Definition

• Employee health savings accounts are employer-sponsored plans in which an employee puts money into the plan each pay period and can access the money only to pay for health care needs. Employees often use these plans to pay for health care expenses that their insurance does not cover. For example, people who have serious health problems such as cancer or diabetes may need to use an employee health savings account to help pay for specialized treatment.
  
  

Contribution Limits

• The Bureau of Labor Statistics says that there is no federal law limiting the amount an employee may contribute to her health savings account over a year or over a lifetime. However, individual employers can limit the amount of contributions employees may make to their plans. Commonly, employers limit employees to $2,000 to $3,000 per year. The employee cannot change the terms of the plan during the year unless her family status changes due to birth, marriage or divorce.
  
  

Rollovers

• As of April 2011, employee health savings accounts do not roll over from year to year. If an employee has funds left over at the end of a benefit year, he can neither use them during the next year nor get a reimbursement from his employer for the unused funds. This is why some employers limit the amount of funds an employee may contribute during the year; they do not want the employee to lose unused funds if he does not need as much medical care as his plan allows him to save for.
  
  

Medical Savings Account

• In addition to a cafeteria plan, some employers offer medical savings accounts. These accounts are similar to retirement accounts in that the employee puts money into the account from each paycheck and the accounts can accumulate interest. The employee does not have to pay taxes on the interest until she withdraws money from the account. Employees must have high-deductible health insurance to qualify for this type of plan and may contribute up to 65 percent of their health insurance deductibles each year. Unlike cafeteria plans, medical savings accounts allow employees to roll funds over from year to year.