Health Savings Account (Section 223 Plan)

Chapter 47

Chapter 47

Health Savings Account
(Section 223 Plan)

lEARNING oBJECTIVES:

A.  Identify essential facts related to health savings accounts (HSAs)

REVIEW:

This chapter covers health savings accounts (HSAs). Although an HSA can be set up by an individual, focus is given to employer-sponsored plans. Advantages and disadvantages of HSAs are discussed, focusing on tax savings and flexibility issues. HSA eligibility requirements are covered next. Contribution and funding requirements are discussed, and plan benefits are summarized. Tax implications and ERISA implications are mentioned, with HSAs coming being considered a welfare benefit plan. When looking at alternatives, the chapter identifies that the options are many, because an HSA does not replace other arrangements. The chapter ends with a question and answer section.

Chapter Outline:

A. What Is It?

B. When Is It Indicated?

C. Advantages

D. Disadvantages

E.  Eligibility

F.  Contributions

G.  Funding

H.  Plan Benefits

I.  Tax Implications

J.  ERISA Implications

K.  Alternatives

L.  Questions And Answers

M.  Chapter Endnotes

FEATURED TOPICS:

Health savings accounts

FIGURES:

Figure 47.1 Chart Comparing HSA, MSA, HRA, FSA

CFP® CERTIFICATION EXAMINATION TOPIC:

Topic 29: Group medical insurance

F. Savings accounts

1) Health savings account (HSA)

COMPETENCY:

Upon completion of this chapter, the student should be able to:

1. Identify essential facts related to health savings accounts (HSAs)

DISCUSSION:

1.  Discuss eligibility and contribution considerations for HSAs.

2.  Discuss differences and similarities between MSAs (Archer MSA) and HSAs.

KEY WORDS:

health savings account (HSA) Section 223 Plan), high deductible health plan, Archer Medical Savings Account (MSA)

QUESTIONS:

1. For which of the following expenses may HSA funds be used?

(1) Medicare part A or B

(2) COBRA continuation payments

(3) qualified long-term care insurance

(4) employee’s share of health insurance premiums (co-pays)

a. (1) only

b. (1) and (2) only

c. (1) (2) and (3) only

d.  (2) (3) and (4) only

Chapter 47, p. 363

2. What is the typical tax status of qualified HSA distributions made after an individual is no longer eligible for HSA coverage?

a. distributions are fully taxable

b. a 10% penalty is applied to the distribution

c. ½ of the distribution is taxable

d.  distributions remain tax free

Chapter 47, p. 364

3. Which one of the following plans allows for individual, rather than employer-related, contributions?

a. MSA

b. HSA

c. HRA

d. FSA

Chapter 47, p. 364

4. Which of the following terms are used to describe the potential gap between the maximum contribution level and the maximum out-of-pocket limit of a combined HSA plan and high-deductible insurance plan?

a. doughnut hole

b. FSA gap

c. HSA exclusion limit

d.  cookie cutter plan

Chapter 47, p. 366

ANSWERS:

1.  d

2.  d

3.  b

4.  a