HSA Costs for Small Businesses and new "Tax Simplification" Law
The proposed Taxpayer Assistance and Simplification Act of 2008 has a provision about Health Savings Accounts that has caused President Bush to threaten a veto.
Here's what is going on: Currently, if your employee health plan contains a Health Savings Account, the HSA is probably administered by a bank. You put money into the account, just like any other bank account, and you receive a debit card to use for applicable medical purchases, tax-free. But the bank doesn't monitor your spending to assure that you are using the account for medical purposes. My financial advisor told me he heard of someone using an HSA to buy a hot tub, saying it was "medically necessary." So the IRS wants the banks to make sure the HSA's aren't getting misused.
These new IRS regulations will mean a lot of extra administrative expense for the banks/HSA administrators, and more hassle for those of us with HSA's. No more debit cards. We will have to submit expenses for payment and wait for approval. Sounds like a giant pain to me.
For small business owners, this means the cost of HSA's will increase, and fewer small companies will provide them; this is why President Bush is threatening his veto. If passed, the bill would go into effect in 2011, giving the HSA administrators time to set up their new administrative rules.
I will keep you posted on this one.
Comments
Another issue with these Health Savings Accounts and proposed legislation… If I’m not mistaken, currently the funds deposited in these accounts are pretax dollars. In other words, you don’t pay tax on your medical expenses when you make payments from the account.
This places the accounts on par with medical insurance costs, which also are paid for with pretax dollars as part of your employment benefit package.
Insurers are lobbying with an effort to get the laws changed to where the accounts have to be funded with after tax funds, giving the insurance companies an edge on tax treatment.
Don’t let them get away with it.
Another issue with these HSA accounts and proposed legislation… If I’m not mistaken, currently the funds deposited in these accounts are pretax dollars. In other words, you don’t pay tax on your medical expenses when you make payments from the account.
This places the accounts on par with medical insurance costs, which also are paid for with pretax dollars as part of your employment benefit package.
Insurers are lobbying with an effort to get the laws changed to where the accounts have to be funded with after tax funds, giving the insurance companies an edge on tax treatment.
Don’t let them get away with it.