Type of tax-favored savings plan in which a working person can deposit money in an HSA and deduct the amount of the deposits from taxable income. Withdrawal from an HSA is tax free when used for qualifying medical expenses. Money left unspent in an HSA may be rolled over year after year. HSAs are open to anyone younger than 65 years of age who enrolls in a high-deductible (e.g., more than $1000/individual or $2000/family) health plan (HDHP). Employers pay the monthly premiums. Also see consumer-directed health plan (CDHP) .
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HSAs are similar to FSAs and HRAs in that they allow account holders and their dependents to pay for qualified out-of-pocket medical expenses with pre-tax dollars that are either provided by an employer or through a voluntary salary reduction agreement. Unlike FSAs, and at the end of the year unused funds remain in the account for later use. To be eligible to contribute to an HSA, a person must be enrolled in a high deductible Health Plan (HDHP)