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Health Savings Account Plans Wiki Question & Answers

2013 July 18
by Sarah Fields

Michael asks…

Can someone explain my health insurance options?

I have a whole book explaining these, but I need a simple answer. What is the difference between HMO, HRA, and HDHP? I’ve always gone with a HMO, but HRA is much less per month. Thanks!

Sarah Fields answers:

With an HMO you generally have to coordinate all of your care through a primary care physician who then refers you to specialists as needed.

An HDHP is usually a kind of PPO plan (which typically won’t require you to coordinate care through a primary care physician), but one with a higher annual deductible. What you get in exchange for a higher annual deductible is usually a less expensive monthly premium. Some HDHP plans can be used in conjunction with Health Savings Accounts, which provide you with a tax-advantaged way to save money for health expenses in the future. You may want to ask your employer about HSAs.

HRA’s are a little more obscure, but basically they are accounts through which employers can reimburse you for specific medical expenses. You can learn more about HRA’s on Wikipedia:

http://en.wikipedia.org/wiki/Health_Reimbursement_Account

Brief explanations like these probably aren’t going to help a lot when it comes to picking the right health plan for you. Approach your decision practically. Keep in mind that the monthly premiums you’re looking at don’t tell the whole story. Pay attention to the deductible amounts as well as copayments and other out-of-pocket costs. If you visit the doctor frequently or if you end up spending time in the hospital, these will factor a lot into your overall costs in the next year. If you’re relatively healthy, don’t take prescription drugs, and rarely visit the doctor, a higher deductible plan may still be a good choice. But decide what your medical needs are and then look at what each plan covers, and how costs are shared between yourself and your employer. You should also pay close attention to any specific exclusions – that is, things not covered under each plan.

Talk to your Human Resources department or benefits administrator for more information.

Hope that helps!

James asks…

what does adjusted gross income mean?

also, what is the “Alternative Minimum Tax?”

Sarah Fields answers:

Adjusted gross incomeFrom Wikipedia, the free encyclopedia
For United States individual income tax, adjusted gross income (AGI) is total gross income minus specific reductions.
AdjustmentsGross income is reduced by certain items to arrive at adjusted gross income.[3] These include:

Expenses of carrying on a trade or business including most rental activities (other than as an employee)
Certain business expenses of teachers, reservists, performing artists, and fee-basis government officials,
Health savings account deductions,
Certain moving expenses,
One-half of self-employment tax,
Allowable contributions to certain retirement arrangements (SEP IRA, SIMPLE IRA, and qualified plans) and Individual Retirement Accounts (IRAs),
Penalties imposed by financial institutions and others on early withdrawal of savings,
Alimony paid (which the recipient must include in gross income),
College tuition, fees, and student loan interest (with limitations and exceptions),
Jury duty pay remitted to the juror’s employer,
Domestic production activities deduction, and
Certain other items of limited applicability.
[edit] Reporting on Form 1040Gross income is reported on U.S. Federal individual income tax returns (Form 1040 series) is reported by type of income.

Http://en.wikipedia.org/wiki/Adjusted_Gross_Income

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2011.

Http://www.irs.gov/uac/55

Hope that you find the above enclosed information useful. 10//23/2012

Betty asks…

I need feedback advice about a Washington Mutual IRA…?

In the late-1980s, I worked for an independent self-service gas station and the owner had given me an Independent Retirement Account (I don’t remember if it was a bonus or if it was an employer-match), but when I left, the account remained open (thru American Savings&Loan) and several months later, I found out that they were bought by Washington Mutual (and to this day, the account is still open).

I have a financial investor with my current bank and have another IRA from my last employer and he has distributed the funding into 3 separate accounts (Small Cap, Balanced Fund, and Cash Management) and when I mentioned that I had the account with Washington Mutual, he said that it was FDIC-insured and not to worry about it and to leave it alone, even though I have the IRA with his bank.

Is there any advantage to leaving my account open at Washington Mutual, given all the problems they had with IndyMac and FreddieMac and FannieMac? I know that the MACs have to do with mortgages and that my IRA is something entirely different.

Can anyone give me feedback about my IRA with Washington Mutual?
I just turned 45 and I understand that there is a penalty of some sort to withdraw any or all of the IRA before I turn 59½.

