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By Liza Horvath


More on Health Savings Accounts


Last week’s Senior Advocate column provided information on Health Savings Plans and underscored the power of investing funds in this triple tax-advantaged account. The HAS, sometimes referred to as the “Medical IRA,” is funded with pre–income tax dollars and investments in the account grow free of capital gains tax. When you withdraw the funds to pay medical expenses, no income tax is paid. The account can be used for current, uncovered medical expenses or may be left to grow to offset medical expenses later or, after age 65, to pay premiums on Medicare Part B or long-term care insurance. There were so many questions from readers on the HSA that I thought we would provide further information on this often overlooked financial tool.


First, if you are age 65 or over and have signed up for Medicare, you cannot set up a new HSA nor can you contribute to an existing HSA. If you have an existing HSA, you can continue to hold it and use the funds for medical expenses and premiums, as mentioned above.


You can roll IRA funds into your HSA but to qualify for this once in a lifetime, tax-free rollover all the other rules and limitations of the HSA apply. Some of these rules are that you must be in a high-deductible health insurance plan, $1,250 for individuals and $2,500 for a family, and you need to stay within the allowable contribution amounts - $3,300 for an individual and $6,550 for a family. If you are age 55 or older, you can add an additional $1,000 to this annual contribution amount. The reverse is not allowed – you cannot roll HSA funds into an IRA.


George Chobany, Certified Financial Planner in Monterey, says that, “I am seeing a resurgence in HSA’s as people transition to more expensive, higher-deductible insurance plans. Individuals paying the full premium for their plan, without the assistance of a subsidy, are generally buying a Bronze level plan. Many Bronze plans have limited, or no, first dollar benefits (except in-network preventive care) until a combined medical and drug amount of $5,000 is met. Since they are going to spend the money to pay for claims under the deductible anyway, they might consider an HSA-compatible Bronze plan, and fund the savings account to make their expenses pre-tax.”

You are not required to withdraw funds each year so they can accumulate and be invested. HSA providers offer differing investment options so it is important to know what the fees and costs are when you invest. Also, a word of caution here – check to make sure that the institution you choose for your Health Savings Account is FDIC insured. When HSAs first began to gain popularity there were at least two instances of unregulated HSA holders who lost these accounts through employee embezzlement. Canopy and 1Point Solutions both filed for bankruptcy after the embezzlement and investors lost money.


As with all investing and particularly with HSA and IRA plans – there are many nuances so it is important to do your own research and seek professional advice.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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