Health saving accounts (HSAs) are tax-advantaged,interest-bearing savings accounts that give employees the abilityto fund their own account and offer the flexibility to set asidedollars for their own health care.

An HSA can serve as a savings buffer for medical bills that areunexpected or higher than anticipated. The HSA balance remains inthe account year to year, similar to an individual retirementaccount (IRA), giving employees the flexibility and control tomanage their own health care dollars as they see fit.

HSAs can be paired with high deductible health plans (HDHPs) andcan be used tax-free to pay for larger deductible or expenses thatan employee's insurance company doesn't cover. Not all HDHPs areHSA compatible. HSAs can be used for current medical expenses orfunds can be saved to pay off future medical expenses.

Older employees who are thinking about retirement can use HSAdollars as a way to plan long-term and ensure they have enoughmoney saved for medical expenses long after their retirement. TheHSA fund is tax-deductible, compounds tax-free interest andearnings and is also tax-free to withdraw from for medical bills.People who are 55 and older can make additional contributions,called "catch-up payments," to their accounts to increase the rateof savings.

HSAs are also employee owned. If an employee ends up quitting,changing jobs, or getting fired, the HSA is theirs, along with allthe funds in it. If an employer ends up offering an HSA that ismore optimal than the one you currently have, you can transfer themoney from the old account to the new one within 60 days.

Contributing to an HSA

An individual's eligibility to contribute to an HSA isdetermined monthly. An employee must have HDHP coverage on thefirst day of the month in which they want to make an HSAcontribution. There is an exception that allows individuals whobecome HSA-eligible during a calendar year to make the fullcontribution amount for that year. With this exception, individualswho are eligible to contribute to an HSA on December 1^stcan contribute the amount equivalent to the annual HSA contributionamount, provided they remained covered by the HSA for at least a12-month period following that year. Contributions to your HSA canbe made as late as April 15^th of the following year.

Contributions can be made each month that you remain eligible.Each month that you are eligible, one-twelfth of the annual maximumfor HSA contributions can be made. You can contribute no more thanthe designated annual maximum. In 2019, the maximum amount is$3,500 for single coverage and $7,000 for family coverage. For2020, these limits have increased to $3,550 and $7,100,respectively. Individuals who are 55 years and older can makeadditional "catch-up" contributions of up to $1,000 annually.

Owners of individual retirement accounts (IRAs) or Roth IRAs whoare deemed HSA-eligible can transfer IRA funds to an HSA withouthaving to worry about a tax penalty. The IRS grants a one-timetransfer that does not exceed your maximum annual HSA contributionlimit. Contributions can also be made post-tax similar to a RothIRA. Funds are not taxable upon withdraw after age 65.

Setting up an HSA is one of the best financial decisions anemployee can make to prepare for the uncertainty that the futureholds.

Steve Rosenthal is one of the most widely recognized leadersin the employee benefits and human resource industry. Beforebecoming CEO of Triton Benefitsand HR Solutions, Rosenthal was the CEO and pioneer ofCheckPoint HR. Rosenthal previously served as Chairman of EPIX ofwhat became under his leadership, one of the largest humanresources outsourcing companies in the country.