« Health Savings Accounts Create Cost-Concious Individuals | Main | Congress Expands Health Savings Accounts in Final Days »
December 09, 2006
Health Savings Account Improvements on the Way
With The Tax Relief and Health Care Act of 2006, the Senate has approved several very positive improvements to Health Savings Accounts that would make them easier to use, more accessible, and more attractive.
The legislation already has cleared the House, and Senate approval is the final hurdle before the legislation will be sent to President Bush. The Senate is debating interminably, but passage is expected very soon.
Here are the details that provide some much needed Health Savings Account fixes and new incentives:
- The legislation would allow money from other tax-favored accounts to be rolled over into a Health Savings Account (HSA). This includes savings from your company's Health Reimbursement Arrangement, your IRA, and the health dollars in your Flexible Spending Account. (FSAs are the use-it-or-lose-it accounts that motivate people to buy prescription sunglasses in December so they don't lose the money they had set aside in their company's cafeteria plan earlier in the year.)
This is good news because people who buy HSA-qualifying insurance plans don't necessarily create the accompanying savings account. This would let them shift money from another of these savings accounts into an HSA.
- It would boost annual contributions limits for HSAs. Current law says you can't deposit more in a year than the amount of your health insurance policy's deductible. Now, as long as you have a qualifying HSA insurance policy, you could contribute the maximum amount, which would be $2,700/individual and $5,450/family this year, then $2,850/individual and $5,650/family in 2007
- The Treasury Department would be required to publish in March (instead of August) the cost-of-living adjustments for HSA contribution and deductible amounts. Employers need to know this earlier in the year so they can get their health insurance contracts and literature printed for the next benefit year.
- You also would be able to make your full annual contribution to your HSA, even if you don't set up the account right away.
- Employers would be allowed to contribute more to HSAs for their lesser-paid employees. (Many employers have said that they want to introduce the plans but can't subject their lower-wage employees to the full deductible without making a bigger deposit to an HSA than current law allows to help them with the routine expenses.)
The Tax Relief and Health Care Act of 2006 will be the major piece of health care legislation passed this year, likely in the last hour of the last day of the session.
A lot of people who believe in the promise of HSAs worked very hard to convince members of the wisdom of these fixes. Kudos to all involved!
Posted by Wiley Long at December 9, 2006 11:58 AM