A:

The Health Savings Account (HSA) was established as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as a savings plan for individuals with high-deductible health plans (HDHP). To qualify in 2009 as a HDHP, your plan must satisfy both of the following:

Self-only Coverage: minimum annual deductible of at least $1,150 and an annual out-of-pocket maximum of $5,800.*
Family Coverage: minimum annual deductible of at least $2,300 and an annual out-of-pocket maximum of $11,600.*

Contribution Limits:
Self-only Coverage: Maximum allowable contribution is $3,000*
Family Coverage: Maximum family contribution is $5,950*

The catch-up contribution amount for those age 55 or older (but under age 65) is $1,000, in addition to the standard contribution limits.
* Note: These dollar figures are for 2009 limits, they are typically indexed (adjusted upwards) each year to account for inflation.

Funds withdrawn from the account to pay for medical expenses in the future are tax-free as long as the expenses are considered qualified medical expenses. At age 65 (when Medicare starts), contributions are no longer allowed. If the individual does not use the funds for qualified medical expenses, withdrawals can be made for retirement income (after age 65) and they are taxed at your then current ordinary income tax rate. (For more on the HSA, see Fighting The High Costs Of Healthcare.)

This question was answered by Steven Merkel

RELATED FAQS
  1. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  2. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  3. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
  4. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.?

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  5. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
Related Articles
  1. Insurance

    Umbrella Insurance: You May Need It, Too

    If you have assets to protect – or just run a business from home – you could be unpleasantly surprised at how much you need umbrella insurance.
  2. Credit & Loans

    Refinance Vs. Debt Restructuring: What's Best For Your Credit Score?

    Discover key differences between refinancing and restructuring debt in regard to terms, the negotiation process and effect on credit scores.
  3. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  5. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  6. Markets

    The 5 Biggest Canadian Insurance Companies

    Learn more about the insurance industry as a whole, how it functions in Canada, and the five largest Canada-based insurance companies.
  7. Entrepreneurship

    How Does ClassPass Work and Make Money?

    Find out how ClassPass makes money, how the company aims to help both businesses and consumers, and why it has been so successful.
  8. Economics

    Will North and South Korea Ever Reunite?

    North and South Korea have been divided for over six decades. Some analysts think the two countries could reunify within the next 10 years.
  9. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  10. Economics

    Is Argentina a Socialist Country?

    Find out why it does not really make sense to call Argentina a socialist country, even though the South American nation has many socialistic tendencies.
RELATED TERMS
  1. Section 1231 Property

    A tax term relating to depreciable business property that has ...
  2. Emergency Banking Act Of 1933

    A bill passed during the administration of former U.S. President ...
  3. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  4. The New Deal

    A series of domestic programs designed to help the United States ...
  5. Net Collections

    A term used in medical accounting to describe the amount of money ...
  6. Directors And Officers Liability Insurance

    Directors and officers liability insurance covers you if you're ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!