At a Plan Sponsor program conducted at New York University recently a group of 20 plan sponsors gathered to talk about issues they face in managing their company retirement plans. One of the hottest topics continues to be Health Savings Accounts (HSA). Health Savings Accounts have been capturing the attention of retirement professionals, especially since the Trump Administration has indicated its desire to overhaul healthcare insurance and has clearly stated its intention to focus on HSA’s.
HSA’s have many tax advantages and are gaining in popularity among plan sponsors and plan advisors. But it was striking that little is known about the HSA features. Here is a primer on the characteristics of a Health Savings Account:
The issue of tax reform has the 401k industry on edge…and that does not seem to be such a bad thing according to many advisors attending the NAPA conference in Las Vegas this week.
Top 10 Things to Know About A Health Savings Account?
- An HSA is a tax-deferred/tax-exempt savings account that can be used for paying medical expenses (usually, but not exclusively with a high-deductible insurance plan),
- Contributions reduce taxable income.
- Earnings on the account build up tax free.
- Distributions for qualified expenses from the account are not subject to taxation.
- The account must be established with a qualified provider and health plan, an you may not have another “first-dollar” insurance coverage,
- It is similar to an Individual Retirement Account (IRA),
- You can use it to pay for a wide variety of qualified medical expenses without being taxed, it’s like a flexible-spending account without the “USE-IT-OR-LOSE-IT” clause,
- Unused balances at the end of the year stay in the account and are invested to continue to grow tax-deferred,
- You can take an HSA from job-to-job without penalty,
- Money in an HSA belongs to the account holder,
- In many cases you can use an HSA to pay for preventative care, even if your deductible is not met,
- When participants turn 65, any remaining funds can be used — without tax penalties — for general retirement expenses, but are subject to income tax,
- Employer can match funds which are also tax-deferred.
Frequently asked questions about HSA’s
Q: What happens to my Health Savings Account when I die?
A: If your spouse becomes the owner of the account, your spouse can use it as if it were their own HSA. If you are not married, the account will no longer be treated as an HSA upon your death. The account will pass to your beneficiary or become part of your estate (and be subject to any applicable taxes).
Q: If both spouses have coverage under separate HSA-compatible health plans, how is the contribution limit determined?
In a situation where each spouse has individual or family coverage under separate HSA-compatible high deductible health plans, the combined contribution for each cannot exceed $6,550.
However, if in this scenario one or both spouses are 55 or older, the additional catch-up contribution may be made on behalf of each eligible spouse.
Q: Can I use the funds in my HSA even if I am no longer enrolled in an HSA-compatible health plan?
Yes, provided the funds are used exclusively for qualified medical expenses as defined by the Internal Revenue Service, the distributions will not be taxed.
Mr. Kelly is an expert in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.
He continues to be a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.
In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.
Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.
Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.
Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.