What is a Medical Savings Account (MSA)?
A Medical Savings Account (MSA) is a healthcare savings account associated with self-employed individuals and small businesses (defined as those with under 50 employees). They operate similarly to a Healthcare Savings Account (HSA) offered by organizations to their employees.
An individual must have a high deductable healthcare plan in order to qualify for an MSA. An MSA allows an individual to set aside earnings for healthcare tax-free, usually capped by a percentage of the amount of the deductible. The funds can be used solely for qualifying medical and medical-related expenses incurred that are not otherwise covered by a healthcare plan.
MSAs can rollover all unspent amounts from year-to-year. The funds in an MSA are also portable, meaning they can be carried over to a new employer. The funds in an MSA can also be transferred into an employer sponsored Health Savings Account (HSA) with no penalties.