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HSA Contribution question

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  • spiritrider
    replied
    There are other criteria other than just the deductible to be an HSA qualifying HDHP. Since your individual deductible is higher than the minimum family plan deductible that solves one of the potential disqualifying features. The other common feature that will disqualify an HDHP plan is that; there can be no first dollar coverage before the deductible(s) are met. There can be no co-pays or co-insurance for any medical care including prescriptions before the deductible is met.

    If this is an otherwise HSA qualified HDHP, FSA enrollment of even $1, disqualifies you from contributing to an HSA for the entire year. If your open enrollment period has not closed and this is a HSA qualifed HDHP, you should be able to retract the FSA election.

    However, my best estimate is that this is not an HSA qualifying HDHP, because your employer should not be offering you a general purpose FSA in conjunction with the HDHP. They should instead be offering you an HSA and possibly a limited purpose (vision/dental) and/or post deductible FSA instead.

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  • kneedoc
    replied
    I am new to the WCI forum and glad to have found you! I was previously employed by a non-profit hospital that offered an HSA with a high-deductible plan . For 5 years I maxed it out and invested almost all of it. Last year I changed employment to a for-profit hospital system and assumed that I could no longer contribute to my HSA. However, something I heard today has made me wonder whether this is true. The plan I have chosen with my new employer has a $4000 individual deductible with a family OOP $8000, which I think is considered a high-deductible plan according to what I've read online. my employer does not offer an HSA, but I have elected to contribute the maximum to an FSA in the coming year, $2,650. My question is whether I may also contribute to my HSA during 2018. If so, do I get to contribute the entire allowed amount ($6,900) or a reduced amount because I'm also contributing to a FSA? If not, may I decline the FSA in 2019 and instead fund my HSA? I would really love to keep contributing.

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  • DMFA
    replied




    I’m looking at the document and it seems a bit ambiguous to me. The HSA plan I am looking at has a $5000 deductible, after which I would have a 20% copay up to an annual out-of-pocket maximum of $10,000. The IRS document says that the minimum deductible for an HSA plan is $2600, and it also says that in addition to an HSA you can have a:

    “Post-deductible health FSA or HRA. These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met.”

    I read that as saying that I would have to pay the first $2600 of medical expenses either out of pocket or out of my HSA, and then after that I could have an FSA or HRA which I could use to reimburse me using pretax dollars for any medical expenses I incurred up to the $10,000 out-of-pocket maximum.

    Is that a correct interpretation of the wording of the IRS document?
    Click to expand...


    Yep, as best I can tell.  You're on the hook for $2,600 of family medical expenses, but the HRA can cover the rest up to the OOP max.

    HRAs are funded from the employer only and have no maximum.

    HRAs can also be used to fund health insurance premiums, which is a pretty sweet fringe benefit.

    So, if you can put together an employer-based HSA and post-deductible HRA for the four of you, you *should* be able to avoid federal taxes (including FICA) on:

    • All the HDHP premiums [link]

    • $6,650 apiece of HSA contributions [link], assuming all 4 of you have family coverage

    • A post-deductible HRA [link], which would annually need to be no more than $7,400 apiece for health expenses (the $10,000 OOP max on your HDHP minus the $2,600 fed min deductible, assuming all families hit their OOP max which is prob unlikely)


    For a total exemption of as much as $56,200 plus the premiums.  That *should* be the most tax-efficient plan for both your corporate taxes and your personal taxes, since you're C-corp and taxed separately.

    Make sure you run that idea by your corp's accountant/finance professional to ensure its feasibility, both as per IRS regs (seems legit) and as it pertains specifically to you and your partners.

    Leave a comment:


  • Don
    replied
    Great! Thanks for the info!

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  • jfoxcpacfp
    replied




    I’m looking at the document and it seems a bit ambiguous to me. The HSA plan I am looking at has a $5000 deductible, after which I would have a 20% copay up to an annual out-of-pocket maximum of $10,000. The IRS document says that the minimum deductible for an HSA plan is $2600, and it also says that in addition to an HSA you can have a:

    “Post-deductible health FSA or HRA. These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met.”

    I read that as saying that I would have to pay the first $2600 of medical expenses either out of pocket or out of my HSA, and then after that I could have an FSA or HRA which I could use to reimburse me using pretax dollars for any medical expenses I incurred up to the $10,000 out-of-pocket maximum.

    Is that a correct interpretation of the wording of the IRS document?
    Click to expand...


    Yes, that is my understanding, also, except you used "reimburse me using pretax dollars..." and you would be using post-tax dollars. The HRA is nontaxable and nonreportable on your W2, iow, which I think is what you meant. You might find this example helpful.

    Leave a comment:


  • Don
    replied
    I'm looking at the document and it seems a bit ambiguous to me. The HSA plan I am looking at has a $5000 deductible, after which I would have a 20% copay up to an annual out-of-pocket maximum of $10,000. The IRS document says that the minimum deductible for an HSA plan is $2600, and it also says that in addition to an HSA you can have a:

    "Post-deductible health FSA or HRA. These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met."

