Definition: HSA is an acronym for Health Savings Account. An HSA is a savings account set up to be used for medical expenses and nothing else. Funds directed to the HSA are pretax dollars, thus reducing taxable income, and HSA's offer interest on the balance. The medical expenses and HSA can be used for include optical, insurance deductions, dental and some over-the-counter medications.
HSA's can be very efficiently used in conjunction with a high deductible health insurance policy. Unlike Flexible Spending Accounts (FSA's) any amount remaining in an HSA at the end of the year is [u]not[/u] forfeited but remains in the account for later use.