Post by Admin/YBB on Feb 23, 2022 16:15:59 GMT -6
In the following, limits are mentioned as $x/$y, with $x for individuals, $y for families; in most cases, y = 2x.
Health Savings Plans (HSAs, 12/2003- ) have triple+ BENEFITS: Contributions are pre-tax or tax-deductible (itemization with Schedule A is not necessary); account assets grow tax-free; qualified withdrawals under age 65 are tax-free and without penalty; "+" (we can call it 4th but nobody else does that) means that after age 65, ALL withdrawals are without penalty but are taxable (and unlike the IRAs, there are no RMDs). So, the HSAs can serve the dual purposes of qualified healthcare expenses and retirement savings. Some go as far as suggesting to use taxable funds for even qualified expenses, if possible, and let the HSAs build up for retirement (if needed, past qualified expenses with receipts can be self-reimbursed anytime). The HSAs are most beneficial for younger people with lower medical expenses and higher incomes. State tax benefits for HSAs vary by states.
The HSAs are used in conjunction with high-deductible health insurance plans (HDHPs). The HSAs are owned by persons/employees and are portable. Any unspent amounts automatically rollover to the next year. Besides the HDHP, the HSA owners cannot have other health insurance, cannot be dependents; the HSAs become passive (i.e. no more contributions) once the Medicare starts. The HSAs can have BENEFICIARIES, but only spouses can have Inherited HSAs; non-spouses can inherit them only as taxable accounts (net of qualified expenses for the deceased). The HSA SPONSORS may have account and transaction fees.
As their name suggests, the HDHPs have high-deductibles ($1,400/$2,800 in 2022) but also lower premiums. Plans' maximum out-of-pocket expenses are capped ($7,050/$14,100 for 2022).
The HSAs cover qualified healthcare expenses beyond deductibles that are not covered by the HDHPs; amounts beyond deductibles may be split-covered. These qualified expenses include medical, dental, vision, prescriptions, some nonprescription/OTC drugs and products, long term care insurance (LTCI; premiums and expenses), COBRA premiums, Medicare premiums for 65+ (but NOT regular health insurance premiums, nor Medigap/Medicare Supplemental premiums). PENALTY for nonqualified expenses before 65 is 20% plus income tax. Qualified expenses may be past, current or future (so, keep good records). The HSA sponsors may issue HSA debit cards or checkbooks for simplified processing.
The HSAs have maximum annual CONTRIBUTIONS ($3,650/$7,300 for 2022). These can be from individuals themselves, employers, even relatives/friends; all contributions VEST immediately. Additional contributions are allowed for 55+ ($1,000 in 2022). Deadline for contributions for any year is April 15th of the following year. Excess contributions are taxed at 6%. The HSA contributions are not allowed if on Medicare; but the HSA funds can still be used when on Medicare. The HSA funds also remain available after discontinuing the HSA coverage.
Keep good RECORDS for HSA contributions, withdrawals and qualified expenses (past and current, claimed and unclaimed); note that there are no deadlines for self-reimbursements that are supported by receipts/records. While prior approvals are not required for withdrawals, there are severe penalties for undocumented/unsupported qualified expenses.
There are some advantages of EMPLOYER-sponsored HSAs over PERSONAL HSAs. While income tax benefits apply to both, the employer HSAs may offer employer contributions and convenience of payroll deductions (but Social Security and Medicare taxes are avoided on HSA contributions).
The HSAs can be invested according to your personal investment style (but beware of market risks); it is a good idea to keep deductible amounts available as cash in the spending account.
HSA RATINGS
Morningstar has comprehensive ratings for about a dozen HSA plans (see additional links for ratings by others).
2021 - Best HSAs for SPENDING based on maintenance fees, interest paid on deposits, other fees
HIGH: Fidelity, Lively, HSA Bank, HealthEquity, The HSA Authority
AVERAGE: Associated Bank, Optum, Bend
BELOW AVERAGE: Bank of America, PayFlex, HealthSavings
2021 - Best HSAs for INVESTING based on fund variety, mix of active and passive funds, fund fees, spending account balances
HIGH: Fidelity, Associated Bank, Bank of America
AVERAGE: HealthEquity, The HSA Authority, Bend, HSA Bank, Lively
BELOW AVERAGE: PayFlex, Optum
2021 - Best OVERALL (top in both lists): Fidelity
Basics
www.morningstar.com/articles/965982/what-is-a-health-savings-account
www.morningstar.com/articles/812682/morningstars-guide-to-health-savings-accounts
www.investopedia.com/terms/h/hsa.asp
www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp
en.wikipedia.org/wiki/Health_savings_account
www.irs.gov/publications/p969
Best HSA Plans
www.morningstar.com/articles/1060277/the-best-hsa-plans-of-2021
www.morningstar.com/articles/1061885/the-best-health-savings-account-for-investors
www.investopedia.com/best-health-savings-account-providers-5079652
www.bankrate.com/banking/savings/best-health-savings-accounts/
thecollegeinvestor.com/22222/best-hsa/
Health Savings Plans (HSAs, 12/2003- ) have triple+ BENEFITS: Contributions are pre-tax or tax-deductible (itemization with Schedule A is not necessary); account assets grow tax-free; qualified withdrawals under age 65 are tax-free and without penalty; "+" (we can call it 4th but nobody else does that) means that after age 65, ALL withdrawals are without penalty but are taxable (and unlike the IRAs, there are no RMDs). So, the HSAs can serve the dual purposes of qualified healthcare expenses and retirement savings. Some go as far as suggesting to use taxable funds for even qualified expenses, if possible, and let the HSAs build up for retirement (if needed, past qualified expenses with receipts can be self-reimbursed anytime). The HSAs are most beneficial for younger people with lower medical expenses and higher incomes. State tax benefits for HSAs vary by states.
