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Tuesday, January 6, 2009 |  |
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Health Savings Accounts (HSAs)
NAHU Opposes Legislation to Radically Change HSA Administration through Substantiation Requirements
On April 15, 2008 the U.S. House of Representatives passed H.R. 5719, the "Taxpayer Assistance and Simplification Act," which included a provision requiring substantiation of withdrawals from HSAs. The vote on final passage of the bill was largely along party lines: 238-179.The underlying legislation was aimed at eliminating the IRS' authority to utilize private collection agencies to pursue bad debt / past due taxes. In order to "pay for" wiping this bad debt off of the U.S. Treasury's books, Congress included a provision in the legislation (Sec. 17) requiring the "substantiation" of all HSA transactions allegedly to combat perceived fraud and abuse in the HSA marketplace where some Members of Congress assert that HSA accounts are being used for non-health care related expenses.
NAHU has strong concerns about this move to radically alter the administrations of HSAs, thereby making them less cost effective and less consumer friendly. During consideration of this bill by the House, lawmakers asked the IRS and Treasury if there is objective data to gauge whether non-medical HSA withdrawals have been a problem, and the answer back was "no." Click here to view NAHU's press statement on the House measure to require HSA substantiation. Click here to view Wall Street Journal editorial on the legislative threat to Health Savings Accounts. Please see below for more information about this legislation. Other New Items:2009 HSA Amounts/Limits
Summary of HSA Guidance Put Forth by the Treasury Department provided by Groom Law Group
CDHC Certification Program
2008 HSA Amounts/Limits
At Issue:
Health Savings Accounts are tax-advantaged personal savings accounts used in conjunction with a qualified high-deductible health plan (HDHPs) to help pay for unreimbursed medical expenses. Contributions to HSAs may be received from employers, individuals or any combination of both. Employer contributions are excludable from income and individual contributions are deductible, regardless of whether or not a taxpayer itemizes deductions. Annual contributions are limited to a statuary level and out-of-pocket maximums are limited, but individuals age 55 and over with accounts can make additional contributions. HSAs are portable and funds carry over to subsequent years.
NAHU Chart Comparing Tax Advantaged Health Care Accounts
Congressional Research Service Report for Congress on Tax-Advantage Accounts for Health Care Expenses: Side-by-Side Comparison
Key components:
Contributions to HSAs can be received from the following sources:
- Individuals
- Employers
Contributions may be made by any combination of employer and individual. Employer contributions are excludable from income and individual contributions are deductible "above the line." That is, a taxpayer does not have to itemize deductions in order to take the contribution as a deduction. Employers may offer HSAs as part of a section 125(d) cafeteria plan.
Tax Treatment:
- Individual contributions are tax-deductible, even if the taxpayer does not itemize
- Employer contributions are tax-free
- Investment earnings accrue tax free
- Distributions are tax-free if used for "qualified" medical expenses (all section 213(d) expenses, except health insurance premium payments).
Qualified medical expenses include:
- Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease
- Prescription drugs
- Qualified long-term care services and long-term care insurance
- COBRA continuation coverage required by Federal law
- Health insurance for the unemployed
- Distributions made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty may be waived in certain circumstances
- HSA funds may also be used to pay for retiree health insurance premiums other than Medigap. This includes Medicare premiums.
NAHU's Position
NAHU believes that HSAs are an excellent way for individuals to save for future health expenses, for employers to offer lower-cost coverage to their employees, and to improve access to affordable coverage for the uninsured. Of the 3 million Americans who have enrolled in such plans since they became available in 2004, more than 30 percent were previously uninsured.
NAHU applauds the changes passed into law with The Tax Relief and Health Care Act of 2006 (P.L. 109-432). These new HSA changes effective in 2007 afford more opportunities for individuals, families and employers to participate in these popular and effective consumer-drive health care vehicle. They will make HSAs more flexible and make it easier for participants to put money aside for their personal health care.
NAHU also supports efforts to broaden further HSA affordability and appeal. HSAs allow people to save money for health care in a tax free manner, and to take their health savings accounts with them if they move from job to job. So far, an estimated 3.6 million people in America are covered by an HSA.
Initiatives like Senator Ensign’s S. 46 in the 110th Congress are welcome steps in the right direction. This bill would allow people in the individual market to purchase health insurance using funds from their HSA, thereby giving them the same tax advantage as those in the group market.
NAHU's Action
Click here to view NAHU's press statement on the House measure to require HSA substantiation. Click here to view NAHU’s coalition letter to Members of the House Ways & Means Committee (April 8, 2008) Click here to view NAHU’s coalition letter to all Members of the U.S. House of Representatives (April 15, 2008) Click here to view excerpts from the transcript of the House Ways & Means Committee’s consideration of H.R. 5719, The Taxpayer Assistance and Simplification Act of 2008. Click here to view the legislative text of H.R. 5719, as passed by the House of Representatives on April 15, 2008 (Sec. 17 is HSA substantiation requirement)NAHU Resources
NAHU CHART on the 2007 HSA changes
AHIP Comparison of Health Care Spending Accounts
Health Savings Accounts Myths and Realities
HealthDecisions.org - Official Health Savings Account Portal
U.S. Treasury Department Resources
Final regulations providing guidance on employer comparable contributions to Health Savings Accounts (HSAs) under section 4980G.
Q&A tri-fold on HSAs published by Treasury Department
The Treasury Department Website contains information on HSAs and can be accessed at http://www.treas.gov/offices/public-affairs/hsa/. The Treasury Department Website can be accessed in Spanish here.
The Internal Revenue Service has issued drafts of model agreements for companies that want to manage health savings accounts.
