Another Defeat for Health Savings Accounts

Another Defeat for Health Savings Accounts

(PRWEB) May 20, 2004

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 http://www.healthsavingsaccount-hsa.com.

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 http://www.freedombenefits.org.

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