Health Savings Account Definition

A HSA is an account created for participants enrolled in a high-deductible health plan (HDHP). The participant contributions are deposited into the HSA, subject to a maximum annual amount. The funds are invested but also available for use to reimburse the participant for qualified medical expenses. Contributions are tax deductible, investment earnings on the funds are tax-exempt, and qualified disbursements are tax-exempt. There are certain restrictions on the availability of a HSA; not all employees or dependents will qualify.