Health Savings Accounts   

Health Savings Accounts (HSAs)  may be established by any individual who is covered by a high deductible health insurance plan (HDHP).  These high deductible health plans  specifically designed for HSAs have a minimum deductible of $1100 for an individual and $2200 for a family.  We have available these high deductible health plans from many of the Washington health- medical  insurance carriers that we represent.      

The participant in  a high deductible health insurance plan may contribute to an HSA tax deferred account up to a total  annual contribution limited to a maximum of $2,900 for an individual or $5,800 for a family in 2008 regardless of the size of the deductible of the health plan. Account holders aged 55 and up may make additional contributions of $900 in 2008, increasing by $100 each year until it reaches $1,000 in 2009.

The ability of baby boomers to begin saving now for their health expenses during retirement, will save Medicare money in the future and ensure Medicare's financial vitality into the future.

Key components:

Contributions can be received from the following sources:
• Individuals
•Employers
Contributions may be made by any combination of employer and individual. Employer contributions are
excludable from income and individual contributions are deductible "above the line." That is, a taxpayer does not have to itemize deductions in order to take the contribution as a deduction. Employers may offer HSAs as part of a section 125(d) cafeteria plan.

Tax Treatment:
•Individual contributions are tax-deductible, even if the taxpayer does not itemize
•Employer contributions are tax-free
•Family member contributions are made on an after-tax basis
•Investment earnings accrue tax free
•Distributions are tax-free if used for "qualified" medical expenses (all section 213(d) expenses, except health insurance premium payments).

Qualified medical expenses include:
•Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease
•Prescription drugs
•Qualified long-term care services and long-term care insurance
•COBRA continuation coverage required by Federal law
•Health insurance for the unemployed
•Distributions made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty may be waived in certain circumstances
•The proposal clarifies that payments to medical service providers through the use of debt, credit, and stored-value cards do not create new reporting requirements for employers
•HSA funds may also be used to pay for retiree health insurance premiums other than Medigap. This includes Medicare premiums.