Health Savings Accounts Come Under Fire

For healthy individuals who can afford to make large contributions, the benefits go beyond medical: after age 65 participants can withdraw income -- penalty-free -- and use it on non-medical expenses.

Money deposited into an HSA can be deposited pretax or claimed as an above-the-line deduction, earnings grow tax-free, and no taxes are taken out when funds are used for qualified medical expenses. Though younger people who withdraw funds for nonmedical expenses are subject to taxes and a 10% withdrawal penalty, people over 65 can use the money for other expenses, and it's taxed only as income.

Those looking to skirt the law and withdraw the money early for other uses, face very little risk of being caught: the only oversight to HSA spending is IRS audits, and fewer than 1% of taxpayers are audited every year.

"This is sounding more and more like a really good tax shelter if you happen to have a lot of money if you've maxed out on your [401(k) or IRA]," said Rep. Becerra. "It sounds to me like a Ponzi scheme here."

« Previous Page

1 2 3

Next Page »