What kind of accounts can I use to set aside money for medical cost?


Health Savings Account (HSA)
A HSA is a tax-exempt account that belongs to you that you can use to pay for health care expenses. The funds may be used to pay for your plan deductible and/or other qualified medical expenses that do not count towards your deductible. HSAs are available to members who enroll in a high deductible health plan that meets the requirements established by the Internal Revenue Service. The amount deposited in the account may not exceed the amount of your deductible.

The features of an HSA include:

  • Your HSA contributions are tax-deductible.
  • Interest earned on your account is tax-free.
  • Withdrawals for qualified medical expenses are tax-free.
  • Unused funds and interest are carried over, without limit, from year to year.
  • You own the money in HSA and it is yours -- even when you change plans or retire.
  • Your HSA is administered by a trustee/custodian.

Health Reimbursement Account (HRA)
An HRA is an employer funded tax-free account that reimburses employees for qualified medical care expenses, which are typically combined with a health plan with a high deductible. The employer determines whether to allow employees to roll over unused funds from year to year, and whether to allow terminated employees to spend their unused balances. The account belongs to the employer and the employer has no legal obligation to transfer the funds from the account to the employer.

Flexible Spending Account (FSA)
Health care flexible spending accounts are established by your employer to reimburse you for specified medical expenses. Separate accounts can be set up to cover each of the following types of expenses:

  1. Health insurance premiums (known as a "premium-only plan").
  2. Qualified medical expenses.
  3. Dependent care expenses.
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