What are the eligibility requirements for opening an HSA?

To open an HSA, an employee must have a high-deductible health plan, no other health insurance, not be on Medicare, and not be claimed as a dependent on someone else’s tax return. The health plan must also meet the IRS's minimum deductible rules.

How do HSAs benefit employees' healthcare expenses?

HSAs benefit employees by offering three tax advantages: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. Employees can use HSA funds to pay for deductibles, copays, prescriptions, and other eligible healthcare costs not covered by insurance.

How are HSA contributions taxed?

Contributions to an HSA are made through pre-tax deductionsvia payroll or deducted from taxable income if made independently. The funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. If used for non-medical expenses before age 65, employees face a penalty plus income tax. After age 65, withdrawals for non-medical expenses are taxed as income, but without the penalty.