Prudent Planning

Gray Easterling
Gray Easterling

Many of you are aware of the tax savings instrument available to you known as the health savings account. This is a program funded by you and/or your employer that can be used to cover deductibles and co-pays in a high-deductible health insurance policy. An article in the January, 2014 Forbes, gives ideas on how to make these HSA’s work harder for you. You probably know that amounts not drawn down in a current year can be carried over from one year to the next, and account balances can build up to substantial amounts. Here is where it gets interesting: You can make retroactive claims with your HSA balances. The strategy is to pay the medical bills owed because deductibles have not been met out of a personal account instead of the HSA. Keep the bill in a file for later use after you retire. Note that HSA contributions are not included in income if paid by your employer; if self-employed, the contributions reduce your taxable income.


Hopefully, after you retire, the HSA has grown in value from earnings on the account balances. When additional income is needed, apply the old medical bills against the health savings account and take a distribution. The distribution is not taxable. There are several caveats. You can’t claim medical expenses you have already used as itemized deductions on your tax return, and you can’t reimburse yourself for the premium used to pay for the HSA. Once you are enrolled in Medicare, you can no longer contribute to the health savings plan, but you can take distributions to pay for Medicare and Medigap premiums.


One other item of note concerning retirement savings. There is a recent tax court case ruling on multiple IRA rollovers. Under the internal revenue code section 408, an IRA owner can roll over only one distribution within a one year—365 day—period, which starts on the day the IRA owner receives the distribution. Until now, it was thought that the rule applied separately to each IRA, allowing multiple rollovers if taken from separate IRA accounts. The new ruling requires a different approach if you want to avoid tax and possible penalties. If you want to move money more frequently than once per year, don’t use the 60 day IRA to IRA transaction. Instead, you can use the trustee to trustee transfers, which can be made anytime without regard to the once per year rollover rule. As always, consult with your tax advisor before taking any action.


Having just experienced the magnificence of Easter Sunday and the Lenten discipline, there were many prayers, both personal and corporate, and hymns that really made significant inroads into my inner being. Not only is it a time of year for personal and spiritual renewal, it is also a time that God’s creation starts rebounding from the cold and dark of winter. As the prayers of praise and thanksgiving roll off our tongues, it is not too much of a stretch to agree with the lyrics of a recent Tim McGraw song. Our words and songs of celebration of God’s glory, “felt good on my lips”. From the Ash Wednesday liturgy, “Accomplish in us the work of your salvation that we may show forth your glory in the world.”


Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed.  This material is intended for informational purposes only and should not be construed or acted upon as individualized tax, legal or investment advice.  FSC Securities Corp does not offer tax or legal advice.  Securities, insurance and investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment advisor 3416 North Blvd, Alexandria, LA 71301, (318) 448-3201.  The views expressed are not necessarily the opinion of FSC Securities Corporation.