A Health Savings Account (HSA) is a tax-favored account set up exclusively to pay certain medical expenses of the account owner, spouse, and dependents. Health insurance coverage must be provided under a high-deductible health plan. Qualified contributions by the account owner are deductible from gross income and growth inside the account is not taxed. Distributions to pay for qualified medical expenses are received income tax-free. Funds not used during one year can be held over and used to pay qualified medical expenses in a later year even if no further contributions are permitted.
For more information in regards to the Health Savings Account, employers are encouraged to review the IRS Publication number 969. Listed below is a link that you can download the publication directly from the IRS http://www.irs.gov/pub/irs-pdf/p969.pdf
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