Health Savings Account Flashcards
Health Savings Account
an IRC Section 223 Plan that provides tax benefits for amounts accumulated in it to pay health care expenses
What did it replace?
the Medical Savings Account
Who is it available to?
All US citizens under the age of 65
Do you have to be employed?
No
Who can provide it?
Employers for employees
Who can set it up?
self employed individuals, those not covered by employer plans, and those who are covered by employer plans
Where is it held?
At a 3rd party
Sometimes segmented as a separate account on what financial statement?
The company’s balance sheet
To contribute to an HSA, a person must be covered under a……
high-deductible health plan
He or she CANNOT be: (3)
- covered under a non high deductible plan
- 65 or older
- cannot be claimed as a dependent on another person’s tax return
He or she CAN be: (2)
- covered by certain types of “permitted insurance” that don’t have high deductibles (accidents, dental, vision, long term workers comp, hospitalization)
- In a health plan with low deductible or first dollar coverage for preventative care (HMO)
Minimum dollar amount of individual deductible
$1,200
Minimum dollar amount of family deductible
$2,400
What is the annual employer and/or individual, maximum pre-tax contribution to an IRA to pay medical expenses for an individual and for family?
individual - $3,000
family - $5,950
Catch up provision
$1,000 for those 55 and older
You have until _____ of the following year to make the maximum contribution
4/15
Employer or employee contributions to an HSA grow ______
tax-deferred
Before age 65, withdrawals that are not used to meet deductibles or pay for unreimbursed medical expenses are reflected as……
ordinary income plus a 10% penalty
After age 65, a person can make withdrawals from this account …..
for any reason and only has to recognize these withdrawals as ordinary income
When is it indicated?
When employers desire a way to save on insurance costs
Advantages of HSA (6)
- offers tax-saving opportunities to eligable individuals
- any unused funds are not forfeited at year end
- even if employee changes jobs, HSA still goes with him
- no requirements that HSA funds can only be used to pay medical expenses
- qualified plan participant can contribute regardless of income level
- no limits on amount that can be withdrawn per year
Disadvantages of HSA (5)
- No appropriate for tailored benefit plans
- not likely to extend converage to people currently without coverage
- lower income employees may see high deductibles
- taypayers in lower income bracket get less tax benefit
- structure may encourage adverse selection
How can contributions be made?
- directly by an individual
- through salary reductions under an employer’s cafeteria plan
- directly by employers
Do HSA have to be funded?
yes
