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<p>Why does everyone leave out the best tax-free savings vehicle of all – the HSA? It gets no respect; is it because it hides behind a healthcare mask? True, you can only put a limited amount in every year, and you have to maintain medical expense records to benefit fully, but it is fully tax free and has no RMDs. </p>
<p>^ Because you have to have a high-deductible health care plan in order to have one, and most of us don’t?</p>
<p>Because…“you can only put in a limited amount in every year, and you have to maintain expense records to benefit fully”</p>
<p>:).</p>
<p>And some insurance companies used to charge more for hsa plans…</p>
<p>^ I used to think that I wasn’t a candidate for a HDHP either, until I ran some scenarios. I was an idiot to think that my PPO was a better plan for my family, and I’m embarrassed that I missed the opportunity for years. I’m not saying it’s for everyone, but you just might be surprised. </p>
<p>There are proposals to limit Roth and force people to take distributions. They don’t think it will pass this year. Who knows what they will do in the future.</p>
<p>I looked in the past and I didnt see much advantage. I may have missed things. However, I will look again during the next sign up period.</p>
<p>I had HSA for one year but no more after that. I rather spend money on my health. I was afraid of going to doctors, paid a lot out of pocket.</p>
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I guess I don’t understand.</p>
<p>I should give up my low deductible, low OOP max plan that my employer pays 70% of the premiums and I pay the rest with pre-tax dollars, and get a high deductible plan I have to pay for myself (my employer only offers one plan) and pay for all of my health care OOP so I can put a few thousand dollars away in a HSA?</p>
<p>We are not huge health care users but we do go through our deductible every year. How does this save me money?</p>
<p>I am missing something.</p>
<p>For a family, it provides a tax-free $6550 ($7550 if 55 or older). In my experience, ex tax consequences, the HDHP plan benefits a family with either low healthcare expenditures or very high healthcare expenditures (assuming you can cover the medical expense from your emergency fund). For middling medical expenses, it’s a wash and maybe the PPO occasionally is better, until you factor in the tax-free aspect. </p>
<p>If you use the HSA in the year you have it with-held, it’s not optimal. If you can cover the OOP from other funds and keep the HSA until after retirement, bingo!</p>
<p>@notrichenough, unfortunately you work for an employer that doesn’t give you a choice and is not mindful of your retirement. In that case, I’d take the only plan they offer, although I’d ask HR why they don’t get with the program?</p>
<p>HSA become more appealing in cases where employer gives incentives (payment into the account). </p>
<p>@notrichenough, ps: my wife’s employer subsidizes HDHP and PPO and HMO plans to the same extent; they’re just passing along some of the cost. No arbitrage there, but choice. </p>
<p>“There are proposals to limit Roth and force people to take distributions. They don’t think it will pass this year. Who knows what they will do in the future.”</p>
<p>That may make sense. They are losing a lot of tax money in the long term on the Roth’s, sometimes just to get a short term tax bonus in the short term.</p>
<p>The problem that I have is when they try to change things that people have already taken action on. No problem with changing future plans, they can adjust taxes and tax rules as they need to. But when the rules were set, and people acted accordingly for those Roths, that should not change. Seems like they’re scamming people by enticing them to do one thing, then trying to change the rules after it’s too late for people to get out of them. Though that’s pretty much what I expect from our representatives, if they think it will benefit them.</p>
<p>My company has only 50 employees.</p>
<p>My last employer was 2500 employees, we had a HRA plan that the company funded, but when you left the company they kept any money in the HRA. No HSA. My previous employer to that was 18,000 employees. No HSA there either, but an HRA. Maybe the non-discrimination rules prevented it?</p>
<p>@notrichenough, I don’t know. For 50 employees, I can see how offering too many choices might get cumbersome for them. For 2500 or 18,000, it would seem that the hassle would be spread out over so many employees that it wouldn’t deter them. I’m not a lawyer, but I would think that any treatment of employees that is fair (e.g., they will subsidize 70% of anyone’s HDHP, PPO, or HMO insurance) wouldn’t be a problem. </p>
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For some things like requiring Roth RMDs or counting Roth distributions when taxing social security, it seems to me less like changing the rules than tightening up some over-generous provisions. For exmaple, I can’t see any logic in using traditional IRA distributions to compute SS taxability but not using Roth distributions.</p>
<p>I don’t see why, for example, heirs don’t have to pay taxes on earnings component in an inherited Roth’s distributions. Retirement programs should be used to fund your retirement, not pass on money tax-free for life to your heirs.</p>
<p>^Congress should have thought about that, but I do agree with busdriver, it’s kind of bait and switch. Thank goodness I’ve not transfer any traditional money to Roth yet, I did the nondeductible IRA to Roth, but I did and paid tax I would be upset.</p>
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The discrimination rules aren’t about fair treatment, they are about making sure highly-compensated employees aren’t overly taking advantage of tax-free stuff.</p>
<p>Although it’s been a long time since any company I’ve worked at had to limit 401K contributions, for example. Maybe those tests aren’t that tough any more. Computing that stuff is a hassle.</p>
<p>“For some things like requiring Roth RMDs or counting Roth distributions when taxing social security, it seems to me less like changing the rules than tightening up some over-generous provisions. For example, I can’t see any logic in using traditional IRA distributions to compute SS taxability but not using Roth distributions”</p>
<p>I don’t think you have to report any Roth distributions or even keep track of them. How could you compute SS taxability on Roths, anyways? As I understand it, there is no basis at all, as there is no tax on Roths. On an IRA distribution, the entire distribution is taxed, as the income and the profit has never been taxed. For a Roth, you could take a distribution, but it’s possible that absolutely none of it could be profit.</p>
<p>.</p>
<p>I think there is a form to file to keep the basis for Roth, IIRC.
<a href=“http://www.irs.gov/pub/irs-pdf/i8606.pdf”>http://www.irs.gov/pub/irs-pdf/i8606.pdf</a></p>