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By request of Robyn I'm starting a thread on HSA's. These are the highlights from another thread since it's open enrollment season for pretty much everyone:
An HSA is similar to a flex spend account with a few differences, important ones:
1. the money put into your HSA by you, your employer or anyone is NEVER LOST, it's something you keep forever, can even pass the funds down to heirs if you die.
2. Contribution limits are higher ($2500 for a FSA) $3300 or $6550 for 2014 (individual or family plan). That number goes up each year, or has in the past, by about $100/year or so.
3. Money goes in tax free-either through pre-tax payroll contributions or through a deduction on your taxes at the end of the year
4. The money in those accounts grows tax free-once your account reaches a certain threshold (usually $2000) you have more options for investing from safe, money market type accounts to very high risk stocks and pretty much anything in between. That growth is tax free and you always have access to those funds.
5. You can use the funds tax free for qualified medical expenses. If you are under 65 those expenses are deductibles, copays, out of pocket costs for medical, dental, vision expenses as well as for long term care insurance premiums. If you are older that list expands to Medicare (or MA plan) premiums, assisted living rent, etc. There is a 20% penalty and income tax if you use the funds for other things before you are 65 and just income tax applied if you are over 65, so in that sense it's like a traditional IRA.
6. Name ONE other investment account/retirement account that is tax free to contribute, grow and use!!! .
7. You have to have a qualifying high deductible health plan, but those deductibles are not always that high either. You can't be covered under another health plan or Medicare eligible and you have to be a tax dependent to be able to use the funds in the HSA of the HSA owner.
Those are the highlights anyway.
I LOVE HSA's
In and ideal world you would max out your HSA contribution every year and not touch it so when you retire you have a nice healthy account to pay medical expenses when you retire. In the real world people have budgets and can't do that. If you focus on getting your HSA balance up to your deductible (out of pocket costs) over 2, 3, 4 years and then leave that in there, adding each year as you go along you won't have to worry about medical expenses ever again. If you are fortunate to work for a company that contributes to your plan maybe leave those dollars in the account each year until it's built up and then add money as needed through the year. If you don't have employer contributions, maybe set an amount you can afford to contribute each paycheck or whatever and don't touch that, adding to the account as you go along the year and experience medical expenses. If you get a big tax refund, maybe 1/2 of that goes into your HSA. There are a lot of ways to contribute funds-birthday gifts from your parents maybe . If you are a family that meets their deductible each year, why wouldn't you have a plan like this. You would reduce your taxable income by over $6000 each year. It's harder for a family to build up an account if you do have a lot of medical costs every year but at least you get to utilize the tax savings each year then!!!
I had an HSA when I worked. Great tax-deferred vehicle. I always maxed it out. Reimbursed myself for my Medicare Part B premiums from the HSA when I retired, plus it has covered dental work and other things since then, as well.
ACA Bronze plans should meet the requirements for HSA. I'm recommending my son consider that option when he starts his shopping - lower premium and savings might help offset the high deductibles.
The higher insurance premium is not tax deductible except to the extent premiums and medical expenses exceed 7.5% of adjusted gross income, whereas first dollar contributions to the HSA are.
I had an HSA when I worked. Great tax-deferred vehicle. I always maxed it out.
ACA Bronze plans should meet the requirements for HSA. I'm recommending my son consider that option - lower premium and savings might help offset the high deductibles.
The higher insurance premium is not tax deductible except to the extent it exceeds 7.5% of adjusted gross income, whereas contributions to the HSA are.
Not all bronze plans are tax qualified plans eligible for an HSA. There are some additional requirements under the law for how the deductible is met, etc. in order to qualify but several of the plans, bronze-platinum are HSA eligible.
HSAs are great. I would highly recommend if your employer offered it--actually, this can be a big "IF." The problem is, this is not something you can sign up just because you want to. Your employer has to offer High Deductible Health Plans (HDHP). I had heard about it when it began about 2004 or so, and was interested in enrolling but I couldn't, because my employer didn't offer any one of them. Luckily for my current job, which I started in 2012, they offered this option, so I got it on right away and so far so good.
According to Wikipedia, as of 2012, about 31% of firms offering health insurance offered HSA plans. So, those with this kind of options should consider themselves lucky.
Golfgal explains it very well, but if I could add my own version from a different angle--from the perspective of HDHP, here it goes.
First, for those who are healthy, you often wonder if you really need health insurance and the premium you pay for the insurance feels like a waste of money. This is actually true if you are really healthy so never go to hospital. So as a compromise, here comes a plan called "high-deductible health plan." On the surface, this doesn't look like a great deal because of the high deductible. But considering the lower premium, you actually don't "waste" money as much as regular plans and still get covered for big ticket items for hospital care, etc, should anything big happen, after meeting the deductible. But HDHP alone cannot work well, because if you do need to go to hospital for accident/injury, then you need a big chunk of money for the deductible, so the HSA comes into play here. If you have an HSA--which is almost a "must" if you have HDHP--and carry enough balance, then you don't have to worry about paying out of pocket.
Second, if you are not really healthy and you (semi)regularly rely on medical/dental/vision care, will HDHP be still a good way to go? It can depend on the total health expenses. If they exceed the deductible, then yes, it is for sure. If not, it is possible that maybe regular plans may be better. That really depends on individual plans. But generally speaking, you can't go too wrong by choosing an HDHP-HSA option, because this way some sort of strategies for tax benefits and long-term savings can be set up, which is not possible in regular plans.
