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The acronym “HSA” is used by many people in a very generic way that is creating a lot of confusion.  There are HSA health plan designs and HSA accounts.

The intent in the creation of HSA accounts was to allow individuals to fund a tax-favored account to use for Qualified Medical Expenses when used in conjunction with an HSA-compatible health plan.  In addition, the account is owned by the individual and the money in the account rolls over year to year (i.e., no “Use it or lose it”).  On the surface these are very similar to Flexible Spending Accounts (FSAs).  But the HSA accounts have some significant differences such as individual ownership and portability, roll-over of funds.  In addition, shareholders and members of S Corporations and LLCs may also use HSA accounts.  

HSA-Compatible Health Plans

HSA-compatible plans are characterized by high deductibles.  The Federal government specifies what the minimum deductible will be each year.  For 2011 the minimum deductible is $1,200 for a plan covering an individual and $2,400 for a plan covering an individual with at least one additional dependent.  Many HSA-compatible plans also have an “Integrated Deductible,” meaning the deductible also applies to prescription drugs.  So if you have an HSA-compatible plan, the insured will be responsible for the 100% of the covered expenses until the deductible is met during the policy or calendar year (however the plan is set up).

HSA Accounts

If you enroll in an HSA-compatible health plan, then you are eligible to open an HSA account.  An HSA account can be use to pay for deductible expenses along with other Qualified Medical Expenses (similar to FSA qualified expenses).  The advantage you receive from using an HSA account is the expenses you pay for will effectively be discounted at your tax rate.  For example, if you tax rate is 32%, then you will save $32 for every $100 you spend with your HSA account.  In this case, the tax benefit is $32.  And the tax benefit is an “above-the-line deduction meaning it is a direct reduction in your tax liability regardless of whether you itemize or receive the Standard deduction. 

Account Trustee

Most banks can be chosen to be the trustee of an HSA accounts.  Be very careful when choosing a trustee.  The IRS regulates HSA accounts and there are details you should be aware of.  HSA accounts are not simple banking accounts.  You want to choose a trustee that; (1) has strong customer service, and (2) is experienced with the IRS rules.  Contact Bridgeport Benefit Advisors to ask us whom we trust in managing HSA accounts.


Many employers are choosing HSA-compatible health plans due to the high cost of health insurance premiums.  Bridgeport Benefit Advisors believes HSA-compatible plans and HSA accounts, when working properly, are a great way to receive rich benefits and to reduce costs.  But if you employees do not have sufficient personal cash flow, these plans, without some assistance, is not what we recommend.  Low premiums may help you in the short term, but when employees have large out-of-pocket expenses without some support, these plans will create an illusion that there is no health insurance.  Additionally, many people will be frustrated with the record keeping required to take care of all of the expenses.  Bridgeport Benefit Advisors has an approach for our clients that will consume about 30 minutes each year to take care of all HSA related expenses.  We will educate you and make it work for you.

For more information, please contact Bridgeport Benefit Advisors.

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The material on this page is intended as general descriptions of the concepts presented.  It is for educational purposes only and it not intended to provide specific financial or tax advice.  These descriptions cannot take into account your specific conditions and situation including the data required for underwriting purposes, financial circumstances, risk tolerance, and other factors.