What is an HSA?

In short, certain individuals with high deductible health plans may establish and contribute to a tax-advantaged health savings account (“HSA”). Distributions from an HSA are used to cover qualified health and medical expenses. Contributions to an HSA may come from the individual, the individual’s employer, a family member or any other person. Some of the potential advantages are: HSA contributions are tax-deductible, HSA distributions for qualifying health/medical expenses are not taxable and the interest is not

taxable. To be eligible for an HSA, you must meet the following requirements:

• You must be covered under a high deductible health plan
• You have no other health coverage except what is permitted under IRS rules
• You are not enrolled in Medicare
• You cannot be claimed as a dependent on someone else's tax return
• According to the IRS, “Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers)."

For more detailed information on HSAs, see IRS Publication 969. You may access IRS Publication 969 through the IRS website at www.irs.gov.