Health savings accounts (HSAs) are employee-owned personal savings accounts, which can be funded by an employer, an employee, or both. They can only be offered in conjunction with a federally qualified high-deductible health plan (HDHP).
Employees contribute to HSAs through payroll deduction, check, or online transfer. Contributions are tax-deductible, and distributions are tax-free when used to pay for qualified medical expenses. Interest and earnings are also tax-free.1
Under an HSA arrangement, an employee owns the account — so if he or she changes jobs, the account goes with that employee. Employees can even use their HSA as an investment to help cover health care costs in their retirement years.