HSA plans included in new tax legislation

[shiny]

Check out paragraph 11 of this article:

http://www.washingtonpost.com/wp-dyn...120900272.html

I'm guessing that a lot more of the big players will jump into the HSA game soon.

[TromboneAl]

The package also would repeal a $5,450 limit on contributions to health savings accounts, allowing taxpayers to shelter an unlimited amount of money as long as they choose certain insurance plans with high deductibles.

That seems too good to be true. Unless there's more to it, this would be equivalent to an unlimited Roth IRA that you can use at age 65. I'm guessing there's some fine print in there somewhere.

[Martha]

Hum. The only thing I had heard before was indexing inflation increases in the amounts. I am off with Greg for a walk, if someone doesn't figure it out before I am back, I'll poke around.


Found it before leaving: Not unlimited, instead indexed plus not tied to the deductible.
http://www.cbpp.org/9-26-06health2.htm

[shiny]

Originally Posted by TromboneAl

That seems too good to be true.

After reading Martha's link, you are right! The unlimited part is not true. Being able to max out even if our deductible is lower will be nice though. (Except for the ballooning deficit and the loads more unnecessary health care that I'm obviously - according to the article - going to run out and get )

[Oldbabe]

"Under H.R. 6134, individuals would be allowed to convert up to $5,450 in savings in a traditional IRA that would be otherwise be taxed upon withdrawal to entirely tax-free savings in an HSA."

YAY!

http://www.cbpp.org/9-26-06health2.htm

[gindie]

Press release from the Treasury Department regarding new HSA provisions at: http://www.ustreas.gov/press/releases/hp209.htm

One of the interesting provisions: One-time transfer from IRAs to HSAs.

"The new rules allow for a one-time contribution to an HSA of amounts distributed from an Individual Retirement Arrangement (IRA). The contribution must be made in a direct trustee-to-trustee transfer. The IRA transfer will not be included in income or subject to the early withdrawal additional tax. The transfer is limited to the maximum HSA contribution for the year, and the amount contributed is not allowed as a deduction. Generally, only one transfer may be made during the lifetime of an individual. If an individual electing the one-time transfer does not remain an eligible individual for the 12 months following the month of the contribution, the transferred amount is included in income and subject to a 10 percent additional tax. "

[kaneohe]

In the post by Gindie (above), is the one-time transfer from IRA to HSA treated as " in place of" or" in addition to" the regular HSA contribution?
When I read the press release in the link posted by Gindie (see section on transfer from FSA to HSA where it specifically mentions "in addition to" and section on transfer from IRA to HSA where it does not do so), I get the impression that transfer from IRA to HSA is "in place of" and not "in addition to". Hope that I am wrong but if it is "in place of", is there any advantage to doing that if you have the funds to do a regular HSA contribution?

[Craig]

Thanks for the info ... we're moving our group health plan to an HSA approach at the end of Q1. Premiums were going to rise substantially due to our claims and shock losses this year. Nice to see more logic being pushed on to the system, and the patient becoming the customer again, instead of the HMO / PPO / employer.

[larry]

Originally Posted by kaneohe

In the post by Gindie (above), is the one-time transfer from IRA to HSA treated as " in place of" or" in addition to" the regular HSA contribution?
When I read the press release in the link posted by Gindie (see section on transfer from FSA to HSA where it specifically mentions "in addition to" and section on transfer from IRA to HSA where it does not do so), I get the impression that transfer from IRA to HSA is "in place of" and not "in addition to". Hope that I am wrong but if it is "in place of", is there any advantage to doing that if you have the funds to do a regular HSA contribution?

I believe that it is in place of and not in addition to.

I see no benefit if you already have the cash to fund the HSA unless you are close to retirement and need to pull some IRA money to prevent having to pay taxes on the money. As I understand it, the transfer contribution would not be allowed as an income adjustment on your taxes and has to be a direct transfer.

[kramer]

I have been reading through all of the HSA threads

I liked this new provision of the new law:

Full HSA contribution regardless of month individual becomes eligible. Normally, the HSA contribution is pro rated based on the number of months that an individual during the year a person was an eligible individual. The new provisions provide an exception to this rule that will allow individuals who become covered under an HSA-eligible plan in a month other than January to make the maximum HSA contribution for the year based on their coverage in the last month of the year. This eliminates a common barrier to switching to HSA-eligible coverage. If an individual does not stay in the HSA-eligible plan 12 months following the last month of the year of the first year of eligibility, the amount which could not have been contributed except for this provision will be included in income and subject to a 10 percent additional tax.

Kramer

[mykidslovedogs]

Originally Posted by Charles

Thanks for the info ... we're moving our group health plan to an HSA approach at the end of Q1. Premiums were going to rise substantially due to our claims and shock losses this year. Nice to see more logic being pushed on to the system, and the patient becoming the customer again, instead of the HMO / PPO / employer.

Charles, as a broker selling primarily to small groups, we are seeing a large number of small employers either switching to or adding an HSA to their benefit mix. We are finding so much savings in premiums, that the employers are able to fund either all or a portion of the deductible into the group member's HSA accounts for members to use as first dollar coverage towards medical expenses.

I posted this earlier in the year, but it looks like this group could use to see it again:

http://www.alston.com/articles/HSA%2...1206023815.pdf

A few pages into the article is a chart showing the "old" rules and the new rules, effective 1/1/07.

[Rich_in_Tampa]

Originally Posted by mykidslovedogs

I posted this earlier in the year, but it looks like this group could use to see it again:

http://www.alston.com/articles/HSA%2...1206023815.pdf

Thanks for the info, MKLD. I was thinking about switching to our high-deductible HSA plan here the year before I retire, just to have a little balance built up while I am still earning money. In our case, the premiums are about $1k apart (family plan) compared to the high-end BCBS plan, but my employer picks it up, so no reason to change sooner.

I'm hoping they make individually paid premiums tax deductible by then.