Gary Lesser

The AICPA's new brochure, Guide to Understanding Health Savings Accounts, is being offered to insurance companies, financial institutions and others to help them offer clients and customers an independent, unbiased explanation. Price information: Contact vendor-- AICPA Martin A. Censor, Esq. Specialized Publications & Subsidiary Rights Voice: 201.938.3717

lolThelol lolcontributionslol lolmadelol lolonlol lolbehalflol loloflol lolnonlol-lolownerslol lolarelol lolclaimedlol lolonlol lolthelol lolbusinesslol loltaxlol lolreturnlol (lolgenerallylol lolFormlol lol1065lol).

Yes. An employer that satisfies the comparability rule by contributing the same amount/percentage to the HSAs of all eligible employees that have, for example, family HDHP coverage, is not required to contribute any amount for those eligible employees with Non-HDHP covrage (higher amount/percentage would also be acceptable).

Agreed, they do not appear to meet the "80 percent" test under Code Section 1563(a)(2). Perhaps the accountant is including individuals whose ownership is not identical with respect to the entities being tested or that the entities are part of an affilliated service group (which is not a mathematical test).

And a new sponsors documents may also be used as an amendment of the existing plan, PROVIDED, the new plan's provisions (mainly options) are not inconsistant with the plan notifications that were distributed to the employees (presumably) last year. As long as the sponsor accepts the employer's plan document, it may establish SIMPLE IRA accounts for employees. Technically (DFI aside), there is no requirement that the SIMPLE-IRAs be established with the same sposor that provides the document. However, such an approach may result in important notices and amendments not reaching the adopting employer.

And if the employers are related, controlled, or affilliated, the plan with the least stringent requirements apply. If plan provisions differ as to testing or allocations they may be discriminatory. Also, compensation should be defined the same in both plans. Both plans may not be fully integrated. Would it be possible for both entities to adopt a single plan? If not, why not?

I am not sure about reimbursement through an HRA, but the expenses are qualified expenses under an HSA.

Generally, this is only true in all non-partners are not comparable partcipating employees. Or the HSA is limited to those with employer provided HDHP coverage and none of the non-owners have a HDHP with employer (and the partners all do). See Prop Treas Reg Sec. 54.4980G-2, Q&A-8.

An individual may have more than one SIMPLE IRA account, but an employer may have only one SIMPLE IRA plan document. Hope this helps.

I do not believe the deduction for the good-faith contribution can be deducted until it is contributed, but the deductible amount can be carried forward (subject to the 25 percent deductible limit for that year). Was the oversight disovered during the annual bank reconciliation?

The prestigious New England Journal of Medicine (NEJM) weighs in on the issue of Health Savings Accounts (HSAs). From an article in the NEJM, by Dr. James C. Robinson, Ph.D., a professor of health economics and chair of the Division of Health Policy and Management at the University of California, Berkeley, School of Public Health: "...the HSA represents a milestone in the ongoing debate about health care reform." "... Today, the most visible embodiment of this goal in the health care sector is the health savings account (HSA), which reflects a philosophical shift in emphasis ... NEJM_Article.pdf

Of course it is an issue. You must also decide if the individual is an really an "employee" notwithsatnding that they decided to pay the individual on a 1099 form. Since the 401(k) limits are higher, the SIMPLE IRA limits eat up the 401(k) limits on an individual basis.

For a SIMPLE IRA, compensation means wages, etc, under Code Section 3401(a)(3) and other compensation subject to federal income tax withholding. Generally, box 1 of Form W-2. However, the payments are exempt (from withholding requirements) if at time of payment (1) it is reasonable to believe employee is entitled to exclusion from income under Code Section 911 or (2) the employer is required by law of the foreign country to withhold income tax on such payment. See Pub 15, page 31.

Even if employer maintained a SEP for the year, the individuals could still establish a traditional IRA (or Roth). Where individual (or spouse) treated as active participant for year, however, the amount allowable as a deduction might be reduced. If contributions were made this year for preceeding year, the individuals may have to be treated as active participants this year.

Assuming the entities are not controlled, related, or affiliated, Company B may start a SIMPLE IRA. The SIMPLE IRA limits applies to the SIMPLE IRA, and the $14,000/$18,000 limit applies in the aggregate.

