- 9,744
Many companies offer preventive benefits in front of the deductible.
Hsa Question
- Thread starter Go Green
- Start date
Many companies offer preventive benefits in front of the deductible.
I dunno guys... I would try to make sure in my presentation that the client (prospect) keeps the distinction between the health insurance (the HDHP) and the tax advantaged savings plan (HSA) separate. Telling them the HSA "gives them a PPO discount that goes against their deductible" is mixing the setup.
I also would make sure they understand that the HSA is one half the setup: the SAVINGS portion. It is the ONLY triple tax advantaged savings plan allowed by the IRS and doubles as a source of funding for medical and retirement SAVINGS. 1) money put in is tax exempt 2) interest earned is tax exempt 3) money taken out for tax-qualified medical expenses is tax exempt. The other half is the HEALTH PLAN, and must have a High Deductible. This allows very low premiums, which is the main point. This is where they save on health insurance costs.
I would also make sure they understand they can take the HSA with them wherever they go, and withdraw funds whenever they want. If the withdrawals are not for tax-qualified medical expenses, then they must pay the IRS a 10% penalty if they are under 59 1/2 (same rule as IRA) and taxes at their earnings rate. At 65, they drop the required HDHP because they qualify for Medicare, no longer allowed to contribute, but can still withdraw, either for medical or retirement. They can think of it as a medical IRA.
I would keep the discussion of medical insurance deductibles, etc. to the HDHP schedule of benefits, because this changes with the HDHP should they change to another carrier, or when Medicare kicks in.
YMMV.
I also would make sure they understand that the HSA is one half the setup: the SAVINGS portion. It is the ONLY triple tax advantaged savings plan allowed by the IRS and doubles as a source of funding for medical and retirement SAVINGS. 1) money put in is tax exempt 2) interest earned is tax exempt 3) money taken out for tax-qualified medical expenses is tax exempt. The other half is the HEALTH PLAN, and must have a High Deductible. This allows very low premiums, which is the main point. This is where they save on health insurance costs.
I would also make sure they understand they can take the HSA with them wherever they go, and withdraw funds whenever they want. If the withdrawals are not for tax-qualified medical expenses, then they must pay the IRS a 10% penalty if they are under 59 1/2 (same rule as IRA) and taxes at their earnings rate. At 65, they drop the required HDHP because they qualify for Medicare, no longer allowed to contribute, but can still withdraw, either for medical or retirement. They can think of it as a medical IRA.
I would keep the discussion of medical insurance deductibles, etc. to the HDHP schedule of benefits, because this changes with the HDHP should they change to another carrier, or when Medicare kicks in.
YMMV.
- 9,744
Excellent post. A couple of suggestions on semantics though...
High deductibles? I don't think $1,100 for a single, and $2,200 for a family (minimums for '08) are considered "high" by today's standards.
"Tax-exempt" is not the correct terminology.
Deposits are "tax-deductible".
Earnings are "tax-deferred".
Qualified withdrawals are "tax-free".
OK, I'll grant you some of your points, but you are not consistent with your critique, as you hold me accountable for technical terms when you, yourself switch to opinion in your discussion of "High Deductibles".
It is true that perhaps $1,100 deductible (the minimum required by the regulation) is not "high" relative to the market. However, it is "High" under the IRS rule.
The differentiation between "tax-deferred", "tax-deductible", and "tax-free" (I used the word "tax-exempt) depends mainly on how you file your taxes.
If you are an employee on a cafeteria plan, your contributions are seen as tax EXEMPT, i.e., no P/R taxes deducted from your wages. If not on a cafeteria plan, you file at EOY, and ask for a DEDUCTIBLE allowance on your return, typically on Sched A, or on the 1040 "above the line", etc. In the case of HSA contributions, you may or may not qualify for that deductible which is determined by conformance to the IRS regs. If disallowed, you pay taxes on it, e.g. you make more than the allowed maximum annual contribution.
If an employer (or self-employed), you may file Sched C and list DEDUCTIBLE business expenses.
If your savings plan earns interest, it is tax DEFERRED to the extent that taxes are not due until they fall into a taxable category. It is possible that they may never become taxable.
Tax-free, (like municipal bonds, etc.) is when you pay no taxes on the monies, such as when you withdraw money from a HSA for tax-qualified expenses that you did not pay taxes on, and will not be subject to taxation. No taxes at all.
The overall term I used (tax-exempt) I mean to say "taxed only to the extent subject to IRS tax regulations." If I am not in conformance to the IRS definition of tax-exempt, I apologize. Make the correction as needed.
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- 9,744
From a marketing perspective (really the only one that matters) perception IS reality.
That's why, when dealing with clients and prospects, I always refer to them NOT as a "High Deductible Health Plan", but a "Consumer Directed Health Plan".
- 944
Is there an HSA out there actually crediting a lot of interest? My HSA is through World, I really didnt shop around, just wrote myself up on it, but now I am looking around any my big thing is that I want my money to gain some interest that I can use Tax exempt on qualified medical expenses...
Im in good health, and have been maxing out (if you will) my HSA for a couple of years now in hopes of gaining intrest. Im getting more intrest in my checking account.
any Ideas?
Im in good health, and have been maxing out (if you will) my HSA for a couple of years now in hopes of gaining intrest. Im getting more intrest in my checking account.
any Ideas?
- 14,809
- 944
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