Health Savings Account Rules

I started a new job in August 2006. My employer offers a group health plan, but it is not a very good and has a high deductible. The company dropped the ball to get signed up for the plan within the time and now their plan is not so good not even going to cover pre-existing condition. I talked to the boss and came to an agreement, instead of being covered by their plan, they would contribute just $ 130 per month (the same amount they pay to put me on their plan) to an account Health savings that I could use to pay medical expenses. He returned and said he could not repair the agreement because he was told that I should have some type of insurance coverage for contributing to an HSA. He also said that the max that I (or my company name) could contribute to one account type is $ 1,100 per year. What is 460 dollars less than what we agreed. Can someone explain the rules of HSA for me and what other options I could consider us out?

A person may establish an HSA for himself or his family. An employer can add a health savings account option to the so-called cafeteria benefit plan, it can already offer.

The money put into the plan is before taxes, including Social Security, if part of an employer plan. Otherwise, there is a deduction above the line, which means you do not itemize your deductions for tax relief and that the deduction is not subject to elimination rules which many itemized deductions are available to high wages.

The health savings account is set up as an IRA. The trustee approved by the IRS must be used. The money put into the plan tax-free growth and funds withdrawn for qualified medical expenses are tax free. Unlike the older flexible savings accounts offered in employer cafeteria plans, you do not spend money to put down later this year or lose all that is left. The money can be rolled over from year to year. This can allow a Nice piece of silver could be removed to accumulate tax free at age 65.

To qualify for a health savings account, the individual or family must purchase a large policy to deduct health insurance. These are specific policies that have a minimum deductible of $ 1,000 to a maximum of $ 5,000 per person and $ 2,000 to $ 10,000 for a family. The higher the deductible, the lower the premium.

Individuals can contribute and deduct the lesser of $ 2,250 or the deductible on the policy: for married couples or families, it is double. If more than 55 years, the contribution and the deduction is $ 600 higher for individuals and $ 1,200 higher for couples and will continue to rise to $ 100 per year until 2009, when it will be capped at $ 1,000 for individuals and $ 2,000 for families or couples.



Money in the savings account health can not be used to pay premiums for this policy, except in certain circumstances (mainly when you are unemployed). It is intended to meet the deductible on the policy, co-pays, drug costs, eyeglasses or any other health expense that could be itemized on a tax return as a medical expense.

The money used to pay eligible medical expenses shall be withdrawn tax free. Money withdrawn from more than eligible medical expenses is taxed as income and subject to a penalty of 10%, unless the owner is disabled or over 65 years. All the money in the account at death is added to the taxable estate.

There is no limit on the income of health savings accounts. If started early, when you're still young and healthy, a substantial amount of money can accumulate is facing rising medical expenses you get older or use it to supplement your retirement income .

The first problem is that you must purchase a health insurance plan is "qualified HSA" Not all high-deductible plans are eligible for HSAs, but you can not open an HSA.