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Since this blog is dedicated to offering the most up-to-date Health Savings Account information, we want to make sure you maximize your HSA for 2010. Remember, if you were covered by an HSA qualified High Deductible Health Plan (HDHP) on or before December 1st, 2010 then you have until you file your taxes (or April 15th 2011) to finish up your 2010 contributions and get a 2010 tax deduction.
2010 Contribution limits:
Single – $3050
Family – $6150
Catch up contribution (age 55 or older) $1000 per person*
2011 Contribution limits:
Single – $3050
Family – $6150
Catch up contribution (age 55 or older) $1000 per person*
*If both are 55+ then both have to open HSA accounts for both to participate in catch up contribution
These limits are also stated on the U.S. Department of Treasury website.
These maximum contributions will not be pro-rated if your HSA qualified health insurance plan (HDHP) was either in force all 12 months of 2010 OR if it was in force by December 1st of 2010 AND remains in force all 2011.
Your tax deduction is based on how much you DEPOSIT into your HSA, not how much you spend.
You do not have to itemize to get the tax deduction.
You do NOT have to pay your eligible expenses out of your HSA.
You are required to keep receipts of your eligible expenses in case the IRS audits you. You can choose to reimburse yourself at a later date up to the medical receipts you have accumulated without being subject to 20% penalty or taxable income.
The triple-tax advantages (tax deductible deposits, tax free interest earned, and tax free withdraws for eligible medical expenses) only available with HSAs make them an important tax planning tool that is unmatched when used properly.
Other statistics show that nearly half of the 10 million Americans covered by the required HDHP insurance plans have not established their HSA account, and therefore are not participating in the tax savings they offer. Although OFM Benefits is one of the nation’s premier HSA focused insurance agencies, there are probably some of you that have procrastinated setting up your account. If you have been covered by your HDHP before or on December 1st, 2010 and haven’t set up your HSA, it’s not too late!
OFM is proud to recommend HSA Bank because of their great combination of low fees, competitive interest rates, and a large number of investment options. With over 350,000 HSA accounts and over $1 billion in HSA deposits, HSA Bank has established themselves as one of the nations leading HSA administrators. They also recently eliminated all setup fees.
As many Americans are facing huge health insurance premium increases and revenue decreases, HSA qualified plans are becoming even more popular. The average household pays over $13,000 per year for health insurance premiums! We feel HSA qualified plans offer the best value in healthcare today.
If you are self employed or a business owner and would like to receive the premium savings and tax deductions only available with HSAs, please visit www.missionHSA.com
Scott Borden
Host of “Insurance Talk with Scott & Mike” Saturday mornings 7-8 on KCMO Talk Radio 710
OFM Benefits Consulting, LLC
6400 Glenwood, Suite 307
Overland Park, KS 66202
913-432-2732
913-432-2061 fax
5 Comments
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Question: While I like the HSA in principle, and found your article the most informative yet, there seems to be one inaccuracy: When I search insurance comparison sites like InsureMonkey, it seems like the HSAs actually cost *more* than the PPOs. Am I missing something? They’re charging me more to pay out of pocket for most of my medical care, than if they cover me for a lot of it, prior to deductible. What are the insurance companies up to?
Thanks for the compliment on my blog! I am not aware of InsureMonkey or which insurance companies they represent. Once the total policy is evaluated including total out-of-pocket maximum (deductible+coinsurance+unending copays), prescription drug coverage (which can exceed $1000 per week in a cancer situation), HSA qualified plans offer the best value not only for healthy people but also in a catastrophic scenario. Call me (913-432-2732) so we can discuss your plan options and see if you are looking at the most competitive policies for your area.
You also hit on one of my pet peeves… every HSA qualified plan I know of is also a PPO plan. This makes some people assume that if they choose a HSA qualified plan they don’t get the insurance company negotiated discount on services which is wrong. I’ve seen as much as 90% of some hospital bills be removed from my HSA clients due to their High Deductible Health Plan’s (HDHP) PPO network.
As for your last question, “What are the insurance companies up to?”, I don’t have a clue.
Scott
I bought the plan you recommended. Very happy about it. So how does the maximum contribution work? Meaning:
1. I fund my HSA with say $4000 to start.
2. I have an accident that costs $4000
3. I pay out of my HSA
4. I have supplemental insurance that reimburses me the $4000
5. That makes the money I took out ineligible as a withdrawal, because I was reimbursed for it by a kind of insurance
6. So I put their $4000 back in. But that puts me over the annual limit of $6150.
This suggests either I don’t understand how the investment/withdrawal works entirely yet, or there’s some hidden feature that I haven’t gleaned yet, or else no… I really am in trouble in both cases, and get penalized on taxes for an illegitimate withdrawal, and again penalized for an overage.
Let’s start by making sure you do not overfund your Health Savings Account (HSA). If you have only yourself covered you can put $3050 in your HSA for this year. I assume you have Family Coverage and can contribute up to the maximum of $6150. You paid for your $4000 accident using the tax free dollars you already saved in your HSA. You were then fortunate enough to be reimbursed for your $4000 expense thanks to your supplemental plan. You could then take $2150 of the $4000 to make your annual maximum contribution for the year remembering what you do not spend in eligible medical expenses will roll over to next year. Come January if you still have the remaining $1850 you would have a head start to your maximum contribution. Remember you can own other types of insurance with your HSA qualified plan like specific injury insurance or accident, disability, dental care, or vision care and still pay those expenses from your HSA.
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