Show #245 Airing: Sunday, February 29, 2004
Medical costs keep going up, and up, and up, and up. We all know that. But you may not know about a new tool, called a Health Savings Account, that could help save you money. Here to tell us about Health Savings Accounts is Jim Lineweaver of Lineweaver Financial Group.
Question: What is a HSA?
Answer: A Health Savings Account helps individuals save for qualified medical and retiree health expenses on a tax-free basis. This is different than Flexible Spending Accounts, which many employers offer. In FSA’s, any money you don’t use in a year is lost. In a HSA however, the monies are rolled over.
Question: Who is eligible to contribute to a HSA?
Answer: Individuals under the age of 65 who have a qualified health plan. This includes both those who are self-employed and those working for a company.
There are not a lot of qualified health plans out there. Talk to your human resource department.
Those over 65 and under Medicare are not eligible.
For self-only policies, a qualified health plan must have a minimum deductible of $1,000 with a $5,000 cap on out-of-pocket expenses (indexed annually).
For family policies, a qualified health plan must have a minimum deductible of $2,000 with a $10,000 cap of out-of-pocket expenses (indexed annually).
Question: How much money can you contribute to a HSA? How much will it earn?
Answer: Contributions are allowed up to 100% of the health plan deductible.
The maximum annual contribution is $2,600 self-only policies and $5,150 for family policies (indexed annually).
Individuals age 55-65 may make additional “catch-up” provisions of up to $500. A married couple can make two catch-up contributions as long as both spouses are at least 55.
Investment earnings accrue tax-free. The earnings average to around 3%.
Question: For what expenses can you pull distributions out tax-free?
Answer:
- Prescription drugs
- Qualified long-term care services and long-term care insurance (While long-term care insurance premiums are deductible at the state level, they aren’t typically at the federal level. HSA’s make them 100% deductible).
- Amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease
- Continuation coverage required by Federal law
- Health insurance for the unemployed
- Medicare expenses (but not Medigap), and
- Retiree health expenses for individuals age 65 and older.
Question: What happens if you turn 65 and you haven’t used the funds yet?
Answer:
- The money can come out as if it were a retirement plan.
- Taxes would need to be paid when the money was withdrawn.
Health Savings Accounts are complicated. But they offer some true opportunities for savings. For more information, or a free information sheet, call the number coming up. My thanks to Jim Lineweaver.
Jim Lineweaver is a registered representative of and offers securities through Walnut Street Securities, Inc. (WSS) Member NASD/SIPC.
Branch Office:
9050 Sweet Valley Drive,
Valley View, OH 44125
216-520-1711
WSS does not offer tax or legal advice.
Lineweaver Financial Group is not a subsidiary or affiliate of WSS.
Material discussed is for information purposes only and should not be the basis for any investment decisions.
