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If you haven't seen this tax-advantaged savings account offered alongside your health-care plan, odds are that you'll come across it this year. Say hello to the health savings account, a way for workers to put money away either on a pre-tax or tax-deductible basis, have it grow free of taxes and then take tax-free withdrawals in order to pay for qualified medical costs. Typically these so-called HSAs work in conjunction with high-deductible health insurance. This coverage, which is also known as a consumer directed health plan, comes with a deductible of at least $1,350 for self-only coverage or $2,700 for family plans in 2019. You cannot fund an HSA if you are on Medicare. More than 9 out of 10 employers expect to offer high-deductible plans in 2019, according to a recent survey by the National Business Group on Health.

The association, which represents large employers, polled 170 companies in May and June of this year. Here's what people are getting wrong about HSAs.

Alphabet soup

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Close to 80 percent of consumers who aren't enrolled in HSAs and other medical savings accounts don't understand how they work, according to Alegeus. The company, a provider of HSA administration software, surveyed more than 1,400 consumers. In fact, people who aren't in these savings accounts tend to confuse HSAs with another employee benefit, known as the health flexible spending arrangement or FSA, Alegeus found. "People assume that they're all the same, and that's not true at all" said Steve Auerbach, CEO of Alegeus. "The FSA is 'use it or lose it,' so you'll want to set aside what you need for that year," he said. "The HSA is structured around current and future medical costs and your ability to drive the dollars."

Contribution limits

In 2018, HSA holders may contribute up to $6,900 if they're in family plans, or up to $3,450 for single coverage. Individuals over 55 may contribute an additional $1,000 to their accounts. In a situation where a married couple has family coverage under separate plans, but one is over 55, the two can split the family contribution limit of $6,900. However, only the spouse who is over 55 can make the additional $1,000 contribution, said Aaron Benway, a certified financial planner and co-founder of HSACoach.com. Though someone who is enrolled in Medicare cannot contribute to an HSA, his or her spouse who is still employed and in an HSA-eligible plan at work may still save in the account. "The spouse might be on Medicare, but they could still be covered under the private policy if the working spouse has family coverage," said Roy Ramthun, president and founder of Ask Mr. HSA. "The family contribution would have to come from the spouse who is not on Medicare." Workers with FSAs currently can contribute up to $2,650 during 2018 and may do so on a pretax basis. Any contributions your employer makes to your FSA is also excluded from your gross income. Withdrawals are tax-free if you use the money to pay for qualified medical expenses.

HSA vs. FSA