Can I Deduct Health Insurance Premiums Deducted From My Paycheck - What Are the Pros and Cons of condition Savings Accounts?
Good afternoon. Yesterday, I found out about Can I Deduct Health Insurance Premiums Deducted From My Paycheck - What Are the Pros and Cons of condition Savings Accounts?. Which may be very helpful for me so you. What Are the Pros and Cons of condition Savings Accounts?Q: My company recently began gift a condition Savings catalogue (Hsa) available to all the employees. Why are employers throughout New Jersey rolling out these plans? What are the pros and cons of a Hsa?
The qoute - Healthcare Costs. If you think rising healthcare costs are only the insurance company's qoute or your employer's problem, think again. Most employees pay 10%-90% of their healthcare costs, when all costs are included. All it takes is a quick present of your pay stub over the last few years to see that the insurance fellowships are passing on expanding healthcare costs to employers and employers are passing on these costs to employees. Healthcare costs have risen 8%-10% each year over the last three years and are likely to grow two to three times the rate of inflation for the foreseeable future.
Compounding the qoute - New Jersey insurance Laws. Almost every state in the U.S. Can deny individuals coverage straight through the underwriting process. New Jersey is one of only five states in the U.S. That provides for "guaranteed issue" - which guarantees condition coverage, regardless of condition status, age, claims history, or any other risk factor. Although this may be carefully a blessing, it is an costly blessing. Almost by definition, this increases the cost of insurance coverage for everybody in the state to catalogue for those who use the benefits most.
The explication - condition Savings Account. Just a quick background on condition Savings catalogue (Hsa) and how it works. Established as part of the Medicare designate Drug, Improvement, and Modernization Act of 2003, the Hsa is a hybrid in the middle of condition insurance and a relinquishment plan. The Hsa was established so savings used for distinguished medical expenses for yourself, or anything you claim as a spouse or dependent would be free from taxes. Qualified medical expenses include: medical doctors, dental and optic care, chiropractic care, long-term care, and Medicare Part A or Part B and Medicare Hmo insurance premiums. Unqualified medical expenses include: cosmetic surgery, condition club dues, nonprescription drugs and medicines and funeral expenses.
A gift to a Hsa is only permitted if the condition insurance with it has a deductible (your out of pocket expense) of at least ,100 for individual coverage or ,200 for family coverage. The current gift limit per year is ,850 for individual coverage or ,650 for family coverage. Those 55 and older can contribute an added 0 in 2007.
Contributions are all pre-tax, a gargantuan advantage for those seeking tax breaks. If the savings are used for distinguished medical expenses, the whole estimate can be withdrawn free of taxes. Yes - that is right, free of taxes. If the savings are used for other purposes, the relinquishment is taxed as wage and accessed a 10% penalty (if under the age of 65). At age 65, when Medicare begins, withdrawals are only taxed as wage at your then tax rate. All interest, gains and dividends in a Hsa are sheltered from taxation - allowing all wage to composition on a tax-advantaged basis.
Unused balances can be rolled over from year to year. Many employees view the Hsa as a relinquishment plan - providing them a tax-advantaged way to save for relinquishment above and beyond their 401(k) and their individual relinquishment catalogue (Ira).
A Win for Employees, Employers and Insurers. Because the Hsa is based on a high deductible insurance plan the worker takes on a higher level of responsibility and risk for medical expenses than a original insurance policy. Employees who run their family to the doctor office every time person has the sniffles (because the visit only costs them , while the insurance company pays the remaining under a original plan) will think twice when they pay the full out of their own pocket under a Hsa.
That said, those out of pocket costs are all with pre-tax dollars that were contributed to the Hsa. By utilizing a Hsa employers can cut their excellent costs by as much as 50%, passing most or all of those savings directly to the employees. Many employers, particularly in "guarantee issue" states like New Jersey, are implementing a Has based on these benefits.
Action Steps - Implement a condition Savings Account. Implement a Hsa for your company or ask your boss to implement one. With condition care costs expanding faster than wage increases, employees are bearing more and more of the cost burden. A Hsa provides a pre-tax means to contribute towards an catalogue that will grow over time, with the selection to use the money for medical expenses on a tax-free basis or for any purpose in relinquishment on a penalty free basis. Implementing a Hsa saves money for all those involved and troops employees to be more responsible with their own savings.
While the healthcare qoute is not going away soon, the Hsa provides one distinguished tool to combat the problem. When it comes to foremost worker benefits, speak with a licensed financial pro before manufacture irreversible decisions that may haunt you for years to come.
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