*APY=Annual Percentage Yield. Tiered Accounts: HSA Money Market accounts are true tiered accounts. The dividend rate is paid based on the appropriate dollars in that level.
You must have a high deductible health insurance plan to be able to take advantage of HSAs. High deductible health plans usually cost less than traditional health care insurance, so the money that you save on insurance can therefore be put into your Health Savings Account.
How HSAs differ from other employer-sponsored health accounts
Money in an HSA rolls over from year to year (there is no “use it or lose it”). Your HSA is owned by you, not your employer, and you control the money in your HSA. You decide how to spend the money and what types of investments to make with the money in the account in order to make it grow. Many people compare an HSA to a “medical IRA”.
Tax benefits and contribution limits
Contributions to HSAs by individuals are tax deductible, even if the taxpayer does not itemize. Contributions by an employer are not included in the individual’s taxable income. Individuals, their employers, or both can contribute tax-deductible funds each year up to the individual or family contribution limit. In addition, individuals over age 55 can make extra contributions to their accounts of up to $1,000 and still enjoy the same tax advantages.
How to use an HSA to pay for health care costs
HSA funds can be used to cover the health insurance deductible and any co-payments for medical services, prescriptions, or products. In addition, HSA funds can be used to purchase over-the-counter drugs and long-term care insurance, and to pay health insurance premiums during any period of unemployment. The interest and investment earnings generated by the account are not taxable while in the HSA. Amounts distributed are not taxable as long as they are used to pay for qualified medical expenses.