When you enroll in a High Deductible Health Plan, you have the ability to contribute to a Health Savings Account to help cover the deductible expenses.
- Money you contribute is deducted from your pay before taxes are withheld. This can save you money on taxes.
- You can use your account to pay for unexpected health care expenses.
- No need to use the money in your account by the end of the year. The "use-it-or-lose-it" rule doesn't apply.
- If you leave your job or retire, your account and the money in your account are yours to keep.
- You may be able to invest the money in your account once it reaches a certain balance. In general, you don't pay taxes on interest earned until you make a withdrawal.
- There's an annual contribution limit. But starting the year you reach age 55, you can make catch-up contributions above the annual limit.
- You must be enrolled in a High-Deductible Health Plan to have a Health Savings Account. You and your dependents can't be enrolled in any other type of medical plan.
- You can't have a Health Savings Account if you have Medicare.
- If you have a Health Savings Account and a Health Care Spending Account (HCSA), you can use your HCSA for only dental, vision, and preventive care expenses.
- Your annual contribution is deducted from your pay in equal increments throughout the year. When using your account, the amount you can spend is limited to the account balance.
- Some states tax Health Savings Account contributions.