Benefits of Health Savings Accounts
New Health savings accounts (HSAs) will appear in 2004 as part of the Medicare drug bill and will help employers pay for raising health insurance costs.
Below are the benefits to both employers and employees of HSAs
A Lower "High Deductible"
The minimal levels to be eligible for a HSA are $1,000 for individuals and $2,000 for family coverage, thus making HSAs and high deductible health plans more attractive.
Available to All Employers
There is no minimum or maximum size limit on companies who can use the HSA.
More Flexible Funding
HSAs can be funded by any or all of the following:
- employer contributions
- tax-free employee contributions
- salary reduction contributions under a cafeteria plan
Smaller Penalty on Taxable Distributions
Any non excise tax for non-health distributions made before death, disability or age 65 is 10%.
Salary Reduction
Pre-tax salary reduction works for HSAs and HFSAs (cafeteria plans).
Account Ownership
Because an HSA is a funded account that belongs to the account beneficiary, HSAs have built in post-employment and retirement portability.
Containment of Rising Medical Costs
HSAs will encourage individuals to buy health plans that better suit their needs so that insurance is used only when needed.
Tax-Free Asset Accumulation
Contributions and earnings from then are pre-tax and distributions for qualified medical expenses are tax-free.
Portability
Because the account is owned by the individual, they can be carried from job to job and into retirement.
Benefits for Medicare Beneficiaries
HSAs can be used during retirement to pay for health care, Medicare
expenses and prescription drugs.