In the current year, Magnum Corporation began offering Devin and other employees access to a high deductible health savings plan and an accompanying health savings account (HSA) through a Section 125 Cafeteria Plan. Which of the following statements regarding the income tax treatment is CORRECT?

1. Contributions to the health savings account avoid federal and state taxes, but not FICA taxes, in the current year.
2. Contributions into the health savings account must be used before December 31st of the plan year.
3. Starting at age 65, funds from the health savings account can be withdrawn penalty free for non-medical related uses.