One thing to note is, although the premiums for HDHP plans are lower (often substantially lower) than regular plans, you should fund the money that you save for the lower premium to the HSA (or possibly more if you can afford it). Without this savings approach of HSA, HDHP cannot be sustainable. Of course, this is a case where the employer does not contribute to the HSA. If your employer does contribute to the HSA, then you are the luckiest of the luckiest and I would say you are a fool if you don't take advantage of this.
To illustrate how dollars work: say, for family, the premium is $200/mo for a regular plan and $150/mo for a HDHP plan. You wonder here---wait a minute, after all there's not much a difference in the premium? Who said that HDHP is a lot cheaper? The truth of the matter is, the real premium of HDHP is $75/mo but they still take $150 out of your paycheck and $75 pays for the real premium and the other $75 directly goes to the HSA. This is called "pass through." I would call it a "forced saving." These numbers are all just example here, but you get the picture. Following these numbers, in my case, I fund additional $50 for voluntary contribution. I know this fund does not get wasted because that's just my savings--especially this is "pre-tax" savings, very attractive.
In short, HDHP-HSA plans are, in a sense, health insurance options with "forced" savings attached. If you can't help but to have insurance anyway (which is true as of Jan 2014), you are going to pay the premium one way or another, then going for HDHP-HSA can be beneficial under many circumstances (again, if your employer offers those plans).
Another bonus of having the exchanges and just the ACA--if your employer doesn't offer a HSA account and you want one, and it works out financially, you can now sign up for a qualified account
My employer has good health benefits, but offered an HSA last year, and did not this year. (company was purchased in the interim). We seem to be going back to a HMO/POS type model.
I'm sure the benefits will be good (we find out next Monday the exact details) - as we're in a very competitive employer environment, and I'm sure the monthly fee will be very reasonable...
So if I still wanted an HSA, what exactly would I do? Refuse employer-sponsored completely, and go to the exchanges?
I'd come to terms with the fact that that tax-break was gone, but now I'll have to think about this further again...
My employer has good health benefits, but offered an HSA last year, and did not this year. (company was purchased in the interim). We seem to be going back to a HMO/POS type model.
I'm sure the benefits will be good (we find out next Monday the exact details) - as we're in a very competitive employer environment, and I'm sure the monthly fee will be very reasonable...
So if I still wanted an HSA, what exactly would I do? Refuse employer-sponsored completely, and go to the exchanges?
I'd come to terms with the fact that that tax-break was gone, but now I'll have to think about this further again...
Yes, you could go through an exchange and refuse the employer based plan. Too bad about not having the option at work. Maybe they are adding one for 2014 . If you don't get a qualified plan, you can still use the money in your HSA, you just can't add to it or you can just save it for future use since the account belongs to you. You will just have to run the numbers to see if it is worth doing that. It really depends on how much of the premium the new company pays for you.
My employer has good health benefits, but offered an HSA last year, and did not this year. (company was purchased in the interim). We seem to be going back to a HMO/POS type model.
I'm sure the benefits will be good (we find out next Monday the exact details) - as we're in a very competitive employer environment, and I'm sure the monthly fee will be very reasonable...
So if I still wanted an HSA, what exactly would I do? Refuse employer-sponsored completely, and go to the exchanges?
Normally the employer pays a big % of premium and that's especially true for "employers with good health benefits." That's like free money. HSAs are great, but not as good as free money. I wonder why anyone would not take it.
Quote:
Originally Posted by Briolat21
I'd come to terms with the fact that that tax-break was gone, but now I'll have to think about this further again...
Tax break was gone? I haven't heard of that ... Am I missing something?
Normally the employer pays a big % of premium and that's especially true for "employers with good health benefits." That's like free money. HSAs are great, but not as good as free money. I wonder why anyone would not take it.
Tax break was gone? I haven't heard of that ... Am I missing something?
Yes, employers pay 50% or more of a premium, however, those premiums can vary widely and getting a plan off the exchange might be the same cost or less, add in the tax breaks from the HSA contributions and you come out ahead. That is why I said they need to crunch numbers to see if it makes sense to do that. I think the Tax Break he was talking about being gone was not having access to an HSA any longer with the new company.
Yes, employers pay 50% or more of a premium, however, those premiums can vary widely and getting a plan off the exchange might be the same cost or less, add in the tax breaks from the HSA contributions and you come out ahead. That is why I said they need to crunch numbers to see if it makes sense to do that. [u]I think the Tax Break he was talking about being gone was not having access to an HSA any longer with the new company.
Yep!
Read my mind!
I'll wait to see exactly what the company's offering next week, before I check out the exchanges. We were informed (as you said) that the money already in our HSA would still be ours to use for health expenses, but couldn't be added to. My plan was to eventually save enough to cover supplemental care at retirement, but with only 2 years of HSA savings in the account and retirement 25+ years from now, that's a lot less likely to happen..
Last edited by golfgal; 10-15-2013 at 05:13 PM..
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. If you are a family that meets their deductible each year, why wouldn't you have a plan like this. You would reduce your taxable income by over $6000 each year. It's harder for a family to build up an account if you do have a lot of medical costs every year but at least you get to utilize the tax savings each year then!!!
