The Internal Revenue Service ("IRS"), has just released their annual limits for 2023. Yes, this is the kind of thing that gets me all excited. It must be hard for the IRS, whose sole purpose is to collect taxes, to furnish us the new limits allowing for greater tax savings for astute health plan participants who like to save money and make the most out of our estate planning. This does not mean we do not believe in paying our fair share ... it only means we do not like to pay more than our fair share.
Read MoreA Plan "Hatched" To Bolster Health Savings Accounts
This year health care costs are expected to rise by more than double the rate of inflation. HSAs and FSAs provide individuals with opportunities to put away tax free savings for everyday medical expenses. When Congress first made HSAs available, these plans only covered 454,000 lives. Today, more than 10 million people are covered under a health plan that is eligible for an HSA.
U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today unveiled the Family and Retirement Health Investment Act of 2011, bicameral legislation to strengthen and expand Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) for American workers and retirees. Companion legislation was introduced in the U.S. House of Representatives by U.S. Rep. Erik Paulsen (R-Minn.).The Family and Retirement Health Investment Act of 2011 will streamline these health care products and simplify them for American families, seniors, and entrepreneurs.
Specifically, the legislation will:
- allow a husband and wife to make catch-up contributions to the same HSA; - remove the onerous new restrictions on the use of HSA and FSA dollars for the purchase of over-the-counter drugs; - allow individuals to roll-over up to $500 from their FSA accounts; - clarify the use of prescription drugs as preventive care that will not be subject to an HSA-eligible plan deductible; - reauthorize the use of Medicaid health opportunity accounts; - promote wellness by expanding the definition of qualified medical expenses to encourage more exercise and better diet; - allow seniors enrolled in Medicare Part A to continue contributing to their HSAs; and - allow for the purchase of low-premium health insurance and long-term care insurance with HSA dollars.
We are witnessing an adoption rate of HSAs that is tracking with similar "hockey stick" patterns experienced by 401(k)s when first introduced. While this is not a cure-all for the fee for service sick care delivery system, we applaud efforts to better align trade offs that improve tax efficiency in health plan design.