A retirement health plan is also known as Health Savings. They were established as part of the Medicare Prescription Drug, Improvement and Modernization Act which was signed into law by President G.W.Bush and was developed to replace the Medical Savings Account system.
Retirement health plans are a tax advantaged medical savings account available to taxpayers of the U.S. who are enrolled in a high deductible coverage plan. The funds deposited are not subject to federal income tax at time of deposit. Funds deposited to your retirement plan roll over and accumulate year to year. A savings plan is owned by the individual. Beginning early 2011, you will not be able to pay for over the counter medications with your health plan ( see section 9003 of H.R. 3590). Withdrawals from your retirement health savings plan not used for medical treatment are best used after retirement age. If taken earlier, they may incur penalties.
Funds in your retirement health savings plan can be invested in the same manner as in an individual retirement account (IRA) sheltered from taxation until the money is withdrawn and can still be sheltered.You always need to speak with a financial specialist, CPA or tax attorney before making any investments toward your future.
The benefit to your health plan is generally less of a premium than that of a traditional health insurance plan. Over time, if your medical expenses are low, and contributions are made on a regular basis to your retirement health saving plan, the account can accumulate significant assets that can be used for your health care tax free. They can also be used for your retirement on a tax-deferred basis.