Jeremy D. Scott
April 26th, 2010, 07:23 AM
BC, we had a great thread on health insurance for pastors (and others as well, but it began as a question about pastors). I had reported what we were trying/hoping to do, and wanted to give an update. I'll save the history of our situation for another time (unless someone wants to hear it). It is pertinent to what our situation now is, but for now I'll just tell you where we ended up.
First, to distinguish between FSA, HSA, and HRA:
FSA - flexible spending account
HSA - health savings account
HRA - health reimbursement arrangement
I am not an expert (persay :o) and encourage anyone to double-check with your state's standards and a tax professional, particularly if you're reading this well after I've written it. Numbers change each year, and while it doesn't appear that the new health bill (in early 2010) affects HSAs too much, that may still be yet to be seen. However, I am fairly confident of what I write below on an HSA (as it's my own situation). In short, we found that having a health insurance plan that qualifies for an HSA was by far the best situation for us (both the church and the pastoral family).
To qualify for an HSA, one must be on an HDHP (high deductible health plan). For IRS standards, an HDHP is defined as a health insurance plan that has a minimum $1200 deductible (for individuals) or $2400 deductible (for families). Once one gets by the fear of being on an HDHP, the possibilities are advantageous. I'll use our own situation as an example.
We now pay $884/month for our premium. In addition, the Church contributes $118.27 each week to our HSA (for a maximum yearly contribution of $6150 for a family or $3050 for an individual). An HSA is itself a bank account (generally "savings", but they also can come with checks and debit cards). Our HSA is with Bank of America, but more and more banks are adding them. The benefit of this situation is that this money is free from taxation at multiple levels (including interest earned). This money can be used for approved medical expenses (http://www.health--savings--accounts.com/qualified-expenses.htm). The HSA funds carry over and accrue from year to year (as opposed to an FSA or HRA). The funds can be rolled over to investment opportunities.
This situation is beneficial really only if the HSA can be funded. For our situation, we found a premium which was several hundred dollars cheaper than our previous one, and simply used the difference in savings on the premium to fund the HSA. The beginning stages of funding the HSA could be considered a period of risk, unless the church can front a couple of thousand dollars rather than contributing weekly or monthly. Or, if a pastoral family is already paying a lot for medical expenses, than a reduction in pay might be considered to fund the HSA. This could also prove to be beneficial for tax purposes.
I'm sure I've forgotten some details, but there are others who are also on HSAs (Kevin R. & Gary C.) that might chime in.
I've found helpful information at these sites:
The IRS site on HSAs (http://www.ustreas.gov/offices/public-affairs/hsa/)
HSA Bank (http://www.hsabank.com)
About.com on HSAs, FSAs, & HRAs (http://personalinsure.about.com/od/health/a/aa022807a.htm)
HSA for America (http://www.health--savings--accounts.com/) (this site is a little more politically- and commercially-oriented, but still some good info there)
First, to distinguish between FSA, HSA, and HRA:
FSA - flexible spending account
HSA - health savings account
HRA - health reimbursement arrangement
I am not an expert (persay :o) and encourage anyone to double-check with your state's standards and a tax professional, particularly if you're reading this well after I've written it. Numbers change each year, and while it doesn't appear that the new health bill (in early 2010) affects HSAs too much, that may still be yet to be seen. However, I am fairly confident of what I write below on an HSA (as it's my own situation). In short, we found that having a health insurance plan that qualifies for an HSA was by far the best situation for us (both the church and the pastoral family).
To qualify for an HSA, one must be on an HDHP (high deductible health plan). For IRS standards, an HDHP is defined as a health insurance plan that has a minimum $1200 deductible (for individuals) or $2400 deductible (for families). Once one gets by the fear of being on an HDHP, the possibilities are advantageous. I'll use our own situation as an example.
We now pay $884/month for our premium. In addition, the Church contributes $118.27 each week to our HSA (for a maximum yearly contribution of $6150 for a family or $3050 for an individual). An HSA is itself a bank account (generally "savings", but they also can come with checks and debit cards). Our HSA is with Bank of America, but more and more banks are adding them. The benefit of this situation is that this money is free from taxation at multiple levels (including interest earned). This money can be used for approved medical expenses (http://www.health--savings--accounts.com/qualified-expenses.htm). The HSA funds carry over and accrue from year to year (as opposed to an FSA or HRA). The funds can be rolled over to investment opportunities.
This situation is beneficial really only if the HSA can be funded. For our situation, we found a premium which was several hundred dollars cheaper than our previous one, and simply used the difference in savings on the premium to fund the HSA. The beginning stages of funding the HSA could be considered a period of risk, unless the church can front a couple of thousand dollars rather than contributing weekly or monthly. Or, if a pastoral family is already paying a lot for medical expenses, than a reduction in pay might be considered to fund the HSA. This could also prove to be beneficial for tax purposes.
I'm sure I've forgotten some details, but there are others who are also on HSAs (Kevin R. & Gary C.) that might chime in.
I've found helpful information at these sites:
The IRS site on HSAs (http://www.ustreas.gov/offices/public-affairs/hsa/)
HSA Bank (http://www.hsabank.com)
About.com on HSAs, FSAs, & HRAs (http://personalinsure.about.com/od/health/a/aa022807a.htm)
HSA for America (http://www.health--savings--accounts.com/) (this site is a little more politically- and commercially-oriented, but still some good info there)