Which statement about Health Savings Accounts (HSAs) is true according to the material?

• A. A general savings account.
• B. An account funded by employer contributions only.
• C. Tax-free accounts used for a variety of medical expenses, allowing savings for future healthcare costs.
• D. An account that can be used only for prescription drugs.

Answer: (C)

Health Savings Accounts are tax-advantaged accounts paired with a high-deductible health plan. Contributions are tax-advantaged, earnings grow without tax, and withdrawals for qualified medical expenses are tax-free. This setup lets you save over time and use the funds for a wide range of medical costs now or in the future. It isn’t limited to prescription drugs; you can cover things like deductibles, copays, dental and vision care, and other eligible medical expenses. You can contribute yourself or through your employer, and any unused funds roll over year to year and stay with you if you change jobs. So describing an HSA as a tax-free account used for a variety of medical expenses, allowing savings for future healthcare costs, is correct.