ATR is proud to support a new bill introduced in the U.S. House of Representatives last week. H.R. 4777, the “Health Savings Act of 2014,” is sponsored by Congressman Michael Burgess, M.D. (R.-Texas).  

Health savings accounts (HSAs) are tax-advantaged accounts which are used to pay for routine, out-of-pocket medical expenses.  They are used in conjunction with insurance plans which tend to cover large and/or unexpected health events.

H.R. 4777 makes HSAs more readily available to the public by implementing the following reforms:

Creation of Child HSAs.  As a way of saving for the future health needs of children, child HSAs are created with a maximum annual contribution limit of $6350 (indexed to inflation). Importantly, these HSAs can be rolled out of or into upon the death of a family member.  This allows for a kind of pre-funding of a child’s anticipated Medicare liability decades before she turns 65.

Increase HSA contribution limits.  HSA contribution limits would match the maximum out-of-pocket limit on HSA-qualified insurance plans.  That limit is currently $6350 for a single person, or $12,700 for a family.  These numbers are indexed annually to inflation.  This would allow people to use HSAs not only for short- and intermediate-term medical needs, but also as a real health retirement account.  This is important since the insolvency of Medicare means that future seniors will likely be called upon to pay for more of their own Medicare benefit.

Allow mandatory IRA and 401(k) withdrawals to be deposited tax-free into HSAs.  When seniors reach age 70 and 1/2, they are required to take minimum distributions every year from their pre-tax IRA and 401(k) plans.  H.R. 4777 would also these “RMDs” to be rolled over tax-free to HSAs.  That way, the pre-tax nature of these dollars can be preserved and the money used to pay for health needs in retirement.

Give HSAs the same bankruptcy protection as IRAs and 401(k)s.  Under the law, a bankruptcy settlement cannot access retirement savings accumulated in IRAs and 401(k)s.  H.R. 4777 would extend this protection to HSAs, as well.

Expand the definition of an HSA-qualified insurance plan.  There is a definition in tax law of an HSA-qualified insurance plan necessary to have in order to make HSA contributions.  H.R. 4777 would expand this definition to include any Bronze, Silver, or catastrophic plan offered on any health insurance exchange.  Furthermore, HSA compatible plans would be clearly identified for health market consumers.  This would mean that nearly all Americans on the individual market would be able to fund an HSA to pay for their out-of-pocket medical expenses.

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