Health Saving Accounts
Helping Consumers Solve The Health Insurance Puzzle
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Health Saving Accounts for Your Health Insurance Needs
 The new personal Health Savings Accounts (HSAs), help pay unreimbursed medical expenses effective January 1, 2004 on a tax-preferred basis was signed into law December 8, 2003 by President George W. Bush. The Health Savings Account must first have a qualified high deductible healthplan. The high deductible healthplan may have deductibles up to a maximum of $5,950 for an individual or $11,900 for a family. HSAs may be established by any individual who is covered by a qualified high deductible health plan with annual contributions limited to $3,050 for individuals or $6,150 for families. Account holders aged 55 and up may make additional contributions of $1,000. The ability of baby boomers to begin saving now for their health expenses during retirement, will save Medicare money in the future and ensure Medicare's financial vitality into the future. Key components: Contributions can be received from the following sources: • Individuals • Employers Contributions may be made by any combination of employer and individual. Employer contributions are excludable from income and individual contributions are deductible "above the line." That is, a taxpayer does not have to itemize deductions in order to take the contribution as a deduction. Employers may offer HSAs as part of a section 125(d) cafeteria plan. Tax Treatment: •Individual contributions are tax-deductible, even if the taxpayer does not itemize •Employer contributions are tax-free •Family member contributions are made on an after-tax basis •Investment earnings accrue tax free •Distributions are tax-free if used for "qualified" medical expenses (all section 213(d) expenses, except health insurance premium payments). Qualified medical expenses include: •Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease •Prescription drugs •Qualified long-term care services and long-term care insurance •COBRA continuation coverage required by Federal law •Health insurance for the unemployed •Distributions made for any other purpose are subject to income tax and up to a 20% penalty. The 20% penalty may be waived in certain circumstances •The proposal clarifies that payments to medical service providers through the use of debit, credit, and stored-value cards do not create new reporting requirements for employers •HSA funds may also be used to pay for retiree health insurance premiums other than Medigap. This includes Medicare premiums. Contact Lay & Williams Insurance Services to find out more about this exciting new product. 817-451-8783 1-800-281-8783 Stephen Hildebrandt |
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