A Health Savings Account (HSA) is a tax-exempt custodial account established exclusively for the purpose of paying qualified medical expenses of you and your family.

Contributions to an HSA are fully tax deductible, the earnings grow tax deferred, and distributions for qualified medical expenses are tax free.

You are eligible to make or receive regular contributions if, in any month, you

• Are covered under a high-deductible health plan (HDHP) on the first day of such month
• The minimum deductible for 2007 for individual HDHP coverage is $1,100 with a maximum out-of pocket expense limit of $5,500.  The minimum deductible for family HDHP coverage is $2,200 with a maximum out-of-pocket expense limit of $11,000.
• The minimum deductible for 2008 for individual HDHP coverage is $1,100 with a maximum out-of pocket expense limit of $5,600.  The minimum deductible for family HDHP coverage is $2,200 with a maximum out-of-pocket expense limit of $11,200.
• Are not covered under another type of health plan that is not an HDHP (with some exceptions)
• Are not entitled to benefits under Medicare (generally, have not attained age 65);
• May not be claimed as a dependent on another individual’s tax return.

For 2007, an HSA owner no longer determines his or her HSA contribution limit by comparing the standard limit to his or her high deductible health plan (HDHP) deductible.  An HSA owner simply determines his or her contribution limit based on contribution limits specified in the IRS code for either self-only coverage--$2,850 or family coverage--$5,650.  Those who have attained age 55 by the end of their taxable year but have not attained age 65 may make an additional “catch-up” contribution of $800.

For 2008, an HSA owner simply determines his or her contribution limit based on contribution limits specified in the IRS code for either self-only coverage--$2,900 or family coverage--$5,800.  Those who have attained age 55 by the end of their taxable year but have not attained age 65 may make an additional “catch-up” contribution of $900.

The contribution deadline for most taxpayers is April 15.

Your HSA funds will roll over from year to year. This is not a “use it or lose it” account.

At Exchange State Bank, your HSA funds will be held in an interest bearing checking account with money market tiered rates.  Funds may also be deposited in time certificates.  You have the option of paying your medical bills by check or debit card.  No minimum balance and no fees.

For additional information, call us at 815.493.2631.

For more information, e-mail us at: deposits@lanarkbank.com