As savings vehicles go, Health Savings Accounts, or H.S.A.s, are rainy day funds with generous benefits.
The funds are tax-advantaged accounts that have been available since 2003 to taxpayers with high-deductible health plans (currently plans with deductibles of at least $1,300 for individuals and $2,600 for families). They were intended to cover out-of-pocket medical expenses, yet H.S.A.s have lesser-known advantages. They can be used to supplement retirement savings, providing tax benefits not only when you contribute but also, in many cases, when you withdraw money. You can also take them with you if you change jobs.
The Internal Revenue Service limits the amount of H.S.A. contributions and deductions, as it does with all tax-deferred vehicles. For 2015, taxpayers with individual medical coverage can invest and write off $3,350. For those with family coverage, the limit is $6,650. Each year, those limits are adjusted to reflect consumer inflation.
As employers have increasingly passed on more out-of-pocket medical expenses to employees, H.S.A.s have become popular additions to workers’ benefits. As of the end of 2014, there were more than 10 million H.S.A.s, with assets of $22 billion compared with four million accounts with $6 billion in assets in 2008, according to the Employee Benefit Research Institute. Fifty million Americans will have health savings accounts in four years, predicts the Institute for Healthcare Consumerism, an industry group, although only 15 percent of H.S.A. holders make the maximum yearly contribution today.
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Jeffrey R. Ungvary President