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Old 11-01-2013, 09:17 AM   #61
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Originally Posted by kaneohe View Post
Name one other plan that has the triple threat of contribution deductible, earnings tax deferred, and withdrawals tax free.
So let me get this right:

1. Let's say I show income of $88K and put $8K in HSA. I then only pay taxes on $80K?

2. The HSA makes $2K in a year. I pay no taxes on that?

3. When I do go to use the money, I pay no tax?

This sounds almost too good to be true.
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Old 11-01-2013, 09:23 AM   #62
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Originally Posted by mikefixac View Post
So let me get this right:

1. Let's say I show income of $88K and put $8K in HSA. I then only pay taxes on $80K?

2. The HSA makes $2K in a year. I pay no taxes on that?

3. When I do go to use the money, I pay no tax?

This sounds almost too good to be true.
A few qualifiers. Your limit for an HSA contribution for 2014 is $3300 individual / $6350 family. if you are over 55, an additional $1K. You pay no taxes when you withdraw the funds and use them to pay eligible medical expenses. Otherwise, yes, it's a pretty good deal.
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Old 11-01-2013, 09:32 AM   #63
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Originally Posted by kaneohe View Post
Many (or at least some) credit unions do it for free......Alliant, for one.
Turns out my credit union does offer an HSA. On the one hand they do not seem to charge an explicit fee, except for unusual services. On the other hand, the annual interest rate yield would be 0.1% on balances from $1000 to $9,999.
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Old 11-01-2013, 09:43 AM   #64
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Turns out my credit union does offer an HSA. On the one hand they do not seem to charge an explicit fee, except for unusual services. On the other hand, the annual interest rate yield would be 0.1% on balances from $1000 to $9,999.
On low balances, not having a fee is a good deal. $45 on $1000 is 4.5%. Mine is at my credit union getting 1.5%, no fees. At some point I may move it where I can earn more but most of my tax-protected money is in bonds and this is doing better right now anyway, with no fees.
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Old 11-01-2013, 09:58 AM   #65
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Didn't read the whole thread, so I don't know if its been mentioned yet, but if you have an HSA with your employer, you can use the HSA funds to pay for your COBRA if you choose to do this option when you retire. Not sure if you could use the HSA to pay for an independent policy thru ACA, but it might be possible.
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Old 11-01-2013, 10:01 AM   #66
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Ziggy, I to am getting more confused by the minute. My link above showed that ACA calculations allowed Traditional IRA contributions to reduce your MAGI for ObamaCare. Now I find this link that says the opposite:

ObamaCare Calculator: Subsidies, Tax Credits, Cost Assistance
Cedar, there's no doubt the second link you provided is incorrect on this, the IRS language clearly defines O-MAGI as starting from adjusted gross income, which excludes retirement plan contributions.

The second website you linked does not disclose ownership or affiliations, so it is not possible to determine if they have an agenda or even if their error is unintentional or not. There are enough sources of high quality analysis, such as KFF and Health Reform GPS, and we also can access ACA research topics from organizations such as Congressional Research Services. You can find many of these in the FAQ section of E-R Forum
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Old 11-01-2013, 10:15 AM   #67
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Didn't read the whole thread, so I don't know if its been mentioned yet, but if you have an HSA with your employer, you can use the HSA funds to pay for your COBRA if you choose to do this option when you retire. Not sure if you could use the HSA to pay for an independent policy thru ACA, but it might be possible.
Yes, HSAs aren't usually allowed to be tapped to pay health care premiums, but they are allowed to pay COBRA premiums or other health insurance premiums while one is collecting unemployment.

HSAs that are funded directly through payroll deductions have other advantages, too -- the money used to fund them directly from a qualified cafeteria benefits plan is also exempt from Social Security and Medicare taxes, while funding outside of payroll deductions is not. Even 401K contributions aren't exempt from SS/Medicare taxes, but HSA contributions done the right way are.
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Old 11-01-2013, 10:19 AM   #68
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Thanks so much for the HSA info.

The plans I am considering are HSA compatible. I didn't really have this option before.

Wow - no income limitations? - that's so unusual for a tax deductible benefit. And lowering AGI and MAGI - even better! This might really help us.

Looks like you can use it to pay medical bills in the near future, or use it for long-term tax free savings/investment to cover medical bills in retirement. I suspect many of you are doing the latter.

