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The Advantages of a Health Savings Account


One of the best ways you can save money on medical expenses is through a Health Savings Account (HSA). An HSA is a great way for you to cover qualified health care expenses and enjoy the benefits of tax-free dollars to put towards medical costs.

At Arkansas Federal Credit Union, we offer HSA accounts to help our members save for medical expenses with a personal HSA that travels with them, even if they change health insurance or leave one job to go to another one. Not only can you save with an Arkansas Federal HSA account, but you’ll also get the benefit of long-term savings rates to grow your HSA.

There are a lot of benefits of having an HSA account, but it’s important to know everything that is included before opening one. Let’s cover the things to consider when using an HSA and the advantages of using one for your medical expenses.

How Does an HSA Work?

A personal health savings account is similar to a regular savings account, but it can only be used to cover medical expenses without paying a penalty. If you use the funds from your HSA account for another purpose, you will be required to pay income tax on those funds as well as a 20% penalty unless you’re 65 or older.

HSA programs are designed to help you save on copays, prescriptions, and other health care expenses that your health plan doesn’t cover. For example, you can use HSA dollars to cover health care costs until you reach your plan’s deductible with a tax benefit of using tax-free dollars.

Beyond helping you save for medical expenses, you also have the added benefit of saving on taxes. Contributions to an HSA account are tax-free, meaning your dollars from your paycheck before taxes can go directly into your HSA account. Contributions can also lower your taxable income, potentially helping you save on income taxes too.

Some employers that offer high-deductible health plans also offer HSAs. However, if they don’t, you have the option to open a personal HSA account if you have a qualifying plan. Each year, you have the option to decide what amount of tax-free money you want to put into the account as long as it doesn’t exceed government-mandated maximums.

Personal HSA accounts can be great options for those who are looking for tax benefits and need extra funds to cover medical expenses. If you choose to open an HSA insurance plan, you will receive a debit card or checks that are linked to the HSA balance to pay for qualified medical expenses.

Health Savings Account Benefits

If you are looking for a way to provide extra coverage for your health care expenses, you may find that there are a number of advantages of HSA. One of the main reasons people choose to use an HSA is because of the various tax advantages that are included as well as a way to set aside money for medical expenses each year. Some of the other benefits include:

Pre-Tax Contributions

If you have an HSA account through your employer, contributions are typically made with pretax dollars. They are not included in your gross income, so they are not taxed by federal or state governments and you may be able to reduce your total tax paid with HSA contributions.

Tax-Free Earnings

One of the biggest benefits to having an HSA is that you get tax-free earnings. Any interest that is accumulated with your account is tax-free. At Arkansas Federal, we offer tax-free earnings when you contribute to an HSA, growing your medical savings without additional tax burdens.

Tax-Free Withdrawals

If you use your HSA to pay for qualified medical expenses, you are not subject to pay federal or state taxes on it.

Tax-Deductible Contributions

If you make contributions to your HSA after taxes, you can deduct them on your tax return, further saving tax dollars and helping cover medical costs.

Annual Rollover

Depending on where you set up your HSA, you may qualify for annual rollovers. At Arkansas Federal, any unused money in your account rolls over for the next year. You don’t have to worry about “use it or lose it” rules.

Supplement Your Retirement

Another significant benefit of having an HSA account through Arkansas Federal is the ability to use it towards retirement. After you reach the age of 65, you can use your HSA funds for non-medical expenses without penalty.

How to Set up a Health Savings Account

In order to apply for an HSA account, you have to first qualify. Qualifications may vary depending on your bank or credit union. At Arkansas Federal, any resident of Arkansas can become a member, however, you must have a HDHP to open an HSA.

In addition, you must also meet a few other requirements to open an HSA.

  • You have no other health care coverage, except what is permitted under “Other Health Coverage,” listed on
  • You are not enrolled in Medicare
  • You are not claimed as a dependent on someone’s tax return
  • You have not received Veteran’s Affairs medical benefits within the past 3 months1
  • You do not have a Flexible Spending Account (FSA) or a Health Reimbursement Account (HRA)

Ready to get started? If you meet the qualifications above, become a member of Arkansas Federal Credit Union and start saving on medical expenses!


1. If receiving treatment or care for a service-connected disability, the three-month rule does not apply. Veterans are also exempt if receiving select preventive care (see US Preventive Services Tasklist of preventive services that receive a grade of A or B.). In other words, if the veteran receives VA medical benefits for a non-service-connected disability during the prior three months, he/she cannot make or receive HSA contributions during this time.

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