HSA Contributions

• When you have an HSA, the contributions that you (or someone other than your employer) make to your account are tax-deductible, even if you do not itemize your deductions. Any contributions that your employer makes on your behalf are excluded from your gross income. The contributions in your account can accumulate from year to year, enabling you to save in the event you incur significant medical expenses. This is a key difference between an HSA and a flexible spending account.
  
  

Portability

• IRS Publication 969 states that health savings accounts are "portable." This means that, like your 401(k) retirement savings, your account stays with you if you change jobs or are no longer working. There is no time limit on when you have to use the funds in your account; they will continue to roll over from year to year. Once you are no longer eligible for a high-deductible health insurance plan, you may no longer make contributions to your account.
  
  

Allowed Expenses

• The funds in your HSA can be used to pay for medically related expenses. If you need to continue your insurance coverage through COBRA until you find a new job, or are eligible for benefits with your new job, the premiums can be paid through your HSA. Any qualified medical expenses can be paid for out of your HSA on a tax-free basis. Once you reach age 65 and enroll in Medicare, you can continue to use the funds in your HSA to pay for any part of your Medicare coverage except for supplemental, or "Medigap" coverage.
  
  

Keeping Records

• It is up to you to keep accurate records of how you use the funds in your HSA. If you are ever subject to an audit or the IRS questions your expenses from your HSA, you will need to provide the records to demonstrate that the funds were used for qualified medical expenses. If it is determined that you did not pay for qualified expenses with your HSA funds, that amount could be taxed as income and subject to a 10 percent excise tax as well.