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Do you have an HSA/MSA account?

 
 
Reply Fri 18 Jun, 2004 07:45 pm
(United States only) Do you have a Health Savings Account or Medical Savings Account?

I'm applying for one right this minute, and am seeking your opinions as to why you have or do not have such an account. Are there any pitfalls I might need to be wary of?

Thanks.

Oh, and can you tell me what this line in the agreement means?

"Article II: The Depositor's [me] interest in the balance in the custodial account is nonforfeitable."

Is this a good, or bad thing?

Thanks

General Tsao
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fishin
 
  1  
Reply Fri 18 Jun, 2004 08:00 pm
I could get one through my employer but I chose not to. My out-of-pocket medical expenses are pretty low and no where near the minimum withholding amount (my employer requires that you deposit at least $50/paycheck into the account) so I'd end up losing most of what I deposit and that's a much bigger loss than any savings on income taxes I'd realize from it.

The only pitfall I know of is that if you don't use it you lose it. If you put $2000 in during the year and only have $300 in expenses the other $1700 disappears. If you have recurring medical costs that you can calculate and count on then it should be a good deal.

(I beleive the section you quoted means that if there is a legal judgement against you the creditor can not seize the interest from your account as a part of their claim for the settlement. i.e. you can't be forced to forefit that money if you are sued. It's a legal protection established in Title 26 USC, Section 408 if you want to go look it up.)
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GeneralTsao
 
  1  
Reply Fri 18 Jun, 2004 08:27 pm
Fishin', thanks for the reply!

From what you explained, it seems as though that sentence in question is in my favor, right?


I think that the HSA deserves another look, fishin'. The way I understand it, Congress established the plan to allow people to save the money they don't spend instead of throwing it away in unused premiums.

For instance, I'm applying for a family plan (to include my wife) with a deductible of $5100.

This means that I may deposit up to $5100 in my HSA account pre-tax per year. If our med expenses are 1,000 for the year, I may take that $1000 out of the HSA tax-free to pay the medical bills.

The remaining $4100 stays in the account, and accumulates tax-deferred unless I withdraw for medical expenses. If I were paying insurance premiums, the premiums would simply be "gone forever."

At retirement, I may remove the money without penalty, paying only my then-current tax rate (theorhetically lower since my income bracket will be lower then).

With the HSA, my monthly premium for both of us will be about $180/month (this is the part that's paid-and-gone). I'm currently paying $790/month for just myself! I figure a portion of my premium savings will easily pay the $5100 annual HSA contribution.

Thanks again for your help,

General
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fishin
 
  1  
Reply Sat 19 Jun, 2004 06:22 am
Yup! That clause is definately in your favor!

What you've listed may be true for a HSA. I'm only famaliar with the MSA my employer offers.

With the MSA I have access to; I could pay my health insurance premiums with it but in my case my employer pays 100% of my insurance premiums (health, dental, vision and life) already so I have no premuims to pay. I'm also a military retiree so I have an aditional medical plan through the military that is used as a secondary insurance policy.

(To use a HSA you are supposed to have a "high deductible insurance policy by law and the policy I have through the military isn't high deductible so it precludes me from using a HSA.)

The deductibles and co-pays from my employers insurance policy only end up coming to about $600/year and I just bill those to the secondary insurance so my actual out-of-pocket insurance costs are literally nothing.

The MSA they offer allows me to contribute up to $2000/year tax free but if I don't use it I forefit the deposit and start over again the following year. It doesn't build into a retirements savings. If it did I'd use it but...
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Miller
 
  1  
Reply Sat 19 Jun, 2004 06:30 am
GeneralTsao wrote:
Fishin', thanks for the reply!

From what you explained, it seems as though that sentence in question is in my favor, right?


I think that the HSA deserves another look, fishin'. The way I understand it, Congress established the plan to allow people to save the money they don't spend instead of throwing it away in unused premiums.

For instance, I'm applying for a family plan (to include my wife) with a deductible of $5100.

This means that I may deposit up to $5100 in my HSA account pre-tax per year. If our med expenses are 1,000 for the year, I may take that $1000 out of the HSA tax-free to pay the medical bills.

The remaining $4100 stays in the account, and accumulates tax-deferred unless I withdraw for medical expenses. If I were paying insurance premiums, the premiums would simply be "gone forever."

At retirement, I may remove the money without penalty, paying only my then-current tax rate (theorhetically lower since my income bracket will be lower then).

With the HSA, my monthly premium for both of us will be about $180/month (this is the part that's paid-and-gone). I'm currently paying $790/month for just myself! I figure a portion of my premium savings will easily pay the $5100 annual HSA contribution.

Thanks again for your help,

General


Will that $4100 be generating interest? If not, the account is a waste of investment potential.
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GeneralTsao
 
  1  
Reply Sat 19 Jun, 2004 07:54 am
Fishin'
Sounds like you have a pretty good deal, there! And you're right--an HSA doesn't seem to make sense for you. Thanks for your help here, and also, thanks for your service to our country!

Miller,
"Will that $4100 be generating interest? If not, the account is a waste of investment potential."

Yes. I have the option to invest the money in an interest-earning checking account, or invest in a miriad of stock & bond options, including mutual funds.

Any money in the cash holding account (where the money sits til it's invested elsewhere) earns 3%.

General Tsao
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jespah
 
  1  
Reply Sat 19 Jun, 2004 08:25 am
An MSA is generally a good idea. In fishin''s case, obviously, it isn't because of his employer's limitations, but those appear to be employer-specific.

One thing to note is that over the counter medications are now covered, so if you buy, say, Claritin, you can claim it. Generics are fine, too, whether prescription or OTC. Medical appliances such as eyeglasses, crutches, canes and soft casts are also covered. All co-pays are covered and things like out of pocket dental expenses (you can tell I just filled out a claim form).

If you are on regular medication or that has to be refilled every month or so, or regularly visit your doctor or dentist, you can figure out your expenses. And, your spouse's expenses are covered.

For example:
* $10 copay for monthly birth control pills ($120 annually)
* $10 copay for monthly thyroid pills ($120 annually)
* $10 copay for quarterly dental checkups, for both employee and spouse ($80 annually)
* $10 copay for annual medical checkup, for both employee and spouse ($20 annually)
* $80 annual mammogram ($80 annually)
* $5 monthly charge for OTC medicines ($60 annually)
TOTAL: $480.

So, given the above example, put away $480 in your MSA and you're all set.
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