Now the severe limitations on deducting medical expenses on Schedule A don't hurt so much. You can save pre-tax dollars to pay them when you need to.

Downside - lots of record keeping, and for a long period; extra forms to file with the 1040; and HSA fees are a bit stiffer than regular accounts.

Some HSA accounts are not available except through an employer - for example Fidelity Investments.

But still quite a few options and flavors. Which HSA custodians are people using?

Can I open an HSA account at any time during the year when my health plan is HSA qualified? There is no timing link to signing up for the health insurance plan, right?

Audrey
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Old 11-01-2013, 10:26 AM   #69
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Downside - lots of record keeping, and for a long period; extra forms to file with the 1040; and HSA fees are a bit stiffer than regular accounts.

Some HSA accounts are not available except through an employer - for example Fidelity Investments.

But still quite a few options and flavors. Which HSA custodians are people using?

Can I open an HSA account at any time during the year when my health plan is HSA qualified? There is no timing link to signing up for the health insurance plan, right?
Yeah, you have to keep a file with all the medical bills you've paid with the HSA in case the IRS comes knocking.

Most HSAs I've seen waive fees once you reach a certain minimum balance (often $5-10K). A $5K minimum balance isn't a problem if you have a family HDHP since you can open it with a single contribution over $5K but a higher minimum to avoid fees may require two years or more. My HSA is with UMB, only because that's what Megacorp used, I have a large enough balance to avoid monthly fees and it hasn't been worth moving it. (It has a balance of about $25K and only generates about $10 per month in interest.)
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Old 11-01-2013, 10:36 AM   #70
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That is how I have always understood it that Traditional IRA will reduce the MAGI. Here is a graph that I think explains the deduction:
ttp://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf
Great chart, thanks for the link.

Note that this is also different from the MAGI for the new Medicare surtax on Net Investment Income (NII). That does not include tax exempt bond interest income.
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Old 11-01-2013, 10:46 AM   #71
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Cedar's link is one of those I'd mentioned as sowing confusion. Although it ts splashed with red-white-and-blue all over, it is not "official" in any sense. Not sure who is behind that "Obamacarefacts" site and what their agenda is. Being the skeptic I am I wouldn't rule out some nefarious motive. There are many more links which give the same wrong information. It's possible that this was one of the proposals that was being hashed out while the law was still being cooked.

From all the available info currently, it seems reasonable to conclude IRA deduction brings your MAGI down for ACA purposes. This is really great in being able to control MAGI for a smooth landing in the spot you want. But what this allows is to do it well after all your 1099's. dividend statements, cap gains etc. that form your tax-inputs arrive. You have until April 15th to add as necessary, provided you have headroom left.

While we are talking about HSA.. (in reply to mikefixac's comment), I would like to note this following.

There is a max contribution limit -- around $3250 adjusted for inflation.

Unlike an inherited IRA which offers gradual withdrawal by your heirs, only your spouse can inherit it as an HSA with the tax benefits continuing. For all others it will be treated as immediate cash out with taxes due at the year end of transfer.

No more withdrawals for OTC medication and supplies. They tightened it up in 2010. Allowed uses are only for prescription drugs, and other things controlled by the healthcare Mafia.

I have had very good experience with hsabank as the custodian of my HSA. (hsabank.com); In the past 10 years I've been with them, I have not found anyone comparable in service/cost.
They are an online only outfit, at least for most of us who don't live in WI. Their fees are reasonable. After a minimum balance, they allow TDAmeritrade brokerage investing. With some Vanguard ETF's in there you can do wonders to your account. Withdrawal is through a debit visa card.
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Old 11-01-2013, 10:53 AM   #72
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Cedar's link is one of those I'd mentioned as sowing confusion. Although it ts splashed with red-white-and-blue all over, it is not "official" in any sense. Not sure who is behind that "Obamacarefacts" site and what their agenda is. Being the skeptic I am I wouldn't rule out some nefarious motive. There are many more links which give the same wrong information. It's possible that this was one of the proposals that was being hashed out while the law was still being cooked.

From all the available info currently, it seems reasonable to conclude IRA deduction brings your MAGI down for ACA purposes. This is really great in being able to control MAGI for a smooth landing in the spot you want. But what this allows is to do it well after all your 1099's. dividend statements, cap gains etc. that form your tax-inputs arrive. You have until April 15th to add as necessary, provided you have headroom left.
I wouldn't necessarily assume nefarious motives. But at minimum I do agree that the multiple IRS definitions of MAGI are causing extreme confusion here.

