Have you heard about “shoeboxing” your HSA receipts? Ever wondered how it works? Check out this quick video to learn how.
We had more than eight inches of snow this weekend in greater Richmond, Va., which means nothing moved for at least 24 hours—48 hours if you didn’t live within eyesight of a major road. So my wife and I did some needed clean-up around the house. We’ve vowed to be more organized for 2017. We went through closets, taking stock of those “we should hang onto this” items we hadn’t touched since we moved in seven years ago. And we organized those things that we hastily put away after the holidays.
Your health savings account deserves similar attention every January. This is the time to do a little housecleaning and organization.
- -Check your deductions.
- -Are you maximizing your HSA contributions? The limits went up $50 for those with individual coverage and remained unchanged for those with family coverage. (Remember that in the eyes of the IRS, if you have more than one person covered on your health plan, you have family coverage.)
- -Are you contributing at least enough to get your full employer match?
- -Will you turn 55 this year, so that you can now contribute the additional catch-up amount?
- -That balance that you’ve been carrying over year-after-year that is sitting in the checking account—should you be investing it?
- -And last, but not least, gather up all those receipts from 2016 and put them in a shoebox (or app) so that you reimburse yourself years from now when that nest-egg has grown into something substantial.
It’s been a great year for HealthSavings. Take a look back with us.
And happy New Year to you and yours!
It would appear that the next several years are looking good for those hoping to find tax-free dollars to pay for medical expenses. President-elect Donald J. Trump’s pick of Rep. Tom Price (R-Ga.) for Secretary of Health and Human Services gives us some more specific insight into the tactics the next administration might use to address healthcare issues. In 2005, Rep. Price introduced H.R. 2300, the Empowering Patients First Act.
Specifically, the bill calls for HSA regulations to be expanded, allowing for:
- A rollover to child or parent of accountholder in the event of the accountholder’s death
- Spouses to make two catch-up contributions in the same HSA, thereby saving fees
- An increase in the contribution limits to be more in line with retirement account funding
- Enrollment in Tricare, or Medicare Part A, without jeopardizing HSA eligibility
- HSA dollars to be used for certain medical events occurring prior to the establishment of the HSA
- HSAs to be treated like IRAs for bankruptcy purposes, and
- Changes in how HRAs and FSAs interact with HSA eligibility.
All in all, the intent appears to be clear; and from my perspective, HSAs have a promising future.
What Will HSAs Look Like Under Trump?
Health savings accounts (HSA) are arguably the best tax shelter in America—even better than 401(k)s, according to many financial experts. Currently, HSAs are restricted to consumers with very specific health coverage. With the election resulting in a Republican House, Senate and Executive Branch, it’s quite possible that HSAs—and their tax advantages—will become even more accessible.
President-elect Donald Trump is certainly a fan of HSAs. In fact, the idea of a tax-free HSA transfer to any heir, not just a spouse, is one of the key tenets of President-elect Trump’s platform.
Additionally, many of the names floated for potential Secretary of Health and Human Services (HHS) are big fans of HSA expansion. Rep. Tom Price (R-Ga), for example, introduced last year the Empowering Patients First Act, which would have expanded HSAs in several ways. And Former Louisiana Gov. Bobby Jindal released a plan in 2014 outlining 16 health care reforms, specifically including HSA expansion.
It’s likely that many of the provisions proposed in the Healthcare Act of 2016 will again see the light of day. If so, we could see eligibility restrictions relaxed, making HSAs available to even more Americans. The earlier proposal would have allowed certain Medicare recipients (those only on Part A), Native Americans, retired military covered by Tricare, and those receiving VA benefits to make HSA contributions, which isn’t the case today. For those who already have an HSA, the list of eligible expenses could expand dramatically. Proposed eligible expenses include over-the-counter medications (with or without a prescription), health insurance premiums, exercise equipment and fitness programs, and possibly even dietary and nutritional supplements.
