California CUs Get The Go-Ahead On HealthAccounts

SACRAMENTO, Calif. - (07/25/05) -- State chartered credit unions in theGolden State can now offer their members tax-deductible HealthSavings Accounts after Gov. Schwarzenegger signed enablinglegislation last week. HSAs are tax-sheltered savings accountssimilar to an Individual Retirement Account, but earmarked formedical expenses. Taxpayers can deduct contributions to HSAs fromtheir gross income, and the interest and investment earningsgenerated by the account are also not taxable while in the HSA.Amounts distributed are not taxable as long as they are used to payfor qualified medical expenses. HSA funds can be used to coverhealth insurance deductibles and co-payments for medical services,prescriptions, or products. HSA owners can also use their funds topurchase over-the-counter drugs and long-term care insurance, andto pay health insurance premiums if they becomeunemployed.