health care FSA question (vanity)

me ^ | 10-29-09 | Wobbly Bob

[WOBBLY BOB]

would I be better off renewing my max $4000 FSA for 2010 or not, thereby raising my taxible income for 2010?

I'm assuming the FSA can/will disappear via Obummercare(should it pass.) I'm thinking the money would best be spent on paying off a credit card?

[rj45mis]

I believe the Federal max for FSA is $5000 and has been for several years. This applies to both medical and dependent care. I will still use this pre-tax option for any out-of-pocket related costs. It has saved me a bunch on taxes throughout the years.

[b4its2late]

Keep it up, assuming you use it all, till they take it away, which you know they will be doing soon.

[ErnBatavia]

I don’t think Zerocare would even kick in for another 4 years....gotta get a huge bureacracy in place, don’t ya know...

[Kansas58]

Don't you mean “HSA” and not “FSA” -—

Yes, you are thinking of a Flexible Spending Account -—

But that is what your company calls it, the IRS calls it either an MSA or an HSA, if it is for medical.

Also, you would REDUCE your taxable income by keeping your plan, and INCREASE your taxable income, by dropping the plan.

What I have seen, so far, from the “tea leaves” out of Congress indicates that NOTHING will change, on the HSA front right away -— though HSA plans will be under attack or eliminated some time down the road, but NOT in 2010 or even 2011, in even the worst case scenarios.

I am an insurance agent.

I am keeping my HSA.

I figure that if the HSA is eliminated, I can roll the balance to an IRA, under current law, or I can purchase some over the counter meds and other allowed expenses, on my HSA debit card, or any number of other options.

You can also, under current law, pay for Long Term Care insurance, I believe, out of an HSA.

In other words, TAKE THE TAX BREAK, contribute to the HSA or MSA under your “FSA” and then worry about what to do with any “stranded” HSA balances, if the HSA is eliminated down the road.

It would be really stupid for the government to declare all HSA balances “taxable” without any window or grace period, as NOBODY would ever trust tax incentives, ever again.

That would be like revoking the $8K home buyer credit, after the fact.

Yes, our government is in the control of idiots right now, but I just do not see our government retroactively changing the rules on us.

But, you are correct, the FSA, MSA, HSA idea is under attack, and future contributions might be limited or eliminated under the Marxists in charge right now.

[WOBBLY BOB]

... I can roll the balance to an IRA, under current law- You can also, under current law, pay for Long Term Care insurance, I believe, out of an HSA.

this part I didn't know.

[WOBBLY BOB]

my work plan max amount is $4000/year (I wish it were $5000) they call it “healthcare FSA “ . I have a VISA card with it,but it can be a pain in the ass (”Substantiation Is Not Automatic Upon Use of the Card”) with having to verify via mail or fax nearly every single thing.

Base on what you said, I think I’ll keep it. Even when I don’t use it all, I can go on a December cold med buying spree.I will have to check out how to put any excess into a longterm ins. plan or similar.

[Kansas58]

Double check on that one, please, but I do know people who are doing it.
I am not telling you it is ok, I am telling you that I have seen no prohibition.
However, you can NOT pay for Medicare Parts A, B, C or D out of an HSA.
Also, you can NOT pay for a Medicare Supplement out of an HSA.
Someone who should know told me that you COULD pay for LTC insurance, but I never got the paperwork documentation on the issue.

[WOBBLY BOB]

yep. I checked...not allowed(per provider’s rules)

[Kansas58]

Well, here is a provider who allows LTC premium payments out of an HSA account:

http://www.health—savings—accounts.com/long-term-care.htm

[Trust but Verify]

Speaking for myself, I intend to INCREASE my contributions to my FSA (yes, that is correct, and FSA has different rules than an HSA, you must spend the annual contributions the same year, HSA roll-over). My company allows up to $10,000. I am going to have a bunch of stuff done next year, including LASIK and some extensive dental work before they change the maximum to a mere $2,500/yr NOT INDEXED FOR INFLATION.