HSA’s and IDA’s
by Caleb Reading
HSA’s (Health Savings Accounts)
Any individual who is covered by a high-deductible health plan may establish an HSA. Amounts contributed to an HSA belong to individuals and are completely portable. Every year the money not spent would stay in the account and gain interest tax-free, just like an IRA. Unused amounts remain available for later years (unlike amounts in Flexible Spending Arrangements that are forfeited if not used by the end of the year). Tax-advantaged contributions can be made in three ways: the individual and family members can make tax deductible contributions to the HSA even if the individual does not itemize deductions, the individual’s employer can make contributions that are not taxed to either the employer or the employee, and employers with cafeteria plans can allow employees to contribute untaxed salary through a salary reduction plan. Funds distributed from the HSA are not taxed if they are used to pay qualifying medical expenses.
Program started January 1, 2004.
IDA’s (Individual Development Accounts) [sometimes called Family Savings Accounts]
If you’re making less than your state’s maximum income for an IDA’s, you can get dollar matching from the state for a certain amount of money put into savings. My state (Iowa) matches up to $3000 per citizen or $8000 per household each year, for example.
These IDA’s have been around a long time, but I just recently heard of them. Turns out my state was encouraging people to save after all, just that most of us who need the help don’t know about these programs.