Health Savings Account (HSA)

Contributions are tax-deductible, account earnings grow tax-free, and distributions for qualified medical expenses are tax-free. — An HSA offers the well-known 'triple tax advantage' under IRC Section 223 when it is paired with a qualifying high-deductible health plan (HDHP): contributions are deductible above the line, the account balance grows tax-deferred, and withdrawals are tax-free so long as they pay for qualified medical expenses. Unlike a flexible spending account, the HSA is owned by the individual, is fully portable, and has no use-it-or-lose-it rule, so unused funds accumulate for future health costs. Only individuals covered by a qualifying HDHP may contribute, and the account holder must not be enrolled in disqualifying coverage such as a general-purpose FSA.

National insurance concept

Is owned by the individual and is portable, so the account follows the person to a new employer or into retirement — An HSA is individually owned, which makes it portable: the account belongs to the person, not the employer, so it carries over when the individual changes jobs, and the funds roll over year after year into retirement. Both the individual and the employer may contribute to an HSA (subject to annual limits) if the person is covered by a qualifying high-deductible health plan. This individual ownership and portability is what distinguishes the HSA from an employer-owned HRA, which generally does not follow a departing employee.

National insurance concept