When considering health care benefits, you may want to look at the Health Savings Account (HSA). This portable health care account rolls forward and can be offered through a Section 125 Plan.
HSA participants must be covered by a high-deductible health plan (HDHP). Employers of any size can set up an HSA plan, and contributions may be made through the employer's cafeteria plan.
HSAs reimburse the same expenses as a health flexible spending account (FSA), without the "use-it-or-lose-it" consequences when the plan year ends or the participant changes jobs. In addition, HSA earnings accumulate tax free.
HSA contribution limits are as follows:
- For single coverage, a maximum of $3,500
- For family coverage, a maximum of $7,000
- Individuals age 55 and older can contribute an additional $1,000 on a pre-tax basis.
If funds accumulated in an HSA are used for anything other than eligible medical expenses, the account beneficiary is required to pay taxes, plus a 10% penalty. However, there is no penalty for distributions following disability, death, or retirement (at Medicare eligibility age).