What are the benefits of an HSA? An HSA can provide significant tax benefits to eligible individuals. Not only can the account provide tax benefits related to paying qualified medical expenses, they may also provide benefits similar to many tax-favored retirement plans. Benefits include: >Contributions are excluded from income. >Earnings are tax deferred. >Assets are never taxed if used for qualified medical expenses. >Unused assets may be used for retirement subject to ordinary taxation. >Upon death, a spouse may treat the assets as his or her own HSA.

What are qualified medical expenses? To retain the tax-free status of HSA assets, funds may only be withdrawn and used for certain expenses. >Actual medical expenses, such as doctors, prescriptions, dental care. >Long-term care insurance. >Healthcare coverage when unemployed. >Certain continuation-of-benefit healthcare coverage. >Certain health insurance after age 65.

Who is eligible to participate? You are an eligible individual for any month if you are covered under a high deductible health plan (HDHP) on the first day of such month. You may not be covered by any other health plan that is not an HDHP, nor be enrolled for Medicare benefits. In addition, you will not qualify for an HSA if you can be claimed as a dependent on another person's tax return.

What is considered a high deductible health plan (HDHP)? An HDHP is an insurance policy that meets certain dollar limits*. A self-only policy must have an annual deductible of $1,100 or more and out-of-pocket expenses cannot exceed $5,500. A family policy must have an annual deductible of $2,200 or more and out-of-pocket expenses cannot exceed $11,000.

Can self-employed individuals have an HSA? Sole proprietors and others who are self-employed can have an HSA, and are, in fact, often ideal candidates.

What are the HSA contribution rules*? The total amount you or your employer may contribute to an HSA for any taxable year depends on whether you have individual or family coverage under a high deductible health plan. The maximum contribution is $2,850 for individual coverage and $5,650 for family coverage.   If you have attained age 55 before the close of the taxable year, you may also contribute an additional amount (known as a "catch-up" contribution) of $800 for 2007.