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Another Defeat for Health Savings Accounts
The IRS and the Treasury dealt another crippling blow to
health savings accounts with the release of Revenue Ruling
2004-45 this week. Tax adviser Tony Novak of Freedom
Benefits Association says the new tax rule restricts an
employee from making Health Savings Account (HSA)
contributions if they are covered by a liberal employer-
sponsored medical plan like a Flexible Spending Account
(FSA) or Health Reimbursement Arrangement (HRA). Since the
trend in employer provided health plans is moving in the
direction of consumer-driven designs defined by FSA and HRA
plans, this new ruling severs a large portion of Americans
from participating in the benefits of HSA plans.
Health savings accounts were originally anticipated as being
a tool widely available to many Americans. Rosy predictions
were floated by Washington insiders that as many as 40
million HSA accounts would be opened by the end of the
decade. But the availability of HSAs has been restricted by
a series of new laws, interpretations and IRS rulings
beginning even before the new plans became effective on
January 1, 2004. A new tax reform law will be required to
reverse the current trend restricting HSAs.
More detail on tax implications of health savings accounts
may be found at www.healthsavingsaccount-hsa.com.
Esisting HRA or FSA plans that incorporate health savings
accounts should be modified immediately to comply with
the new law.
This new ruling reaffirms Novak's earlier predictions that
HSAs will essentially be a tax savings tool for a select few
rather than a health care management tool for the nation.
Most employers should focus on health reimbursement
arrangement (HRA) as the core method of delivering health
benefits to employees and view HSAs as an ancillary option.
Information on combining health plans is available at
www.freedombenefits.org
The IRS and the Treasury dealt another crippling blow to
health savings accounts with the release of Revenue Ruling
2004-45 this week. Tax adviser Tony Novak of Freedom
Benefits Association says the new tax rule restricts an
employee from making Health Savings Account (HSA)
contributions if they are covered by a liberal employer-
sponsored medical plan like a Flexible Spending Account
(FSA) or Health Reimbursement Arrangement (HRA). Since the
trend in employer provided health plans is moving in the
direction of consumer-driven designs defined by FSA and HRA
plans, this new ruling severs a large portion of Americans
from participating in the benefits of HSA plans.
Health savings accounts were originally anticipated as being
a tool widely available to many Americans. Rosy predictions
were floated by Washington insiders that as many as 40
million HSA accounts would be opened by the end of the
decade. But the availability of HSAs has been restricted by
a series of new laws, interpretations and IRS rulings
beginning even before the new plans became effective on
January 1, 2004. A new tax reform law will be required to
reverse the current trend restricting HSAs.
More detail on tax implications of health savings accounts
may be found at www.healthsavingsaccount-hsa.com.
Esisting HRA or FSA plans that incorporate health savings
accounts should be modified immediately to comply with
the new law.
This new ruling reaffirms Novak's earlier predictions that
HSAs will essentially be a tax savings tool for a select few
rather than a health care management tool for the nation.
Most employers should focus on health reimbursement
arrangement (HRA) as the core method of delivering health
benefits to employees and view HSAs as an ancillary option.
Information on combining health plans is available at
www.freedombenefits.org
