Health Savings Accounts

Delivering Value to Employers and Employees

Definition of Health Savings Accounts
Health Savings Accounts are tax-exempt health care accounts used by employees to pay eligible medical expenses. In a health care market that foresees no slowdown of rising costs, employers' interest in Health Savings Accounts is rapidly growing. In addition, employees favor Health Savings Accounts as a method of paying current health care expenses and investing funds to cover future health care costs.

Establishing Health Savings Accounts
According to legislation passed by Congress in December 2003, Health Savings Accounts can be established and funded by both employers and employees. However, as a prerequisite to establishing Health Savings Accounts, employees must be enrolled in High Deductible Health Plans (HDHPs). Employees enrolled in partial self-funding plans through their employers are eligible to establish Health Savings Accounts.

Advantages of Health Savings Accounts
Health Savings Accounts offer advantages to both employers and employees. They allow companies to offer employees valuable benefits for a lower cost, while providing employees tax-free vehicles to cover current health care expenses and save for longer-term health care needs.

Health Savings Account Rollover and Portability
The advantages of Health Savings Accounts are based on two features: rollover and portability. Funds remaining in Health Savings Accounts at year-end are not forfeited. Instead, year-end balances, including interest earned, roll over into each subsequent year. The portability feature of Health Savings Accounts means that employees who change jobs can take their Health Savings Account funds with them.

Health Savings Account Administration
Employees who elect to open Health Savings Accounts can choose between two investment options: one, an interest-bearing Visa debit card for employees who expect to use their Health Savings Accounts to pay for current medical expenses, and two, a variety of no-load mutual funds for those interested in longer-term investments.

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