Sarah Fields answers:

Few things:

1. If you have an IRA or any account with Washington Mutual it is now owned and called Chase Bank.

Http://www.usnews.com/blogs/planning-to-retire/2008/09/26/how-the-washington-mutual-takeover-will-affect-consumers.html

2. IRAs or any retirement account are NOT FDIC insured or guaranteed by any bank or government or government agency.

Http://www.fdic.gov/consumers/consumer/information/fdiciorn.html

3. If you have FDIC insured Certificate of Deposits inside the IRA THEN those deposits are FDIC Insured. But that still does not mean the IRA is insured nor guaranteed. FDIC Insurance is scheduled to revert back to $100,000 coverage by year end 2009 unless higher coverage is authorized by FDIC. Current FDIC insurance for deposit accounts as below is $250,000.

Http://www.fdic.gov/deposit/deposits/insuringdeposits/

4. If a current or former employer made the decision to place you in ANY investment (other than distributing cash to the retirement account), that employer is now, what is called a “Fiduciary” and can be held liable for the investment decisions.

Http://en.wikipedia.org/wiki/Fiduciary_duty

http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html

Employers, even investment firms such as a stock brokerages do not engage in placing money in their employee’s retirement accounts and then directing those funds into any particular fund or investment. The liability here is huge!

You could take legal action against the fiduciary if you lost money or your funds were down as the result of them acting as an unlicensed adviser, and acting as a fiduciary. A securities attorney or better an ERISA attorney can be of further help for legal advice.

Http://www.lectlaw.com/def/f026.htm

http://www.seclaw.com/docs/RIAOverview.htm

http://codes.ohio.gov/orc/5815.35

http://www.winston.com/index.Cfm?contentid=34&itemid=1638

Retirement plans are regulated under, The Employee Retirement Income Security Act (ERISA) of 1974

http://www.investopedia.com/terms/e/erisa.asp

http://www.dol.gov/dol/topic/health-plans/erisa.htm

http://www.dol.gov/ebsa/compliance_assistance.html

5. If you have a current investment advisor, I would say this person has no clue what they are doing based on the statements you made about him or her. I would seek a professional advisor with 10+ years of retirement experience and preferably 15+ years of investment experience.

6. My question is do you have a SEP IRA, a SIMPLE IRA, a SARSEP, or the similar? An employer sponsored retirement plan would not open a “Standard IRA” as those are open and managed by individuals only, not by employers.

7. Yes, there is a 10% penalty for taking money out of a qualified retirement account before 59 1/2. In addition to that penalty, the ENTIRE amount withdrawn would be deemed as taxable income in the year it was withdrawn.

See this link below for more info on taking money out of a qualified retirement account prematurely. Note, no matter what kind of qualified retirement account you have the answer is the same:

How much will my 401K cashout tax be?

Http://answers.yahoo.com/question/index?qid=20090303111950AAijAaE&r=w&show_comments=true&pa=FZB6NWHjDG3N56z6v_2wXVTV6igbwQuehdgfQCGq2KUvXhjrBd.HQA–&paid=add_comment#openions

Additional info on retirement accounts:
Should I open a Roth IRA or just an IRA?

Http://answers.yahoo.com/question/index;_ylt=AsnUXN0g6HSkPbxUymoO4GPty6IX;_ylv=3?qid=20080603121941AAMN0bP&show=7#profile-info-RtfCGOtNaa

8. I would move (transfer) your retirement account(s) to someone who understands what they are doing. I would suggest a firm that offers more depth of understanding of investments and retirement services.

Suggestions to consider:
Charles’s Schwab. Offers both discount series and live body in person help.

Https://www.schwab.com/public/schwab/home/welcomep.html

You can do this online with fund companies or other discount firms but do you get knowledgeable people? Rarely.

Depending on your assets, I would also consider Morgan Stanley.

Http://www.morganstanley.com/about/offices/usa.html

Again you want to ask (demand) for advisors with the said experience above.

9. Final note:
IndyMac is bankrupt. No longer operating as a public entity.
FreddieMac and FannieMay are mortgage companies now under US Gov control (Sept 2008). If they have ANY sort of investor services/ financial planner assistance, avoid them like the plague. They are not experts in this dept either.

Good Luck!

Disclaimer:
Links are for references only and are not deemed as endorsements. I am not currently employed by any of the firms listed hereto, and do not receive any compensation for ANY referrals such forth.

Additional Disclaimers:

http://profiles.yahoo.com/u/CUXTCCBSBYDZODXWGYK2IZDOOI

http://360.yahoo.com/profile-MRcc7V81cqUI1qzb8SDAZw–

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