What you need to know about the new rules
Before heading home for the holidays, the 109th Congress passed legislation to greatly improve the benefits of health savings accounts for both employers and employees. Health-care costs consistently rank as the No. 1 concern of small-business owners, and NFIB has led the fight for greater options.
The Tax Relief and Health Care Act of 2006, signed by President Bush on Dec. 20, makes several business- and employee-friendly changes to HSAs that increase the affordability and accessibility of health care for independent businesses.
Highlights of the legislation:
- Money from flexible spending accounts and health reimbursement accounts can be rolled over one time, penalty-free, into health savings accounts.
- There is no longer an annual plan deductible limitation on HSAs, meaning that in 2007, individuals will be able to contribute $2,850 to an HSA and families will be able to contribute up to $5,650, regardless of the size of their health insurance deductible.
- Allows people to fully fund their HSA account, regardless of when during the year they became covered under the plan.
- Employers may contribute more for lesser-compensated employees.
- Allows a one-time rollover from an IRA to a HSA.
HSAs are tax-free savings accounts designed to help small businesses and their employees save for qualified health expenses. To learn what's qualified, visit http://www.irs.gov/publications/p502/ar02.html#d0e516. Participants are not penalized for using their HSA funds for such expenses and are allowed to carry over any unused funds from year to year to pay for future health-care needs. Employers may contribute to employees' HSAs if they so choose, and employees are able to take their HSA with them if they change jobs.
NFIB applauds Congress' passing of this recent legislation improving HSAs and supports the expansion of consumer-directed health plans, as they are designed to save employees money by encouraging them to be more involved in the decision-making process about their medical care. For more information on savings accounts for medical spending, visit NFIB's health savings account page.