Health Savings Accounts

A Health Savings Account (HSA) is a specialized savings account that works hand-in-hand with your employer-sponsored high deductible health insurance plan (HDHP), allowing greater flexibility over how you use your health care dollars. Created by Congress to help combat rising healthcare costs, a HSA is similar to an IRA but is used exclusively to cover medical expenses.

A High Deductible Health Plan (HDHP) is an insurance policy usually maintained by sole proprietors or the self-employed. The current HDHP limit is $1,650 for an individual annual deductible and $8,300 for annual out-of-pocket expenses. The family limits are $3,300 for the annual deductible and $16,600 for annual out-of-pocket expenses.

Qualified individuals may open an HSA at AVB Bank and make pre-tax^* contributions to the account that grow in the same manner as an IRA. Distributions are tax-free^* if the proceeds are used for qualified medical expenses.

*Consult with your tax advisor.

Withdrawals can be made for medical expenses tax-free. After age 65, funds may be withdrawn for any reason without penalty, and medical expense withdrawals continue to remain tax-free.

*Consult with your tax advisor.

• Funds roll over year to year
• HSAs are portable
• Employers can save on health care costs
• HSAs allow greater flexibility over how you use your health care dollars
• By law, you must enroll in an HDHP to be eligible for an HSA

Individuals who establish HSAs should maintain records of medical expenses to show distributions have been made exclusively for qualified medical expenses should the IRS request them.

*Consult with your tax advisor.

HSAs can provide you with significant tax benefits^* not only related to paying qualified medical expenses, but also those similar to many retirement plans. Any unused HSA assets may be used for retirement with the HSA earnings tax-deferred.