Medical Savings Account

[StoneHeartFarm]

Does anybody have one of these? This is an IRA like savings account (tax deductible) that you use to cover the deductible on your insurance. This allows you to have Health insurance with a much higher deductible, hence lower premium. Apparently at age 55 you can roll the account over into an IRA.

Has anybody got one? Can these accounts only be set up with banks, or can any IRA account be declared such an account?

SHF

SHF

 

[Richard]

(panting) Still working on trying to find something for you. I've called Kemper, Fidelity, Pimco, Putnam and Van Kampen and gotten the same blank response from each of them, SO, I then went to the IRS web site http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D10343,00.html

This second url may give you a greater overview of questions/answers.
As I'm typing this moment, I'm on phone with Nationwide Insurance. They have come back to me (as have the above funds) with blank stares.

I'm getting really curious now and will try later on today to peel back some of these onion layers of hinderence to see if/what else we can find out.

Richard

 

[StoneHeartFarm]

Richard,

Thanks for the help. I've done some research and found one bank that had some general info. The problem is they're offering a whopping 4% interest on the account, 20% of which they keep as a maintenance fee.

Apparently, as a family, I'm allowed to deposit a specified amount each year (which amount decreases each month as the year progresses), 75% of this is deductible. Then, the bank gives me a VISA check card which allows me to draw against the account as medical expenses arise. Once the specified insurance deductible is reached, the insurance company is supposed to kick in and pay the bills. At the end of the year, I can get my account balance returned, or roll it over for the next year.

I have to talk to my banker Friday anyway, so I'll ask her what she can do. At 4%, I don't think I'd want this as an IRA. Can I have 2 IRA's (wife and myself) and still have the MSA?

The IRS deduction is nice, but probably not necessary to the overall process, which is to save some money on insurance and not be hasseled at the emergency room.
SHF

 

[dmccarty]

SHA,

The MSA got me curious so I checked vanguard.com and motleyfools.com to see if they had any accounts/fund/info and I came up with nothing.

That surprised me! These two websites usually have good information about taxes/financial planning. I searched for "archer". "msa", "medical savings account" and came up with zero.

That does not help you but you don't have to try searching those websites! /w3tcompact/icons/smile.gif

I wonder what Yahoo comes up with? /w3tcompact/icons/smile.gif

I have to go see if my plan is a High Deductable plan....

Later...
Dan

 

[TerryinMD]

SHF,

My guess is that you are self-employed.

If you are not, a lot of companies have Flexible Spending Accounts which are similar to what has been discussed in this thread with the exception that they need to be used by April following the year that the money was deposited.

This money is taken out of your paycheck pre-tax and can be used for any medical use. Our company has a credit card which can be used to "charge" against my account. Or you can submit a form to get the money from the account at the end of the year. The benefit is that the money is pre-tax and lowers your taxable income for the year.

Terry

 

[cowboydoc]

Steve,
Call 888-367-6727 and ask for Christine at Ext. 134. It's Fortis and they do the MSA's. Email me again if you want more personal info.

 

[StoneHeartFarm]

Thanks Cowboydoc! I'm going to be jumping on something here in the next month. Want to consult my Tax preparer first and put the next couple of weeks behind me, but I also want to start early enough I can get max deposit/deduction for the year.

You guys have been a lot of help on this and I do appreciate it.

SHF

 

[StoneHeartFarm]

Terry,

I think you've basically got an MSA just with a different title. They may call it something else when it's provided by an employer. They don't give you the option to roll the money over? Do they pay interest?

SHF

 

[StoneHeartFarm]

Dan,

Yahoo yields this website with a reprint from the Detroit News <A target="_blank" HREF=http://www.medicalsavingaccount.com/p2.htm>http://www.medicalsavingaccount.com/p2.htm</A>

Does make it sound pretty good.

SHF

 

[TerryinMD]

SHF,

No, you cannot roll it over and you do not get any interest.

The money you set aside in your Flexible Spending account is to be used during a calendar year. The rules allow you until April the next year to file to get any remaining money. If you don't use it, you lose it. It supposedly goes towards adminstrative costs. Whatever that means!!

Basically, there are companies that specialize in administering these accounts. Every company I have worked for in the past 15 or so years have had this type of plan. My understanding is that the administrator (the company holding my money) takes the funds and invests them in short term investments and makes their money from those investments. If you have a large company that has 10,000 people using this mechanism and each puts $500 a year into it, you have $5 million to play with. Nice chunk of change to invest. /w3tcompact/icons/crazy.gif There are probably other administrative costs that are picked up by my company and I don't know what they may be.

It's a win-win situation. I get money set aside pre-tax which reduces my tax burden somewhat. The monies are available to me immediately and I haven't paid any taxes on them. Cool stuff really. The trick to being successfull is to gauge how much you need to set aside every year. For example, my oldest daughter need braces. We had to pay for 50% of the cost. So, we planned out how much we would need to cover the additional cost and had it taken out of my pay. This year we don't need to worry about those additional costs so we lowered the amount taken out.

Additionally, you can do the same think if you have child care expenses. It is a different plan but essentially works the same way.

Hope this explains things a little better.

Terry