HSAs: Help for employers offering health insurance
March 30, 2006 - Submitted by Citizens State Bank

In an effort to assist employers and the American public with rising health care costs, the federal government and health providers have introduced the Health Savings Accounts (HSAs).

The Health Savings Account is a tax-exempt trust or custodial account established exclusively for the purpose of paying your qualified medical expenses if, for the months for which contributions are made to an HSA, you are covered under a high-deductible health plan (HDHP). The new HSA combines the qualified high deductible health plan with the Health Savings Account to reduce the premiums paid on traditional health insurance plans and to provide tax advantages to saving for medical expenses..

HSAs allow you to enjoy unique tax benefits and affordable health premiums without risking your protection. An HSA is a tax-exempt account with contributions made by the employer and/or employee. The money in the HSA accumulates to pay for minor and routine medical expenses that make up your deductible or are not covered by your plan. The funds in the HSA are owned solely by the insured and can be used for current medical expenses or set aside to pay for future medical expenses, even into retirement.

Annual contributions to the HSA reduce the taxable income for both the employer and employee. HSA funds used to pay qualified medical expenses are never taxed. All of the money you set aside in your HSA grows tax-deferred. At age 65, you can withdraw funds for any non-medical purpose at ordinary tax rates, or tax-free when used for qualified medical expenses.

You are permitted to receive distributions from your HSA at any time. Distributions from an HSA used exclusively to pay for “qualified medical expenses” are always tax-free. Upon death, any balance remaining in your HSA becomes payable to the named beneficiary of your HSA.

An HSA could be a valuable new tool to help you save for the medical expenses for you, your family, and your employees. The sooner you start contributing, the more savings you will have! Starting an HSA is easy, and because you control the funds you can also choose the financial institution to handle your HSA. Your local bank or financial institution can provide you with the forms to set up your account.

Citizens State Bank, a locally owned and operated community bank, specializes in serving small to medium-sized business owners in Macomb and St. Clair counties. To learn more about Health Savings Accounts, contact Citizens State Bank at 888.598.8900. Learn more about Citizens State Bank at www.mycommunitybank.com

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