Rates on Health Savings Accounts

Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis . Deposits to an HSA may be made by any policyholder of a qualified High Deductible Health Plan (HDHP), by an employer on behalf of a policyholder, or any other person. If an employer makes deposits to an HDHP on behalf of its employees, non-discrimination rules apply — that is, all employees must be treated equally. However, if contributions are made through a section 125 plan, non-discrimination rules do not apply. Employers may treat full-time and part-time employees differently, and employers may treat individual and family participants differently. (The treatment of employees who are not enrolled in a HDHP is not considered for non-discrimination purposes.) Also, for 2007, employers may contribute more for non-highly compensated employees than highly compensated employees. Contributions from an employer or employee may be made on a pre-tax basis through an employer. If this option is not available through the employer, contributions may be made on a post-tax basis and then used to decrease gross taxable income on the following year’s Form 1040. The main advantage of making pre-tax contributions is the FICA and FUTA deduction, which amounts to a savings of 7.65% to the employer and employee. Regardless of the method or tax savings associated with the deposit, the deposits may only be made for persons covered under a HDHP, with no other coverage beyond certain qualified additional coverage. [source: wikipedia.org]

Banks Offering Above-Market Rates on Health Savings Accounts

State Farm Bank, 4.00% APY, checking account, $10,000 minimum

Principal Bank, 4.45% APY, 1-year HSA CD, $10,000 minimum

HSA Bank, 4.75% APY, savings account, $15,000 minimum

Sovereign Bank, 5.12% APY, savings account, $10,000 minimum