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Many people are first attracted to consumer-directed health plans (CDHPs) that feature a health savings account (HSA) simply because the monthly premium is lower than that of the more traditional plan with co-pays. However, if they stop at the premium savings, they are really missing the best part of this unique insurance/savings package – the HSA.

People who select a qualified HSA plan and open a HSA are actually signing up to receive a tax break. Any money deposited into the account is exempt from federal (and most state) income taxes. When funds are payroll-deducted on a “pre-tax” basis, employees and their employers also do not pay FICA taxes on the money contributed to the account.

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