Health Savings Accounts moving ball  Health Savings Accounts (HSAs)  Health Savings Accounts moving ball

Recently approved by the U.S. Congress, a health savings account (HSA) is the newest way to help you manage health care costs and save for future qualified medical expenses. An HSA is an interest-bearing tax-exempt savings account that’s coupled with an economical, HSA-qualified high-deductible health plan (HDHP). HSAs provide you with more control over your health care dollars.

HSA Basics

You may use the HSA to pay for qualified medical expenses now and after retirement for you, your spouse and qualified tax dependents.

HSAs are tax-deductible, interest-bearing accounts that permit unused funds to carry over from year to year, even if you change employment.

Contributions, withdrawals to pay for qualified medical expenses and interest earned on contributions are tax-free up to the amount set by federal law.

The account is permanent — all money and interest earned belong to you.


You and other individuals may make tax-advantaged contributions, up to certain limits, to your HSA.

If you’re under age 65, you are eligible to contribute to an HSA if:

What kind of tax savings are possible with an HSA?

The following scenario illustrates potential federal tax savings for an individual who makes the maximum amount of contributions to a qualified HSA plan in 2012, when income tax is paid at various rates.

 Total Yearly HSA
 Tax Rate  Potentional Federal
Income Tax Savings
 $3,250  35%  $1137
 33%  $1072
 28%  $  910
 25%  $  812
 15%  $  487

Important: This is just an illustration; we do not provide tax advise and urges all individuals to seek guidance from a qualified tax advisor to determine their specific savings potential.


HSA distributions are tax-free if they are used to pay for qualified medical expenses. Effective January 1, 2011: Distributions made for any other purpose are subject to income tax and a 20% penalty. Also over-the-counter medicines and drugs will no longer be considered a qualified medical expense.

Once a person is 65 years old, the money may be used to pay for medical expenses and certain insurance premiums, such as Medicare Parts A, B and D, Medicare HMO, and an employee’s share of retiree medical insurance. Distributions may also be made for non-qualified medical expenses without the 10 percent penalty.

Custodian and Financial Services Provided by Mellon Trust

Anthem Blue Cross (for example) has aligned with Mellon Trust of New England (or you can choose another financial institution) to supply HSAs to members. Mellon Trust offers a Visa® debit card for easier access to the funds in your HSA, check-writing availability, online account management services and other investment options. After July 1, 2005, HSA accountholders may invest in various mutual funds offered by Mellon Trust. Account holders must have at least $2,000 in their HSA for transfer into an investment account.

How It Works

You will receive details about setting up an HSA with Mellon Trust upon approval of your enrollment in an HSA-qualified HDHP.
 Click to Apply for Anthem Blue Cross Lumenos Plus HSA Insurance

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Important Disclaimer:  Answers and comments provided above are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, governmental, or other professional advice. We do not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service, health plan, or service provider mentioned or any opinion expressed in the website.  Replies, comments, or information gathered on  website may not be accurate but are intended to be helpful.

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