable for helping employees save for medical expenses in retirement.
 

HSA’s are established in conjunction with a High Deductible Health Plan.  HDHP premiums are much lower since the policy deductibles are higher. This is a WIN-WIN solution for employees and small businesses.  Employees pay for more routine costs in exchange for lower premiums and the right to establish a HSA with all its tax benefits.  Important catastrophic coverage remains.  The employer pays lower benefit costs, making drastic benefit cuts less likely. 
 

If you’re a small business owner or an employee of one, talk to your Mutual Savings Personal Banker about HSA’s.  We have established a High Deductible Health Plan and Health Savings Accounts for our employee group.  Our bankers have received in-depth training on HSA’s.  We can help you and your employer determine if such a plan is right for your group.  If you would like, we can arrange to do a “lunch and learn” educational program for you and /or your employees. 

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