I think they can establish an HSA, so long as the benefit isn't provided to employees under an insurance-type arrangement.

Yes, if he is truly "unrelated" (not Controlled/Affilliated etc). See 415(h) regarding application of the 415 limit if owner is in control (more than 50%) of more than one entity. In calculating the compensation (earned income), the gain from the other entity has to be taken into account (in each case) in determining the 1/2 of the SE tax deduction and the SE tax apportioned between the two entities.

What did the SS-4 read? What "name" goes with the number.

If the qualified plan is adopted for the same calendar year (benefits accrue etc) the SIMPLE-IRA would be invalidated for the year. See other posts if this road taken.

Legislators in Most States Have Cleared the Way for Health Savings Accounts Reprinted from the Aug. 19, 2005, issue of INSIDE CONSUMER-DIRECTED CARE a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. Insurance commissioners in Rhode Island, Pennsylvania and Florida tell ICDC that lawmakers in their states recently removed legal roadblocks that would have made it impossible, or at least difficult, to pair a health savings account (HSA) with a high-deductible health plan (HDHP). But the clock is ticking for legislators in several states that still have laws on the books that could prevent or impede the adoption of HSA-based health plans on Jan. 1, 2006, when a two-year "transition period" granted by the Treasury Dept. comes to a close. On Jan. 1, 2004, when HSA-based health plans became available, laws in 17 states included "structural impediments" that made it difficult to pair an HDHP with an HSA, says Larry Akey, a spokesperson for America's Health Insurance Plans (AHIP), the trade association for health insurers. "Today there are only two, New York and New Jersey," he says, adding that legislators in both states are working to address the impediments. While some states — including Illinois, Maine and Missouri — allow insurers to pair high-deductible PPOs with HSAs, they can't couple the accounts with a high-deductible HMO. "Our HMOs cannot be used with an HSA because the deductibles are too low. By our definition, a plan that has a high deductible is not an HMO," says Sue Hofer, a spokesperson for the Illinois Division of Insurance. "We expect that employers that want to offer HSA-qualified plans will do so by offering a [high-deductible] PPO." Although HSA contributions are exempt from federal taxes, several states — Alabama, California, Maine, Massachusetts, New Jersey, Pennsylvania and Wisconsin — don't exempt HSA dollars from state taxes. Such laws, Akey says, could hinder adoption of the plans, or confuse account holders who aren't familiar with the state-specific glitches. But most health insurers, he adds, "seem to be going out of their way to educate their customers" about the effect laws in some states could have on their HSAs. Milwaukee-based Assurant Health, a division of Assurant Inc., is one of the nation's largest sellers of HSA-compatible plans. Legal roadblocks haven't stopped the company from selling HDHPs in several states, including its home state of Wisconsin where Gov. Jim Doyle (D) twice vetoed legislation that would have exempted HSAs from state taxes. "It doesn't preclude us from selling [HSA-based plans] because the big tax benefit is on the federal side, and there's also premium savings for the [high-deductible] plans," says Assurant spokesperson Rob Gilbert. "I don't think it will have a significant sales impact" in the states that don't remove legal obstacles before the end of the year. State laws will have little, if any, impact on large employers that make HSA-based plans available this fall, says John Hickman, an employee benefits and compensation attorney in the Atlanta office of Alston & Bird, LLP. Most large employers, he says, adopt self-funded plans "that are not subject to state mandates." Roundup of HSA Rules in Selected States Here's a look at states that have recently removed legal HSA roadblocks, or are still working out the kinks: Rhode Island: In 2004, state lawmakers in Rhode Island passed legislation that addressed some of the issues that made it impossible for health plans to comply with the Treasury Dept.'s definition of an HSA-qualified plan. While they removed first-dollar coverage mandates for several health-related issues, they missed a rule that requires insurers to cover early-intervention services below the deductible for special-needs children. "The way the bill was written allowed one mandate to slip through and not be included" in the HDHP legislation, says Rhode Island Health Insurance Commissioner Christopher Koller. A joint proposal passed this year, and signed by Gov. Don Carcieri ® on June 28, addresses the mandate. The new law also exempts tax-advantaged health plans in general from any future mandates. Rhode Island's two largest insurers have since applied to sell HDHPs in the state, Koller says. Blue Cross Blue Shield of Rhode Island's HSA-compatible plans will be available on Oct. 1, while UnitedHealthcare of New England says its product will be effective a month earlier. Florida: A state law in Florida prohibits health insurers from charging deductibles for services provided to victims of violent crimes. House Bill 811 addressed the specific impediment for HSA-based plans. On June 14, Florida Gov. Jeb Bush ® signed legislation that allows health insurers to sell HSA-compatible health plans, says Rich Robleto, deputy commissioner of the Florida Office of Insurance Regulation. This month, UnitedHealthcare said HSA-based plans would be among the options available to government and state university employees across Florida this fall. New Jersey: A state law requires insurers to provide below-the-deducible coverage for tests that screen children for levels of lead in their blood. The health coverage also must include any necessary medical follow-up and treatment for children determined to have lead poisoning. Two bills, SB 2435 and AB 3440, have been introduced to remove the mandated benefit, says Perry Krasnove, a spokesperson for the New Jersey Dept. of Banking and Insurance. AB 3440 moved through committee and passed in the Assembly by a 77-0 vote in June, Krasnove says. Both bills are now pending in Senate Commerce Committee. New York: Health coverage in New York must include home health care coverage that has a deductible of no more than $50. The state also requires that health plans provide below-the-deductible preventive and primary care coverage for children. Lawmakers in New York have proposed legislation that would remove those impediments for HSA-based plans, says Chapin Fay, a spokesperson for the New York State Insurance Dept. Another bill, S-1405, would authorize HMOs to offer high deductibles. While that bill passed the state Senate, it died in the Assembly, Fay says, adding that the legislature could take up the issue again this fall. Pennsylvania: Last month, Pennsylvania Gov. Edward Rendell (D) signed legislation (SB 107) removing two rules that required some below-the-deductible health coverage. One rule required insurers to provide coverage of at least one home health visit for new mothers who are discharged from the hospital less than 48 hours following a normal delivery or 96 hours after a Caesarean delivery. The other rule required coverage of medical foods for the treatment of several health conditions. Highmark, Inc., a company that operates two Blues plans in central and western Pennsylvania, had been marketing HSA-based plans prior to the adoption of the new rule. The change, however, could eliminate some of the confusion surrounding the plans, says spokesperson Michael Weinstein. "There was interest in the plans, but we'll wait for the marketplace to tell us if this will translate into additional sales," he says. "We'll learn a lot more after Labor Day, when we begin the renewal cycle."

