The Medicare reform bill signed into law in December 2003 by President Bush provided a new option for health care in the form of Health Savings Accounts (HSAs).
Below are a few facts about these accounts:
- HSAs are tax-sheltered medical savings accounts.
- Contributions are 100% tax deductible for employers, as well as either pre-tax or tax deductible for employees.
- To be eligible to establish an HSA account, you must first set up a high deductible, HSA-qualified health insurance plan. Individuals are eligible to set up an HSA if they are not covered by someone else’s health insurance, are not enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax return.
- Maximum contributions are $3,050 for singles, and $6,150 for families. People 55 years of age and over can contribute an additional $1,000 in 2011.
- Deductibles for singles are a minimum of $1,200; and $2,400 for families.
- Out-of-pocket maximums can be up to $5,950 for singles, and up to $11,900 for families.
- The contributions grow tax-deferred until needed. Money withdrawn for qualified medical expenses is tax-free. If withdrawals are not used for qualified medical expenses, then the amount will be taxable. Beginning January 1, 2011, there is a 20% penalty for those under the age of 65.
- Money is readily accessible since most accounts offer the use of checks and/or debit cards.
- Some medical expenses not covered by medical plans may be considered qualified expenses from HSA accounts. Examples include expenses for dental, vision, alternative medicines, etc.
Determining whether HSAs are right for you will, more or less, depend on what your comfort levels are in regards to health insurance. You have to be willing to have a low-cost, high deductible, and potentially, a high out-of-pocket maximum medical plan to be eligible. Some people prefer to pay a little more for health insurance to have the lower deductible as a safety net, so again, it is about personal preference. For more information on this topic, contact Henssler Financial at 770-429-9166 or [email protected].