Health Savings Account | HSA


A Health Savings Account (HSA) is an innovative approach to health care that involves two elements:

  1. A qualified high-deductible health plan
  2. An individual tax-exempt Trust (savings/investment)

Employees who are enrolled in a qualified high-deductible health plan can contribute money to their tax-exempt Trust from their gross income to use for qualified medical expenses. The money in an HSA is rolled into subsequent years, so participants can choose to either use the money in their HSA to pay for routine medical expenses or save the money in their HSA to provide for the future. An HSA functions in a similar way to an IRA; however, the money in the account is used to pay for qualified medical expenses.

Annual Limits

In one year, the maximum annual amount a participant may contribute to an HSA is $3,500 for an individual and $7,000 for a family (2019 limits). However, it is important to check with your employer regarding how much you can contribute, since an employer may decide to offer a lower annual maximum amount.

Why an HSA?

Some of the benefits of an HSA include:

  • Lower health insurance premiums than with regular health plans
  • Contributions may be made by an individual, an employer, or both
  • You own your HSA and choose how to invest the funds
  • You are eligible to deduct contributions you make on your federal income tax return even if you do not itemize deductions (California does not permit the deduction).
  • Interest and other earnings on an HSA maintained in accordance with federal law are not taxable on your federal return.
  • Withdrawals for qualified medical expenses are federally tax-free
  • Catastrophic protection is provided through the high deductible health plan
  • HSA plans continue to grow if the money is saved and not used for health-related expenses, since funds may be rolled over to subsequent years
  • Freedom of choice to see any physician you choose