Alpine Bank's Financial News · Vol.4 · No.3 · March 2017
Health Savings Accounts
We all need health insurance. Likewise, we all like to save money and reduce our taxes. Health savings accounts (HSAs) can help with both of these goals.
Created by federal law in 2003, health savings accounts are tax-advantaged personal savings accounts to be used for medical expenses. Congress had a few objectives when they created these accounts: To encourage all individuals to have medical insurance; to save for current and future medical expenses; to reduce the overall costs of medical care; and to encourage individuals to take ownership of managing their medical expenses. In many ways, HSAs for medical expenses are like IRAs for retirement expenses.
An HSA works in conjunction with a high-deductible health plan (HDHP). An HDHP is a specific type of health insurance policy that generally does not cover the first several thousand dollars of healthcare expenses. These HDHPs usually have lower monthly premiums than traditional health insurance policies. You must have an HDHP to be eligible for an HSA. HSAs are not available for those enrolled in Medicare.
In 2017, the deductible must be at least $1,300 for individuals or $2,600 for families and the annual out-of-pocket expenses cannot exceed $6,550 for an individual or $13,100 for a family, including the deductible and copayments (but not premiums).
Individuals can buy high-deductible policies on their own or through their employers. If you are interested in setting up an HSA, you can speak with your employer or insurance provider to see if your health insurance plan qualifies.
If you do qualify, then you can establish a HSA with a financial institution, make tax-deductible contributions to the HSA and use funds from the HSA to pay medical expenses that are not covered by your HDHP. Funds within the HSA grow tax-free until withdrawn and are never taxed as long as they are used for qualified healthcare expenses. Distributions that are not used for qualified expenses are subject to regular income tax and a 10 percent penalty.
Many financial institutions offer HSAs. The account often works like an interest-bearing checking account with a debit card you can use to pay medical expenses. There are also HSAs available from some investment firms and mutual fund companies that enable you to invest the funds within the HSA.
The IRS sets the amount you can contribute to an HSA and take as a tax deduction. Your income level, type of income, or whether or not you itemize your deductions does not affect the limits.
For 2017, the contribution limit is $3,350 for individuals and $6,750 for those with family coverage. In addition, for 2017, an individual age 55 and above can make an extra contribution of $1,000. If both spouses are 55 or over, the extra contribution limit is $2,000.
Once you establish and fund an HSA, you can take distributions from it to pay or reimburse qualified healthcare costs that are not covered by your insurance. The definition of qualified healthcare costs is similar to what the IRS uses to determine if an expense qualifies as an itemized deduction for your tax return.
With an HDHP and HSA arrangement, your medical insurance will cover large expenses and you’ll get a tax deduction for your HSA contributions. HSA funds grow tax-free and you’ll have funds available for current and future medical expenses that are not covered by insurance.
Products of Alpine Bank's Wealth Management service are not FDIC insured, may lose value, and are not bank guaranteed.
Dan McCaslin has been with Alpine Bank since 2007 and has worked in commercial lending and retail bank management prior to joining the Wealth Management team. His broad range of financial and banking experience provides the perfect background to counsel clients in all aspects of their banking and investment needs. He serves all Alpine Bank markets along the I-70 corridor from Battlement Mesa to Summit County, as well as the Steamboat Springs market. In addition, he serves as the point person and in-house expert for clients with annuities. Dan has a Bachelor of Arts degree in business administration from Colorado Mesa University.
Financial Literacy for Teens and Beyond
Automobile insurance is important and required by law in many states, including Colorado. It may seem like a large expense, but it is much more costly not to insure your car. Insurance helps you pay to repair your car if you are in an accident. It also provides for coverage if you are in an accident and someone is injured or his or her property is damaged while you are driving.
An auto insurance policy is actually a collection of coverages that helps you in different ways, but all related to driving the car.
Collision coverage is the feature most people think about regarding car insurance. It will cover repairs to your car after the accident after you have paid your deductible. A deductible is the amount you have to pay before the insurance company will make any payments from your insurance policy.
Comprehensive coverage is the feature that covers your car if it is stolen or it is damaged outside of an accident.
There are also liability components to a policy that can cover injury to other people involved in an accident that was your fault, or to help pay for damage done to the other car if the accident is your fault.
States require by law what type of coverage and minimum amounts of coverage you must carry on your car insurance policy.
(Source: Kirsten Petre McDaniel, I am Financial Knowledge. www.youthentity.org)
National Small Business Association Surveys Businesses About Regulations
The National Small Business Association (NSBA), which bills itself as "the nation’s first small business advocacy organization," recently conducted a survey among 1,000 small-business owners, on how government regulations affect them. The survey was conducted between President Trump's election and his inauguration from November 28, 2016 through January 10, 2017.
The survey found the two "most burdensome" regulations for small businesses were the federal tax code and the Affordable Care Act (commonly referred to as "Obamacare"). Business owners said they have also been taking the brunt of the regulatory burden to handle compliance. Fourteen percent of small business owners said they spend over 20 hours per month just on federal regulations.
NSBA President and CEO Todd McCracken said, “The average small-business owner is spending at least $12,000 every year dealing with regulations. This has real-world implications: More than half of small businesses have held off on hiring a new employee due to regulatory burdens.”
The NSBA asked business owners to estimate their first year's regulatory costs, and the average ended up being an astounding $83,019.
According to the NSBA, about three out of four business owners said they read proposed regulations, while 63 percent said they only have to comply with those they read half the time or less. Forty-four percent said they spend 40 hours or more each year dealing with new and existing federal regulations alone. More than one in three spend over 80 hours a year studying and implementing regulations.
The top 10 most concerning regulations are: federal tax code, Affordable Care Act, overtime rules, state licensing requirements, reporting pay data by gender and race, independent contractor test, EPA Clean Water rule, limits on carbon emissions by power plants, the fiduciary rule for investment advisers and joint employer standards.
Since the survey was conducted, President Trump eased regulations with an executive order directing regulators to eliminate two rules for each one put into effect. The NSBA applauded this move.
Not all organizations representing small businesses believe federal regulations have been as time consuming and as much of a financial concern among business owners. Small Business Majority maintains through its own research that business owners have been more concerned with weak demand and the cost of health coverage, and that regulations at the state and local levels are more burdensome than the federal level.
Either way, it's clear that under a new administration, things at the federal level are changing.
Mobile Banking for a Mobile Life
Access your accounts anytime, anywhere with any web-enabled phone or with the AlpineMobile® app for iPad® , iPhone® and Android™. Deposit checks, view real-time balances, transfer money between accounts and more when you’re on the go.
Green Your Coffee
According to a recent poll by the National Coffee Association, one in five adults get their daily caffeine boost from one-use coffee pods. Switch over to a greener pod by choosing a recyclable, biodegradable or compostable version. Or better yet, kick the one-use coffee pod to the curb with a reusable, stainless steel pod or even try an alternative brewing method—pour over, press, standard drip or moka pot—to get your coffee fix.