Seeking Alpha--Pay 0% Tax

[Dividend Watcher]

rayray Wrote:[quote pid='10965' dateline='1464026460']

(05-23-2016, 12:39 PM)Dividendsrule Wrote: "I also have a HSA and it saves on some taxes but it has to be used within a certain time frame or the funds whisk away into thin air."

Hey Ray, where do you see that? I looked at the HSA FAQ page over here https://www.hsaresources.com/faq/#opening-01 and they say:

3. Can I withdraw the funds from my HSA account at any time?
Yes, however, if the funds are withdrawn for any expense other than a qualified medical expense, the IRS will impose a 20% penalty tax. After you reach age 65 you can withdraw the funds without penalty but the amounts withdrawn will be taxable as ordinary income.

Looks like HSA can be used as basically a Traditional IRA after age 65?

Maybe I'm using the wrong term/acronym? Okay, I just checked the card, it's called HSA. It's through my employer and you designate a certain amount during enrollment, say 1k, that you contribute on a weekly basis with pre-tax dollars. So, say I enroll in November 2016 1k dollars, according to the plan I have until April of 2017 to use or loose that 1K. I guesstimate how much I'll use and undercut the amount so I never use or loose the amount. Our HSA was better years ago cause you use to be able to buy things like rubbing alcohol, hydrogen peroxide, band aides ect ect but the rules changed. Even the doctor co-payments have become such a pain in the ass I only use it for scripts anymore.

It use to be cut and dry, pay the co-payment with the HSA card and no questions asked, now every and I do mean every co-payment is denied then you have to go through this appeal process of endless calls and faxes to get it approved. The funny part is that every co-payment is ALWAYS approved after the appeal process. I got fed up and just use it for scripts because I have better things to spend my time on. I would get 2 or 3 denied letters and it seemed like I had to get every denied letter approved even though it was just for one co-payment, very frustrating.

It's not an outside HSA or an account that I get to invest the dollars...I was talking to someone and they said they get to invest their HSA dollars pre-tax and let it build up for years. Mine is company-sponsored.

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<<<Pardon me for screwing up the quotes, too lazy to re-write.>>>

Sounds like you have a Flexible Spending Account (FSA) and NOT a Health Savings Account (HSA). Unused portions of an FSA are lost if not spent before the deadline. HSA accounts are only allowed with a "High Deductible" health insurance policy.

The IRS sets the rules for High Deductible Health Plans in Publication 969. Among the rules are these requirements:

   

Their are also limits on how much you can contribute to an HSA. HSA's are yours forever and are portable. FSA's are not.

Sounds like your HR department is being lax with their terminology. Common of the numerous ignoramuses I run into on a frequent basis. Sounds to me like it's an FSA.

Sorry to hear about your problems getting co-pays reimbursed. Reimbursements are frequently outsourced to the aforementioned ignorami. If it were me, I'd file complaints both with your HR department, your congresspeople and the Labor or Health department. If your state has one, maybe the insurance regulators too. Typical of medical insurance companies trying to $%^& you over. Who knows what happens to unused FSA balances.

Pub 969 is here.

I read the initial article on SA. Sounds promising but, to me, the machinations required to achieve it would require a lot in taxable savings to tide you over between the timing of events. IIRC, it seemed to depend a lot on long term capital gains which may or may not appear.