Comments on: Increasing Penalties for Health Savings Accounts http://www.mydollarplan.com/changes-to-health-savings-accounts/ because money doesn't grow on trees Thu, 09 Feb 2012 14:28:55 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Rory http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-120485 Rory Fri, 30 Dec 2011 15:34:31 +0000 http://www.mydollarplan.com/?p=1220#comment-120485 Hi Jill, I have some expensive surgery coming up. I have a substantial balance in my HSA bank and I can pay for it using my debit card. What I am wondering is if I can pay for the surgery with a credit card instead and then reimburse myself from my HSA account so I can accrue Credit Card rewards? Thank you, Richard Hi Jill,
I have some expensive surgery coming up. I have a substantial balance in my HSA bank and I can pay for it using my debit card. What I am wondering is if I can pay for the surgery with a credit card instead and then reimburse myself from my HSA account so I can accrue Credit Card rewards?
Thank you,
Richard

]]> By: Tim http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-120484 Tim Fri, 30 Dec 2011 15:13:02 +0000 http://www.mydollarplan.com/?p=1220#comment-120484 No one explains what the 20% penalty for using your HSA for non-medical expenses means. Do they send you a bill or is it added to your taxes? My taxes are deducted automatically from my paychecks by my employer, if the 20% penalty is something included in my taxes does that mean I'm responsible for adding it? I've checked a dozen sites for explanations and all of them just say "are subject to a 10% penalty (20% starting in 2011)." No one explains what the 20% penalty for using your HSA for non-medical expenses means. Do they send you a bill or is it added to your taxes? My taxes are deducted automatically from my paychecks by my employer, if the 20% penalty is something included in my taxes does that mean I’m responsible for adding it? I’ve checked a dozen sites for explanations and all of them just say “are subject to a 10% penalty (20% starting in 2011).”

]]> By: Sydney http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-12739 Sydney Tue, 29 Jun 2010 21:18:14 +0000 http://www.mydollarplan.com/?p=1220#comment-12739 Aaah, yes, absolutely agree. Aaah, yes, absolutely agree.

]]> By: Jill http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-12733 Jill Tue, 29 Jun 2010 21:06:02 +0000 http://www.mydollarplan.com/?p=1220#comment-12733 Good point about paying in cash. Just a quick point on your second paragraph -the money is yours after a certain age with no penalties, but you will still have to pay taxes on the withdrawals. Basically functions the way a 401(k) or traditional IRA does. Good point about paying in cash.

Just a quick point on your second paragraph -the money is yours after a certain age with no penalties, but you will still have to pay taxes on the withdrawals. Basically functions the way a 401(k) or traditional IRA does.

]]> By: Jill http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-12732 Jill Tue, 29 Jun 2010 21:04:50 +0000 http://www.mydollarplan.com/?p=1220#comment-12732 What I said was that you shouldn't save more than you need IF you are doing it at the expense of retirement savings or other savings goals (house downpayment, etc). Certainly if you have the free cash flow an HSA is a great way to save for and on medical expenses both now and down the road. But with the new penalties there's no reason to lock up money that could instead go into a Roth IRA or towards a big purchase. What I said was that you shouldn’t save more than you need IF you are doing it at the expense of retirement savings or other savings goals (house downpayment, etc).
Certainly if you have the free cash flow an HSA is a great way to save for and on medical expenses both now and down the road. But with the new penalties there’s no reason to lock up money that could instead go into a Roth IRA or towards a big purchase.

]]> By: Funny about Money http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-12726 Funny about Money Tue, 29 Jun 2010 17:08:32 +0000 http://www.mydollarplan.com/?p=1220#comment-12726 It essentially functions as an IRA, but one that allows you to draw down funds to cover medical bills. The penalties evidently are put in place to encourage people to save for retirement in any way possible. It certainly is true that one day you may land a job with a decent insurance plan, and so quit contributing the HSA. However, at a still later date you could lose that job and need the HSA to cover future medical bills, or, even if you get into another plan, you might need the HSA monehy to cover copays, which these days can be pretty exorbitant. In any event, when you reach Medicare age, any money left in the HSA is yours to spend as you please, just like funds in an IRA. When I had an MSA (early version of HSA), I was surprised to discover that many doctors will give you a substantial discount if you tell them you have to pay in cash. A payment directly from the patient is money the doctor gets right away, without having to pay an employee to fight with an insurance company and without having to wait upwards of three months for disbursal. If we all could pay in cash for office calls and relatively minor treatments, the cost of medical care would drop significantly, because medical practices could dispense with some highly skilled, expensive staff. It essentially functions as an IRA, but one that allows you to draw down funds to cover medical bills. The penalties evidently are put in place to encourage people to save for retirement in any way possible.

It certainly is true that one day you may land a job with a decent insurance plan, and so quit contributing the HSA. However, at a still later date you could lose that job and need the HSA to cover future medical bills, or, even if you get into another plan, you might need the HSA monehy to cover copays, which these days can be pretty exorbitant. In any event, when you reach Medicare age, any money left in the HSA is yours to spend as you please, just like funds in an IRA.

When I had an MSA (early version of HSA), I was surprised to discover that many doctors will give you a substantial discount if you tell them you have to pay in cash. A payment directly from the patient is money the doctor gets right away, without having to pay an employee to fight with an insurance company and without having to wait upwards of three months for disbursal.

If we all could pay in cash for office calls and relatively minor treatments, the cost of medical care would drop significantly, because medical practices could dispense with some highly skilled, expensive staff.

]]> By: Sydney http://www.mydollarplan.com/changes-to-health-savings-accounts/#comment-12668 Sydney Sun, 27 Jun 2010 19:18:54 +0000 http://www.mydollarplan.com/?p=1220#comment-12668 I fail to see any downside to saving more than you "need" in an HSA (presumably you mean more than you need to spend on medical expenses.) First of all this account is good for a lifetime, so I can hardly foresee a situation where you would not use the money eventually for medical expenses (and in the meantime earn tax free returns on the money). Second of all, even if you never spent another dime on medical expenses, you can use it to supplement your retirement accounts, in that if you wait until you are 65 to take the money out for any reason, it operates much like an IRA, you simply pay the regular tax on what you withdraw. (Thereby enjoying the tax-free accumulation just like you would in a retirement account). One final point worth mentioning, if you put the maximum into the HSA and then never use it currently (allowing it to grow tax free) but just save all the receipts for all the medical expenses you incur along the way, you can take that amount out 20 or 30 years from now TAX FREE up to the amount you are reimbursing yourself for all those past expenses (all the while earning tax-free earnings in that account.) Tell me again where I should be seeing any downside? I fail to see any downside to saving more than you “need” in an HSA (presumably you mean more than you need to spend on medical expenses.) First of all this account is good for a lifetime, so I can hardly foresee a situation where you would not use the money eventually for medical expenses (and in the meantime earn tax free returns on the money).

Second of all, even if you never spent another dime on medical expenses, you can use it to supplement your retirement accounts, in that if you wait until you are 65 to take the money out for any reason, it operates much like an IRA, you simply pay the regular tax on what you withdraw. (Thereby enjoying the tax-free accumulation just like you would in a retirement account).

One final point worth mentioning, if you put the maximum into the HSA and then never use it currently (allowing it to grow tax free) but just save all the receipts for all the medical expenses you incur along the way, you can take that amount out 20 or 30 years from now TAX FREE up to the amount you are reimbursing yourself for all those past expenses (all the while earning tax-free earnings in that account.)

Tell me again where I should be seeing any downside?

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