Health savings accounts differ from flex-spending accounts but can still provide a considerable tax and medical cost savings.
There is very little limit in ability to banks offering health savings accounts. Any institution that can offer an IRA can offer an HSA. Whether your individual institution does or not is something you will need to determine for yourself. As these accounts also have the benefit of earning interest, even if you can get one with your current bank, it may pay you to look around and see if there is a better rate offered at a different, or even with an online bank.
What is an HSA? A health savings account is similar in form to the flex-spending accounts offered by many employers, in that a certain amount of money is set aside to be used for health-care related expenses that are not covered by insurance. This can include anything from copays to aspirin, although an HSA differs in several key points. For example, while both are tax deductible, a flex-spending account can only be obtained through an employer. Whereas, a health-savings account can be obtained by the individual regardless of whether her employer offers it or not.
Other differences include the fact that health savings accounts earn interest for the individual and are accessible at any time, pre-approval not being required and that monies not used in one year will rollover into the next. It is advisable to save documentation for tax time in order to prove qualified expenses. With upper limits for yearly contributions of nearly $3,000 for the individual, this can lead to substantial funds by the time the holder retires. Other factors, which apply to this specific kind of account, are that the holder must be enrolled in a high-deductible insurance plan, rather than a standard one. This caveat can lead some people to decide against such a program.
If you are opening the health savings account on your own, this doesn’t mean that you lose the tax advantages that come with something like a flex-spending account. If it is not possible to arrange with your employer to have monies deposited into your account pre-tax, the funds are still essentially tax-exempt and can be deposited post-tax, then deducted from your year-end tax bill. This is the kind of investment one wants to approach with a modicum of caution and a degree of research. If it turns out to be to your advantage, numerous banks such as Bank of America and Chase offer such programs. Your first step after making sure you qualify for such a program is to find the bank that works best for your needs.
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