Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) were created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 , which was signed into law on December 8, 2003.

How it works
HSAs are designed to help you save for future qualified medical and retiree health expenses on a tax-free basis.

• Generally, you must be covered by a high-deductible health plan (HDHP) to be eligible to establish and contribute to a Health Savings Account.
• Amounts contributed to an HSA belong to individuals and are completely portable
• Every year the money not spent remains in the account and can accrue interest, tax-free--just like an IRA
• Unused amounts remain available for later years (unlike amounts in Flexible Spending Arrangements that are forfeited if not used by the end of the year)

Making contributions
Tax-advantaged contributions can be made in three ways:

1. The individual and family members can make tax deductible contributions to the HSA even if the individual does not itemize deductions
2. The individual's employer can make contributions that are not taxed to either the employer or the employee
3. Employers with cafeteria plans can allow employees to contribute untaxed salary through a salary reduction plan.

• For 2009, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,000
• For family coverage, the maximum HSA contribution is $5,950
• Catch-up contributions for individuals who are 55 or older is increased by statute to $1000
• Both the HSA contribution and catch-up contribution apply pro-rate based on the number of months of the year a taxpayer is an eligible individual

IRS HSA forms

• Model Health Savings Custodial Account
• Model Health Savings Trust Account
• Form 1099-SA
• Form 5498-SA
• Instructions for Forms 1099-SA and 5498-SA

For additional information

• IRS Information on HSAs
• Fact sheets and more on HSAs