If deductible IRAs do indeed reduce MAGI for ACA purposes, that's even better than using a 401K since you can run the numbers in January and see how much you need to contribute to "step away from a cliff" when filing your taxes (assuming you can contribute to a deductible IRA).
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Old 11-01-2013, 11:18 AM   #73
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I have had very good experience with hsabank as the custodian of my HSA. (hsabank.com); In the past 10 years I've been with them, I have not found anyone comparable in service/cost.
They are an online only outfit, at least for most of us who don't live in WI. Their fees are reasonable. After a minimum balance, they allow TDAmeritrade brokerage investing. With some Vanguard ETF's in there you can do wonders to your account. Withdrawal is through a debit visa card.
Thanks!

Anyone use HSA Administrators which provides access to 22 Vanguard funds (mostly Admiral)? They use HSA Bank, but only for HSA management. Health Savings Account - HSA Administrators
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Old 11-01-2013, 11:21 AM   #74
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+1 on HSA Bank.
Audrey, their site is very easy to work with, and you can link your checking/savings account to your HSA for the annual movement of $ to fund the HSA. Lots of good info on their site, as well as good support by email or phone.

They are a division of Webster Bank.

Edited to add: when I did my research 3 years ago to set up this account, HSA Bank turned out to be the winner in terms of fees. You may want to use that as a comparison to the other administrators you are considering.

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Old 11-01-2013, 11:23 AM   #75
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Thanks!

Anyone use HSA Administrators which provides access to 22 Vanguard funds (mostly Admiral)? They use HSA Bank, but only for HSA management.
I've looked at them, but their $45 annual fee turned me off. There seems to be no way to avoid it, either, whether with a minimum balance or online statements.
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Old 11-01-2013, 11:23 AM   #76
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HSAs can be used to pay LTCi premiums up to specified IRS limits.
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Old 11-01-2013, 11:35 AM   #77
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I've looked at them, but their $45 annual fee turned me off. There seems to be no way to avoid it, either, whether with a minimum balance or online statements.
As compared to whom?

All the other custodians that offer investment opportunities such as Chase, or HSA Bank with its Ameritrade account charge extra monthly fees for them on top of their bank account fees which add up. The JPMorgan and American Century mutual funds offered through chase have much higher expense ratios.
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Old 11-01-2013, 11:40 AM   #78
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I've not seen a (non-employer based) HSA account anywhere that didn't have high fees. If the intention is to leave the money invested and defer use to the future, HSA bank and HSA Adminstrators look like good options.
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Old 11-01-2013, 11:59 AM   #79
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As compared to whom?

All the other custodians that offer investment opportunities such as Chase, or HSA Bank with its Ameritrade account charge extra monthly fees for them on top of their bank account fees which add up. The JPMorgan and American Century mutual funds offered through chase have much higher expense ratios.
HSAbank waives all the fees provided you keep a specified balance parked in the bank account. The required amount started out at $3K a few years ago, and has slowly crept up. Now they have put it on auto-pilot and tied it to the contribution limit itself! It is listed as the average of single and family HSA contribution limits. Very clever. It works out to about $5K/year of dead money with the zero interest rates at present. Any money above that, you can move to TD Ameritrade and invest.

If you don't have the required balance the fees are $2.50/month to keep the account, and an additional $3/month for investment account.

http://www.hsabank.com/~/media/files/fees_s1

One of the things that tripped me up in HSA was how to split my contribution and spouse's contribution. With all the talk about family HSA limit, I was lulled into thinking it can all be kept in one account. HSA treatment is just like an IRA and it is individually titled and tracked. So your spouse's contribution should go in his/her own separate account, but the combined contribution should be under the limit. It is not clear whether you can put all the money in one individual's account if you have a family plan. But we were each under our own individual HDHP plans. When I found out, I had to take out the excess contribution in my acct. and open a separate account for my spouse. Fortunately, I caught that in the first year itself and unwinding was fairly easy.
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Old 11-01-2013, 12:33 PM   #80
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I've not seen a (non-employer based) HSA account anywhere that didn't have high fees. If the intention is to leave the money invested and defer use to the future, HSA bank and HSA Adminstrators look like good options.
That's how things seem to be leaning....

If enough Vanguard ETFs are commission free at TD Ameritrade, that looks like a good option compared to HSA Administrators.
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