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Having gone into effect Jan. 1, 2004, Congress created HSAs using Individual Retirement Accounts (IRA) as a model. The idea is to allow families with high-deductible health insurance plans to save tax-free money for routine medical fees. A family's insurance plan would be used for major medical expenses, while the cash in their HSA would go toward out-of-pocket costs, such as prescriptions, co-payments or special treatments like a CAT scan.

Instead of paying a health insurance company monthly payments, families can deposit up to $5,250 per year for 2005, while individuals are limited to $2,650 per year. Money deposited into HSAs accumulates tax-free until retirement, similar to an IRA. Families or individuals can create an HSA, but must have a high-deductible health plan with a minimum deductible of $2,000 for family coverage or $1,000 for self coverage.

HSAs are similar to Flexible Spending Accounts as tax-free money is used for expected medical costs, such as buying new eyeglasses once a year. But money deposited into HSAs is not owned by an employer and can rollover into the next year.

If an HSA owner changes jobs, the account will travel with the owner to a new location. HSAs also can be used during periods of unemployment to cover health insurance premiums.

For more information about Health Savings Accounts, log onto the U.S. Treasury Department web site at

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