    I read that as saying that I would have to pay the first $2600 of medical expenses either out of pocket or out of my HSA, and then after that I could have an FSA or HRA which I could use to reimburse me using pretax dollars for any medical expenses I incurred up to the $10,000 out-of-pocket maximum.

    Is that a correct interpretation of the wording of the IRS document?

    Leave a comment:


  • jfoxcpacfp
    replied




    If you have an HSA-qualified health plan, is it possible to both contribute to an HSA and also have an HRA or FSA? We are a C-corp with 4 physicians and no employees. Up to now we have had a high-deductible health plan and a flexible-benefit plan to pay for routine medical expenses with pretax money, but our current health plan is going away so we need to move to something else. My choice appears to be to either go to another high-deductible non-HSA plan that is about 25% more expensive than what we have now, or go to an HSA-qualified plan with almost the same deductible and other parameters that is about 15% more expensive than our current plan. If we could do both an HSA and an HRA and also save a bit of money on premiums, I guess that would be a no-brainer.
    Click to expand...


    Yes...see this thread for more information.

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  • DMFA
    replied
    Yes. Their interactions have specific guidance:
    https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204042

    Leave a comment:


  • Don
    replied
    If you have an HSA-qualified health plan, is it possible to both contribute to an HSA and also have an HRA or FSA? We are a C-corp with 4 physicians and no employees. Up to now we have had a high-deductible health plan and a flexible-benefit plan to pay for routine medical expenses with pretax money, but our current health plan is going away so we need to move to something else. My choice appears to be to either go to another high-deductible non-HSA plan that is about 25% more expensive than what we have now, or go to an HSA-qualified plan with almost the same deductible and other parameters that is about 15% more expensive than our current plan. If we could do both an HSA and an HRA and also save a bit of money on premiums, I guess that would be a no-brainer.

    Leave a comment:


  • jfoxcpacfp
    replied




    That is correct. Employer only contributes $1400 and it is use it or lose it. The rest of the OOP is on me. Basically, it is always in one’s best interest tax wise to do a HSA correct?
    Click to expand...


    Well, I wouldn't go that far and don't like to make one-size-fits-all recommendations. Your tax bracket matters, for example, along with plan premiums. I would say that, in general, it is probably more beneficial for a HIP to go the HSA route.

    HIP = High Income Professional if you're not familiar with my lingo  

    Leave a comment:


  • alloykat
    replied
    Johanna,

     

    That is correct. Employer only contributes $1400 and it is use it or lose it. The rest of the OOP is on me. Basically, it is always in one's best interest tax wise to do a HSA correct?

    Leave a comment:


  • jfoxcpacfp
    replied
    Just to clarify, are you saying that the employer will reimburse only $1,400 and the rest of the OOP is on you? If so, the net result is that you w/b OOP an extra $2k with the HSA but (assuming you fill the HSA space) you'll save taxes at your marginal tax bracket multiplied by your contribution of $5,350. Assuming you are at the top bracket (rounded to 40%), that's $2,140 + whatever state and local taxes you save - and you'll have $6,750 in your HSA but nothing to show for it in the HRA. Of course, you'll have to come up with enough to both fund the HSA and pay the medical bills, assuming that's possible. Didn't count the difference in premiums for each plan since they are negligible.

    Does that sound right? I'm kind of running through all this in my head.

    Leave a comment:


  • alloykat
    replied
    My employer offers a HRA plan where the out of pocket annual maximum is 6K and the employer contributes $1400 towards that 6K. The deductible is $2200. There is also a HSA plan with a out of pocket maximum of 8K and employer contributes $1400 toward that. The monthly premium is slightly cheaper for the HSA. Would you select the HSA plan if you were planning to definitely reach the out of pocket maximum due to a pregnancy/delivery or just use the HRA? My question is basically are there instances where a HRA plan would make more sense than HSA plan?

     

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  • jfoxcpacfp
    replied


    I want to make sure I am understanding this as well.  I want to open an HSA.  My employer does offer one, but I want to open one separately (as I don’t know how long I will be at my current job).  iI I choose the HRA plan I have a deductible of $1750 and Annual Out of Pocket of $6850.  With these limits can I still open an HSA?  I also plan on contributing the max amount as a one time contribution.
    Click to expand...


    It's not as simple as meeting the deductible and OOP requirements. You should have your insurance provider or HR department verify that it is an HSA-qualified plan. If so, make sure you are not passing up any employer contributions by opening a separate account. You can still open a separate account, but get the maximum from your employer and then contribute the difference to the other account.

    Leave a comment:


  • Sunshine98
    replied
    Hello,

     

    I want to make sure I am understanding this as well.  I want to open an HSA.  My employer does offer one, but I want to open one separately (as I don't know how long I will be at my current job).  iI I choose the HRA plan I have a deductible of $1750 and Annual Out of Pocket of $6850.  With these limits can I still open an HSA?  I also plan on contributing the max amount as a one time contribution.

    Leave a comment:

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