Currently, HSAs are also a valuable retirement savings tool. Untapped funds can be invested for the future, since they roll over indefinitely. And many savvy accountholders pay for current medical expenses out-of-pocket and shoebox their receipts for future, unrestricted access to their HSA funds. Given Trump’s fiscal leanings, it’s unlikely these features will be dialed back in any way.
While it’s not possible to predict exactly what will happen with HSAs, it’s clear that Trump and many of his potential Cabinet officials have demonstrated they see the full value of these accounts. Any potential changes would more than likely open up access and loosen restrictions so that more Americans could see that value, too.
It’s like having a PB&J without the bread—doable, but far less palatable. And potentially a little messy.
Yet many employees are choosing their employer’s high deductible health plan (HDHP) without signing up for its counterpart, the health savings account (HSA). That may be because they were never offered one.
According to the fourth annual “Guardian Workplace Benefits Study,” only two in five private employers offer an HSA alongside their HDHP.
An HSA allows accountholders to set aside pretax dollars to cover eligible medical expenses. Without an HSA, HDHP subscribers miss out on valuable tax savings as well as opportunities to save and invest any unclaimed dollars for the future. Worst case, without an HSA, subscribers struggle to plan for adequately covering their share of the deductible.
But what many consumers don’t realize is that, even if their employer does offer an HSA, they’re not beholden to that option. While pairing HDHPs with HSAs offers employees some level of convenience, HSAs are individual, personally owned accounts. That means accountholders have every right to choose who administers their account even if they’ve earned their HSA eligibility by enrolling in their employer’s qualified health insurance plan. Every HSA-eligible individual is a free agent. In fact, 40 percent of HealthSavings Administrators’ HSA accountholders are not associated with an employer group.
So a lack of employer-sponsored HSA plans isn’t necessarily a dead end for HDHP subscribers, as long as those subscribers understand they have options.
But the reality is that many employees don’t know what they don’t know. And after sifting through the onslaught of open enrollment forms and materials, few have leftover time to poke around the Internet for guidance on whether they’re eligible for an HSA. Ideally, employers as well as financial and benefit advisors need to offer this important information throughout the benefit year and use the open enrollment meetings as a reminder and call to action.
Whether or not an employer offers an HSA for their HDHP subscribers, they owe their employees information about HSAs. Ideally, it would be presented as part of every discussion focusing on financial planning. Otherwise they’re leaving out an important piece of the financial wellness puzzle.
The December 2016 issue of Kiplinger’s Personal Finance magazine just came out, and HealthSavings was listed as the best health savings account (HSA) on its annual “The Best List.”
The article cited our first-dollar, low-cost investment options, specifically our 22 Vanguard® funds and the more than 70 funds we added throughout 2016.
HealthSavings Administrators and HSA Coach have released a white paper about Millennials’ health savings account (HSA) adoption rates and their use of these money and tax saving accounts. The paper also provides tips for employers, advisors and other entities in making HSAs relevant to members of the Millennial generation.
“With decades ahead until retirement, Millennials stand to gain the most from investing in a HSA,” the white paper begins. “But research shows they lag behind other generations in understanding—and leveraging—the long-term benefits of HSAs.”
The paper shares research from a 2016 survey of HealthSavings’ accountholders, as well as commentary, insights, and tips from HealthSavings President Pat Jarrett, HSA Coach Founder/CEO Aaron Benway, and Roy Ramthun, who led the U.S. Treasury Department’s implementation of HSAs beginning in 2003.
Download the white paper now to read more.
Calculating how much you can contribute to your HSA during your first year of Medicare can be tricky. But there are answers in Internal Revenue Service (IRS) guidance—specifically Information Letters 2016-0003 and 2016-0014.
According to the IRS, the max HSA contribution during the year someone turns 65 is prorated “based on the number of months the individual is an eligible individual and whether the individual has self-only or other than self-only coverage.”
Check out a specific scenario here.