3. What is a Health Savings account, and who is eligible to establish one?

A Health Savings Account (HSA) is a tax-exempt trust or custodial account that you set up with a U.S. financial institution (such as a bank or an insurance company) in which you can set aside money exclusively for future medical expenses. this account must be used in conjunction with a High Deductible Health Plan.

Benefits of the HSA include the following:

• Interest earned in the account is tax free
• You can claim a tax deduction for the amount you put into the account
• distributions from the account are tax free if you use them to pay qualified medical expenses
• Amounts not used for medical expenses can remain in the account to be used for medical expenses in a future year, or can be kept in the account until you retire
• the funds stay with you even if you change employers or leave the work force

To be eligible to set up an HSA you must have a high deductible health plan, and you cannot have any other medical insurance or Medicare coverage. To qualify as a high deductible plan, the deductible amount must be at least $1,100 for a plan covering yourself only, or at least $2,200 for a plan that covers more than one person (2008 limits). For 2008, you can contribute up to $2,900 to an HSA for yourself - only, or up to $5,800 to an HSA for a family (2009 limits are $3,000 and $5,950). Additionally, if you are over 55 by the end of 2008, you can contribute an extra $900 ($1,000 for 2009).

Give us a call if you’d like more information about setting up an HSA.

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