Working with Small Business Association of Michigan (SBAM) and Kushner & Company, Inc., Innovative Payroll Processing can set up a tax-exempt Health Savings Account (HSA) that is established exclusively for payment of current and future qualified medical expenses.
Qualified Medical Expenses
Qualified medical expenses for an HSA include health insurance plan deductibles, co-payments and co-insurance amounts, prescription and over-the-counter drugs, dental services, vision care, long-term care, psychiatric and certain psychological treatments and certain health premiums, including COBRA (but not premiums while an active employee).
Once you have established the HSA, your company, the employee or both may contribute to the HSA in a given year. For an HSA established by a self-employed individual, the individual may contribute to the HSA. In addition, family members may contribute to an HSA on behalf of another family member.
Contributions to an HSA must be made in cash. Contributions to an HSA may be made through a Section 125 Plan via the pre-tax payroll method or after-tax by making deposits. In any given year, contributions may be made until April 15 the following year.
HSAs may be invested, much like a 401(k) or an IRA, in an interest-bearing account, a mutual fund or stocks and bonds. Because you don't know when the HSA will be called upon for medical expenses, it is generally recommended that the majority of funds be readily accessible through a bank account.
No Limits or Risk of Losing Funds with an HSA
There is no "use-it-or-lose-it" provision with an HSA. Any balance of funds at the end of the year may be carried over into future years with no limits.
The HSA Stays with the Employee
Because the account is owned by the employee or individual and maintained in a trust, the account holder may use the account after he or she leaves the employer who offered the qualified high-deductible health plan.
Employees receive a free debit card to pay for eligible expenses that gives them direct access to their account (when using an approved bank).