Treasury Department Guidance on HSAs
2.15.07
Treasury, IRS Issue Guidance Helping Employees
Transition To HSAs
7.31.06
Final regulations providing guidance on employer comparable contributions to Health Savings Accounts (HSAs) under section 4980G.
11.22.05
This notice clarifies the interaction of the 2-1/2 month Flexible Spending Arrangement grace period (established earlier this year by Notice 2005-42) and eligibility to contribute to Health Savings Accounts.
11.18.05
This notice provides relief for certain health plans with non-calendar year renewal dates that otherwise qualify as high-deductible health plans, except that the plans provide state-mandated benefits without regard to a deductible or with a deductible below the minimum annual deductible specified in§ 223(c)(2) of the Internal Revenue Code.
04.13.05
Treasury Department and IRS issued guidance clarifying spousal contributions to HSAs. This ruling confirms that an individual can be eligible to contribute to an HSA even if his or her spouse has nonqualifying family coverage, provided the spouse's coverage does not cover the individual.
11.19.04
Treasury Department and IRS issued new guidance on the maximum contribution levels for Health Savings Accounts and out-of-pocket spending limits for High Deductible Health Plans used in conjunction with HSAs.
07.01.04
Notice 2004-50 provides certain basic information on HSAs in question and answer format.
06.21.04
Notice 2004-43 provides transition relief for individuals in states where high deductible health plans (HDHPs) as described in section 223(c)(2) are not available because state laws require health plans to provide certain benefits without regard to a deductible or below the minimum annual deductible of section 223(c)(2)(A)(i). The transition relief covers months before January 1, 2006, for state requirements in effect on January 1, 2004.
05.11.04
Treasury and
the IRS issued Revenue Ruling 2004-45 which clarifies how health Flexible
Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs)
interact with Health Savings Accounts (HSAs). The guidance provides a
number of ways that individuals may have access to benefits from FSAs
and HRAs and remain eligible to contribute to an HSA.
03.30.04
Notice 2004-23 - Provides a safe harbor for preventive care benefits.
03.30.04
Notice 2004-25 - Provides transition relief with respect to medical expenses incurred by eligible individuals.
03.30.04
Rev. Rul. 2004-38 - Clarifies rules for individuals covered by both prescription drug plans and HDHPs.
03.30.04
Rev. Proc. 2004-22 - Provides transition relief for individuals covered by both prescription drug plans and HDHPs.
02.01.04
Notice 2004-02 - Provides guidance on HSAs.
Health Savings Accounts—Interaction with Other Health Arrangements
U.S. Department of Labor - Rev. Rul. 2004-45 - May 2004
The Basics of HSAs - U.S. Treasury Department - Powerpoint Presentation
The Honorable John W. Snow HSA Remarks
Department of The Treasury - March 30, 2004
Treasury Department Fact Sheet on Health Savings Accounts
Department of The Treasury - December 8, 2003
Additional Resources
Overview on the 2007 HSA changes
America's Health Insurance Plans (AHIP) overview of the new changes in HSA law, effective 2007.
AHIP
Chart of outlining state impediments to consumers using HSAs to fund their health care needs. (8/15/05)
Health Savings Accounts and Other Tax-Favored Health Plans
An updated publication for use in preparing 2004 returns - December 20, 2004
Whether Health Savings Accounts
Established in connection with employment-based group health plans constitute "employee welfare benefit plans" for purposes of Title I of ERISA? - U.S. Department of Labor - April 7, 2004
Myth vs. Fact on HSA's
Coalition for Affordable Health Coverage
OPM Director James Directs Agency to Review Options for Extending New Benefit to 3.1 Million Members of the Federal Family
Office of Personnel Management (OPM) - December 22, 2003
Health Savings Accounts - Medicare Reform Reshapes the Landscape for Active Employee Health Coverage
Kilpatrick, Stockton, LLP - December 2003
Recent Legislative Action
In December, 2006, Congress passed and President Bush signed into law The Tax Relief and Health Care Act of 2006 (P.L. 109-432).
This legislation extended certain tax provisions, made changes to Medicare and Medicaid, and made a number of changes to improve Health Savings Accounts to make them more accessible.
NAHU worked very hard to get these HSA changes made before the end of the 109th Congress. In addition to direct lobbying of members of Congress by both our members and staff lobbyists regarding these issues, NAHU gave written testimony to the US Senate Committee on Finance. and the House Ways and Means Committee last fall. One of our members, Eric Biettel of Pennsylvania, was invited in September to testify before the US Senate Committee on Finance. to urge Congress to make these improvements.
The new HSA provisions for 2007 raise contribution limits and make the accounts more flexible. The new law lets people fund their HSAs with one-time transfers from their Individual Retirement Accounts, and allows people to contribute up to the annual limit of $2,850 regardless of the deductible for their insurance plan. HSA account holders may now also fully fund their HSAs regardless of what time of year they sign on to a plan.
Click here to view more detail about the new changes to HSAs for 2007!!!
NAHU Press Releases About HSAs
NAHU Opposes HSA Substantiation
(April 9, 2008)
(September 26, 2006)
Treasury Issues Final HSA Guidance for 2004
(July 26, 2004) - National Association of Health Underwriters Press Release
Treasury Issues New HSA Guidance
Claries Confusion Among HSAs, FSAs and HRAs (May 12, 2004) - National Association of Health Underwriters Press Release
HSAs for the Uninsured Act of 2004 Brings Americans One Step Closer to Affordable Health Insurance
(March 4, 2004) - National Association of Health Underwriters Press Release
NAHU Hosts HSA Training Session for Record Numbers
(February 12, 2004) - National Association of Health Underwriters
For more information, please contact the Government Relations Department at legislative@nahu.org.
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