- They have to be enrolled in an HSA-eligible health plan such as a high-deductible health plan.
- They must not be enrolled yet in Medicare.
- They cannot be claimed as a dependent on someone else's tax return.
- They must not be covered under another, non-HSA-eligible health plan.
- Employees contribute to an HSA on a pre-tax basis through payroll, reducing their taxable income.
- If employees leave contributions in the HSA, in many cases they can be invested rather than just sitting there in the account, and the earnings grow on a tax-deferred basis.
- Employees can withdraw money for qualified medical expenses without having to account for that on their federal income taxes.
- With an HSA, an employer isn't involved in approving employee expenditures. It's the employee's responsibility for knowing how to spend it -- which, on the positive side, means they don't have to get employer approval on expenditures.
- HSAs are different from FSAs in that there is no "use it or lose it" rule -- the funds can roll over year after year.
- With an HSA, the account and funds stay with the employee if they move to another employer.
- 23% of HSA users use 100% each year (Super-Spenders—spend all of their account)
- 33% of HSA users use 51-100% each year (Spenders—spend most of their account)
- 28% of HSA users use 0.1-50% each year (Savers—save most of their account)
- 16% of HSA users use 0% each year (Super-Savers—save all of their account)
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