Does Anyone Know About HSA's?

[SkunkedAgain]

My wife and I have a BCBS health plan through her company. Last year they switched to a high deductible plan. Ours is $5k for the family plan. Of course, I sliced my thumb, had surgery, and paid $5k out of pocket. So we want to have an HSA. Our health insurer says that our plan (the only option we have) is not HSA-compatible. However, I think that just means that you can't attach an HSA account to it, but they can't tell me for sure...I haven't reached a bright person on the other end of the line. My wife and I are fine with opening a separate HSA and paying our post-tax money into there, getting the tax credit at the end of the year. However, BCBS seems to be telling us that we can't do that. I'm confused because the IRS doesn't mention anything about HSA-compatible plans, just that they be a high deductible.

Does anyone know if we can open a self-funded HSA away from our plan and still get the tax deduction at the end of the year when we file?

Here are excerpts from the IRS:

Quote:

IRS Publication 969

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

* You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.

* You have no other health coverage except what is permitted under Other health coverage , later.

* You are not enrolled in Medicare.

* You cannot be claimed as a dependent on someone else's 2009 tax return.

An HDHP has:

* A higher annual deductible than typical health plans, and

* A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.

The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2010:

***********************************Self-only*****Family coverage

Minimum annual deductible******$1,200**********$2,400

Maximum annual deductible******$5,950**********$11,900

[LightningBG]

You should be able to open a HSA.

BCBS doesn't even need to know you have it. You'll get a checkbook just like any other account. or you can submit receipts for reimbursement (from yourself basically).

The conversation should be one between you and your accountant, not the insurance company.

You should be able to open a HSA at most banks or there are some online places (who are also banks, just not local)

[SkunkedAgain]

I am my accountant! So the heart of the question is can you still get the tax break even though the HSA is not associated with my plan?

[LightningBG]

yeah, that shouldn't be a problem. I had one for years, not associated with my insurance at all.

The name of my account or whatever was: First Horizon M Saver

should come up easily in a google search

I wouldn't say it was anything special, but it wasn't horrible either.

[DANR]

We recently switched to a high deductible plan with an HSA at our business. In order to have an HSA that qualifies with the IRS, you must be on a qualifying HDHP insurance plan. For our employees that are on a lower deductible health plan, we have an FSA (flexible savings account). That allows you to contrbute pre-tax money like the HSA, but the difference is that you can't carry any balance over from year to year (use it or lose it). Perhaps that would be available at your wife's workplace?

[fisherdog19]

If you open it yourself, will your employer pull the money pre-tax and deposit it into the designated account? That is the only way you will get the tax break on it; not sure if all employers will do it for you.

[SkunkedAgain]

We don't have any FSA or HSA options through her employer unfortunately. However, that is not the only way to get the tax break. The IRS allows you to contribute post-tax and then regain the tax break at the end of the year when you file. The question really just becomes, does it have to be an HSA-compatible plan to receive that tax break.

I've heard one yes and one no. Maybe this will be the first year for me to have my taxes prepared by someone else. Or can you pay a tax preparer to a nominal fee to answer questions?

[muskielaw]

I am not a tax guy but I did sleep at a holiday inn express:) I always thought the only way you can get a tax break on medical expenses out side a Health Plan HSA is if you itemize on your taxes. Thus, even if you have a HSA outside your plan that you fund with post-tax dollars you still will not be able to get a tax break if you do not itemize your deductions and meet the requirements for unreimbursed medical expenses. Which I believe you can do with or without the separate HSA. I may be way off but that has always been my understanding when I tried to set up an HSA outside of health plan. In fact, when I had my own insurance policy outside employers I had an HSA with it. When I switched back to employers health plan, although I still have the HSA and can use those funds with a tax deduction, I can not add any additional dollars to it.

Muskie

[LightningBG]

Who doesn't itemize?

[SkunkedAgain]

As I understand it Muskielaw, you were not able to add money to your HSA because it was part of a specific health plan. Once you switched, you are no longer able to contribute but can still take money out.

I just read through all of the instructions for IRS Form 8889. It does not have any requirements about requiring an HSA-compatible health plan in order to claim your HSA contributions. Therefore, when I itemize my deductions I should be able to claim my contributions up to $5950 and reduce my above-the-line adjusted gross income.

As usual, the IRS is confusing but it's really the know-nothing health insurance folks that muddy up the picture. Hopefully I'm right!

[muskielaw]

If you have read the IRS code you have done more than me. My info came much like most from the insurance companies when I was trying to set up an HSA not associated with a specific health plan. Which means they know very little even though you would think they would be the ones that should be able to tell you if it is possible or not. As far as the question about who doesn't itemize that would be most of America!!! That is why there is a standard deduction.

[LightningBG]

I guess worst case scenario is you open the account, write it off, get audited and have to pay those taxes, but that's the same as not opening it to begin with.

Or you open it, have an accountant (other than yourself) prep your taxes, they say it isn't kosher, you drain the account and aren't able to write it off.

Either way I don't think you'll lose any money.

[Powerstroke]

"High-deductible health plan" doesn't just mean any plan that has a high deductible.

I haven't read the rules because I have a plan that qualifies so I haven't had to worry about it, but when deciding whether to change or not, the difference seemed to be whether or not the insurance covers any portion of your deductible.

So, if your insurance company covers any portion of your deductible prior to you reaching that amount than it doesn't qualify. In our family plan, I am required to pay 100% of the bill up to my $2500 per person max and $5000 family max. After that the insurance company pays 100% of services and 80% of prescriptions.

I would contact someone before you make up your own rules about how they work. The rules seem pretty clear cut and they were all recently updated with the new health care bill.

As a side note, I think the HSA is the best thing to come to health care and health insurance.

[harvey lee]

  LightningBG said:

Who doesn't itemize?

Me and I have not for years. No deductions making it a benefit.

[harvey lee]

  SkunkedAgain said:

We don't have any FSA or HSA options through her employer unfortunately. However, that is not the only way to get the tax break. The IRS allows you to contribute post-tax and then regain the tax break at the end of the year when you file. The question really just becomes, does it have to be an HSA-compatible plan to receive that tax break.

I've heard one yes and one no. Maybe this will be the first year for me to have my taxes prepared by someone else. Or can you pay a tax preparer to a nominal fee to answer questions?

I might look at paying a CPA to answer these questions. You could open up a can of worms and the fee to the accountant would be much easier to deal with.

[Powerstroke]

You certainly can speak with a CPA to get your answers questioned. Finding someone who is open all year is a great place to go since they are more into all aspects of tax law and not just a seasonal tax=preparer.

My wife has a business and we meet with out CPA a couple times a year to plan out our taxes and deductions so its a not a huge scramble every year. Its worth it.

[harvey lee]

A qualified CPA would be the best as these tax laws change all the time and I would want a full time person up on the latest facts and laws.

You are correct Andy, a little mistake here or there and suprise at the end of the year at tax time.

Not a good place to be if that happens.