The HSAs are used in conjunction with high-deductible health insurance plans (HDHPs). The HSAs are owned by persons/employees and are portable. Any unspent amounts automatically rollover to the next year. Besides the HDHP, the HSA owners cannot have other health insurance, cannot be dependents; the HSAs become passive (i.e. no more contributions) once the Medicare starts. The HSAs can have BENEFICIARIES, but only spouses can have Inherited HSAs; non-spouses can inherit them only as taxable accounts (net of qualified expenses for the deceased). The HSA SPONSORS may have account and transaction fees.
As their name suggests, the HDHPs have high-deductibles ($1,400/$2,800 in 2022) but also lower premiums. Plans' maximum out-of-pocket expenses are capped ($7,050/$14,100 for 2022).
The HSAs cover qualified healthcare expenses beyond deductibles that are not covered by the HDHPs; amounts beyond deductibles may be split-covered. These qualified expenses include medical, dental, vision, prescriptions, some nonprescription/OTC drugs and products, long term care insurance (LTCI; premiums and expenses), COBRA premiums, Medicare premiums for 65+ (but NOT regular health insurance premiums, nor Medigap/Medicare Supplemental premiums). PENALTY for nonqualified expenses before 65 is 20% plus income tax. Qualified expenses may be past, current or future (so, keep good records). The HSA sponsors may issue HSA debit cards or checkbooks for simplified processing.
The HSAs have maximum annual CONTRIBUTIONS ($3,650/$7,300 for 2022). These can be from individuals themselves, employers, even relatives/friends; all contributions VEST immediately. Additional contributions are allowed for 55+ ($1,000 in 2022). Deadline for contributions for any year is April 15th of the following year. Excess contributions are taxed at 6%. The HSA contributions are not allowed if on Medicare; but the HSA funds can still be used when on Medicare. The HSA funds also remain available after discontinuing the HSA coverage.
Keep good RECORDS for HSA contributions, withdrawals and qualified expenses (past and current, claimed and unclaimed); note that there are no deadlines for self-reimbursements that are supported by receipts/records. While prior approvals are not required for withdrawals, there are severe penalties for undocumented/unsupported qualified expenses.
There are some advantages of EMPLOYER-sponsored HSAs over PERSONAL HSAs. While income tax benefits apply to both, the employer HSAs may offer employer contributions and convenience of payroll deductions (but Social Security and Medicare taxes are avoided on HSA contributions).
The HSAs can be invested according to your personal investment style (but beware of market risks); it is a good idea to keep deductible amounts available as cash in the spending account.
HSA RATINGS
Morningstar has comprehensive ratings for about a dozen HSA plans (see additional links for ratings by others).
2021 - Best HSAs for SPENDING based on maintenance fees, interest paid on deposits, other fees
HIGH: Fidelity, Lively, HSA Bank, HealthEquity, The HSA Authority
AVERAGE: Associated Bank, Optum, Bend
BELOW AVERAGE: Bank of America, PayFlex, HealthSavings
2021 - Best HSAs for INVESTING based on fund variety, mix of active and passive funds, fund fees, spending account balances
HIGH: Fidelity, Associated Bank, Bank of America
AVERAGE: HealthEquity, The HSA Authority, Bend, HSA Bank, Lively
BELOW AVERAGE: PayFlex, Optum
2021 - Best OVERALL (top in both lists): Fidelity
Basics
www.morningstar.com/articles/965982/what-is-a-health-savings-account
www.morningstar.com/articles/812682/morningstars-guide-to-health-savings-accounts
www.investopedia.com/terms/h/hsa.asp
www.investopedia.com/articles/personal-finance/090814/pros-and-cons-health-savings-account-hsa.asp
en.wikipedia.org/wiki/Health_savings_account
www.irs.gov/publications/p969
Best HSA Plans
www.morningstar.com/articles/1060277/the-best-hsa-plans-of-2021
www.morningstar.com/articles/1061885/the-best-health-savings-account-for-investors
www.investopedia.com/best-health-savings-account-providers-5079652
www.bankrate.com/banking/savings/best-health-savings-accounts/
thecollegeinvestor.com/22222/best-hsa/
