A health savings account is a tax-free fund that works in conjunction with a high-deductible health plan. HSAs offer a way to pay primary medical expenses that fall below high deductible health plan deductibles, including doctor visits and prescriptions. The people listed on the account put money into an HSA and the funds are invested according to their instructions. Those contributions reduce your employees’ taxable income and build up, year to year, if unused. HSAs are also attractive to employers because they replace expensive health plans and allow employees to take their contributions with them when they leave the job.
For more on HSAs, be sure to read Do I Need a Health Savings Account?