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SACRAMENTO, Calif. – The California Assembly unanimously approved legislation April 11 that allows state-chartered credit unions to offer members health savings accounts which members can use to offset their health care expenses. AB 434, sponsored by Assemblymember Nicole Parra (D-Bakersfield), cleared the Assembly 78-0. The bill now moves to the state Senate. Federal credit unions can already offer members HSAs. Commenting on the bill’s passage by the state Assembly, California Credit Union League Director of State Government Affairs Ron Fong said, “We applaud the Assembly for recognizing that there should be parity between federal and state credit unions on this matter, so state-licensed credit unions can also play a role in assisting working Californians in meeting their health care costs.” HSAs are congressionally authorized, tax-sheltered savings accounts similar to IRAs, but are specifically earmarked for medical expenses. Taxpayers can deduct contributions to HSAs from their gross income, and the interest and investment earnings generated by the account are also not taxable while in the HSA. Amounts distributed are not taxable as long as they’re used to pay for qualified medical expenses. HSA funds can be used to cover health insurance deductibles and co-payments for medical expenses, prescriptions, or products. HSA owners can also use their funds to purchase over-the-counter drugs and long-term care insurance, as well as to pay health insurance premiums if they become unemployed.

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