WASHINGTON, DC -- Today the IRS and Treasury issued proposed regulations with respect to the comparability rules for employer Health Savings Account (HSA) contributions. The proposed regulations generally follow the previously issued guidance on comparability rules. The rules also provide additional clarification with respect to a few issues not previously addressed. Unlike many other employer-provided tax-favored benefits, the HSA rules do not have nondiscrimination rules restricting the amount of benefits provided to highly compensated employees. Instead, the HSA statute requires that all employer pre-tax contributions to employee HSAs be comparable. That is, all employer contributions to employee HSAs must be the same amount or the same percentage of the High Deductible Health Plan (HDHP) deductible for all employees with the same category (self-only or family) of HDHP coverage. These rules, as provided in prior guidance, provide an exception from the comparability rules for employer contributions to HSAs made through cafeteria plans. See, Link to Proposed Regulations

The Health Savings Account Answer Book is now available from Aspen Publishers. For more information or to order on-line click on the following: Aspen On-Line To order by telephone, call 1-800-638-8437.

The Health Savings Account Answer Book is now available from Aspen Publishers. For more information or to order on-line click on the following: Aspen On-Line To order by telephone, call 1-800-638-8437.

IRS Plans More Guidance for 401(K) Plans, Including Amendment and Restatement of EPCRS Excerpt: Link to Guidance The Department of the Treasury and the IRS have issued their 2005-2006 Priority Guidance Plan listing regulations and other guidance currently under development. See Employee Plans Area (pages 2-4) and HSA and effect of 2-1/2 month rule on page 5. No answers are provided

Who's Fed Tax number is it? Is the account designated as a "Special Account" essentially run by one of the employers? Is there an agreement that covers the relationship of the parties in regard to such employees or to the account?