| As often happens to investment vehicles created by | | | | Unlike flexible spending accounts, however, HSA |
| legislation, Health Savings Accounts (HSAs) have | | | | contributions and gains can be rolled from year to |
| suffered under the complex regulations meant to | | | | year--there's no "use it or lose it" requirement--and you |
| discourage misuse. However, the accounts have | | | | retain ownership of the funds even if you terminate |
| potential to do more than simply allow investors to | | | | employment. If your employer offers a flexible |
| save and pay for health-care expenses with tax-free | | | | spending account, you should take a description of the |
| dollars. They offer a potential way for individuals to | | | | account requirements and restrictions when you |
| bridge gaps in health insurance coverage that may | | | | discuss an HSA with your financial professional. |
| occur during times of unemployment or in retirement. | | | | Because you establish an HSA independent of your |
| The Medicare Modernization Act of 2003 created | | | | employer, these accounts can provide a health care |
| HSAs. Anyone younger than 65 can open an HSA | | | | expense "safety net" should you terminate |
| after purchasing a qualified high-deductible health | | | | employment (voluntarily or involuntarily). They also |
| insurance plan. An individual can maintain an HSA and | | | | provide retirees with another investment vehicle that |
| be covered under other insurance policies, as long as | | | | offers tax deductions for contributions, tax-free growth |
| that person doesn't "double dip" and have medical | | | | and tax-free withdrawals for medical expenses. |
| expenses paid by both insurance and the HSA. | | | | Withdrawals for nonmedical expenses after age 65 |
| To be considered "qualified" the insurance plan must | | | | are still taxable, and a 10% penalty applies for |
| have a deductible of at least $1,050 for individuals or | | | | nonmedical withdrawals before age 65. |
| $2,100 for family, and have a limit of $5,250 individual | | | | If you plan to use HSA funds in the near term, a liquid, |
| and $10,500 family for out-of-pocket expenses. | | | | interest-bearing account like a savings account may be |
| Choosing a policy that qualifies can involve insurance | | | | appropriate. However, if you don't anticipate an |
| and tax issues that should be discussed with | | | | immediate need for all or part of your HSA funds, the |
| professionals in those fields. | | | | accounts are self-directed, allowing you to use other |
| Contribution caps are the lesser of the insurance plan | | | | investment options. Your financial professional can help |
| deductible or the IRS maximum. For 2006, the IRS max | | | | you determine which investment vehicle best meets |
| is $2,700 for individuals and $5,450 for families. | | | | your needs. |
| Individuals 55 or older can make a $700 catch-up | | | | According to a 2006 survey by Watson Wyatt and |
| contribution in 2006. | | | | the National Business Group on Health, health care |
| Many employers offer flexibility spending accounts for | | | | insurance premiums have been rising at two to three |
| medical expenses (and sometimes child care) that | | | | times the rate of inflation for the past five years. |
| allow employees to set aside pre-tax dollars for | | | | Understanding the complexities of health savings |
| medical expenses not covered by the company's | | | | accounts may be one way to lessen the blow and |
| health insurance, including premiums and deductibles. | | | | prepare for the future. |