Healthcare and HSA Reminders

Whether you have health insurance or not, it’s important to stay abreast of the major changes that have occurred to the healthcare system in the wake of the Affordable Care Act—also known as Obamacare. Fortunately, the IRS has issued four reminders to Americans as they go forward. After each reminder, I’ve added a short bit of additional information and commentary.

1. Most people already have qualified health insurance coverage and will not need to do anything more than maintain qualified coverage throughout 2014. Indeed, many employers offer health insurance that fits the requirements set by the Affordable Care Act. If your employer offers an acceptable plan and you do not take it, you will be mandated to register for health insurance or, eventually, pay a penalty fee.

2. If you do not have health insurance through your job or a government plan, you may be able to buy it through the Health Insurance Marketplace. Using the marketplace, accessible at healthcare.gov, is a new tool launched by the government to help Americans find the insurance plan that works best for them. The deadline to sign up for 2014 has passed, but you can still browse plans for next year on the Marketplace.

3. If you buy your insurance through the Marketplace, you may be eligible for an advance premium tax credit to lower your out-of-pocket monthly premiums. Tax credits and subsidies are a major part of the Affordable Care Act. By offering ways to lower premiums and expenses, the government is encouraging Americans to get covered. You must meet certain requirements including whether your employer offers a plan and how much money you make.

4. Your 2014 tax return will ask if you had insurance coverage or qualified for an exemption.  If not, you may owe a shared responsibility payment when you file in 2015.

The IRS issues tips and reminders periodically and you can browse them by visiting www.IRS.gov. IF you have questions about health insurance or about Health Savings Accounts (HSAs), visit www.ndira.com.

Alternative assets in an HSA

At New Direction the focus, rather than selling or recommending investments, is to help the clients learn about their options and guide the client through the process of making it happen. Co-founder and CEO Bill Humphrey said, “Self Direction is not for everyone. The self directed investor must be willing to take the responsibility for investment choices. Although their outside advisers or associates can help. Since we don’t sell any investments, we don’t question your choices or try and steer your decisions. Our clients already have the sexiest IRAs on the block.” New Direction offers Roth and Traditional IRAs, SEP IRAs, as well as 401k plans.

Humphrey warns clients and potential clients not to overlook the HSA for retirement expenses of the medical variety. Creative investors are discovering the investment potential of HSA funds and some clients feel that the tax shelter of an HSA can be better than either a Roth or Traditional IRA. New Direction includes Self Directed Health Savings Accounts in the available plans, Humphrey explained, because many employers are now offering plans in conjunction with HSA contributions.

Most investors look at an IRA as a long term investment, and recently, according to New Direction, more HSA investors are doing the same thing. As mentioned in the WSJ article, investors in hardwood trees are looking for a long term return. Humphrey said, “Our clients mention the low initial amount required as one of their reasons for making the investment aiming that the trees will ‘grow’ in value between now and retirement.”

A New Direction HSA can purchase Hawaiian Koa trees or whatever investment they choose, and harvest future profits. Those profits are never subject to tax, provided distributions are used for qualified medical expenses. And HSA contributions are not subject to tax either. Thus, HSAs offer tax free contributions and distributions as well. Account holders generally defer distributions from HSAs to retirement years while allowing the account to grow in the meantime.

Given the lower typical balances in HSAs, the focus is often on lower priced investments. Small plan balances don’t necessarily limit the client to small investments. HSAs and IRAs with low balances may also, as mentioned in the WSJ article, make purchases with other investors or using debt leverage.
Since 2003, New Direction has focused on education of investors on the details of the process and rules. They teach hundreds of free webinars and classes to educate both new and experienced investors how the take advantage of a self directed plan. Through their professional training classes for CPA and others, the details of tax treatment of profits of the plan and any UBIT (unrelated business income tax) are also addressed.

New Direction IRA, Inc., a self-directed IRA plan provider and record-keeper, offers only self-directed IRAs, HSAs, Coverdell educational savings accounts, plus company sponsored SEP, SIMPLEs, 401k plans and recordkeeping for qualified plans and defined benefit plans. They can be reached at 303-546-7930 or toll free at 877-742-1270. Visit their website at NewDirectionIRA.com. New Direction does not offer investment advice nor do they sell any investments.