Health Savings Account Answers

How and where can I open a health savings account?

It depends on if you're buying coverage on your own or getting it through your employer.

On your own. You can find a list of health insurance companies offering HSA-eligible plans in your state at HSAInsider.com or HSADecisions.org. You can compare several compani es policies in most states at eHealthInsurance.com, or can search for a local agent who knows which policies are available in your area at the National Association of Health Underwriters Web site. The list of companies offering HSA-eligible plans continues to grow ever y month.

Through your employer. If you get health insurance through your employer, you may have seen an HSA-eligible op tion during last-year's open-enrollment period (generally in the fall). If not, talk to your benefits manager to see if HSAs will be on your health insurance menu. Choosing an HSA could knock down your share of premiums significantly, and some employers may choose to fund all or part of the HSA for you -- perhaps even adding a 401(k)-style match.

Would I fund an HSA with pre- or post-tax dollars?

If your employer offers a high-deductible health insurance po licy, you may be able to make pretax contributions, like you would with a flexible-spending account. If you open the HSA on your own , your contributions will be deductible when you file your taxes, even if you don't itemize.

For 2006, you'll be able to deduc t the lesser of either

• Your insurance deductible
or
• $2,700 for individuals; $5,450 for families

If you 're between the ages of 55 and 65, you can add an additional $700 to the deduction limits in 2006.

For 2007, as a result of le gislation passed December 9 (and expected to be signed by the President soon), you can deduct up to $2,850 for individuals, $5,650 f or families. The dollar amount of your tax deduction no longer will be restricted to the amount of your insurance deductible.

Topo the tax benefits phase out at certain income levels?

Unlike man y other tax breaks, there aren't any income limits. Anyone under age 65 who buys a qualified high-deductible policy can open an HSA.

What's the difference between the new HSAs and the flexible-spending accounts? It seems they are for t he same purpose.

The tax benefits of both plans are quite similar, but there are several differences. The biggest and most important difference is that your HSA balances can roll over from year to year and continue to grow tax-deferred.