HSA’s – A Year End Tax Planners Dream

Tax Savings From My Health Plan You Say?

If you have just completed your 3rd quarter review and discovered that Uncle Sam will be taking a bigger bite out of your profits, the cure for your ills may be found in your health plan. HSA’s or Health Savings Accounts were established by Congress in 2003 when they passed the Medicare Prescription Drug Improvement and Modernization Act. When first implemented, it came with a myriad of complicated rules and conditions.

In 2006, President Bush signed the Health Opportunity Patient Empowerment Act which simplified the rules for employees and employers wanting to put an end to ever rising health insurance premiums. Simply put, Health Savings Accounts are like Healthcare IRA’s. Money deposited in your HSA grows tax free, and the funds placed in the account either by you, your employer, or both, uses pre-tax dollars, money that is free from payroll and income taxes.

What Dream?

Unlike an IRA or 401k account, money withdrawn from your Health Savings Account must be used for a wide range of allowable medical, dental, and health related expenses. If not, you are subject to the same 10% penalty and taxes that a 401k plan has. However, money spent for allowable expenses is never subject to taxes either going in or coming out.

The amount you are able to shelter depends on whether you are an individual or have a family of 2 or more people covered by a qualified (HDHP) High Deductible Health Plan. A single person could contribute $2,850 tax free in 2007 and $2,900 in 2008. A married couple or family can contribute $5,650 and $5,800. By taking advantage of an IRS sanctioned Health Savings Account between November 2007, and January of the next year, an individual can shelter $5,750. For married couples or families, their maximum grows to $11,450 in the next 3 months.

Pinch me!!!

Follow this example, John is single. He contributes $2,850 in a Health Savings Account prior to December 31st 2007. In January, John deposits another $2,900. In February, John goes for Lasik eye surgery to repair his vision back to 20-20. The cost is $5,000 which John has deducted from his health savings account. In a period of less than 4 months, John was able to deposit $5,750 tax free, spend most of it, without paying a dime in taxes.

Charles, age 57 and Susan 55, are married, kids are grown, and Charles is covered under a qualified High Deductible Health Plan (HDHP) offered by his employer. His employer is contributing $100 a month for single and $150 for all other employees who applied for the lower cost health plan. Charles plans to contribute the maximum allowed. Because Charles and his wife are over 55, the law allows for “catch-up” contributions of $800 each in 2007 and $900 each. Their catch–up contributions add up to an extra $3,400 or $14,850 between 2007 and 2008.

All that you need is coverage under a qualified High Deductible Health Plan, which by law can be a policy with deductibles as low as $1,100 for individuals and $2,200 for two or more people. Open your Health Savings Account at a bank or other financial institution, and its lights out for the tax man. Pleasant Dreams.

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Bruce Silver is the founder of Employers Rx LLC, an employee management consulting firm specializing in HR Outsourcing and Professional Employer Organizations.

http://employers-Rx.com

HR Outsourcing for Small Firms Predicted to Double by 2014

Carrie Aaron, president of PEO Network, and Lisa Rowan, program director of HR and talent management services research for IDC, have written a 5-page article "Double PEO Market Share" for the October 2007 issue of the PEO Insider®.

"The small business economic engine is booming and so goes the PEO industry," said Carrie Aaron, president of PEO Network. "After a setback in 2001 due to post 9-11 and a difficult Workers' Compensation market, the PEO industry is predicted to double by 2014."

"The small business market opportunity is strong in the United States given its size and growth. Employment among small employers increased at a growth rate of nearly 12 percent from 1999 to 2006 according to the BLS. Small companies employ half of all workers in the U.S. private sector," said Lisa Rowan, program director of HR and talent management services research for IDC.

A copy of this must read article is located at http://www.peonetwork.com/articles/aaron1007.pdf

Why Work With A PEO Consultant?

A PEO Consultant is a person who is a specialist working with PEOs. The typical consultant does an in-depth assessment of your needs and goals before matching you with a PEO. You save hours of research and get the best possible deal from the PEO you ultimately choose. There are hundreds if not thousands of PEOs in the United States alone. You could narrow your choices by visiting a PEO directory such as http://www.peo.com and http://www.employeeleasing.com. A business owner could not possibly evaluate all of the potential PEOs and this is where the PEO consultant steps in.

For more information about working with a PEO consultant visit http://www.employers-rx.com

Evaluating a PEO

Amy Grimmer, President of Centripetal Consulting Group published an excellent article about evaluating a Professional Employer Organization (PEO). Centripetal Consulting Group are experts in human capital management and they have alliances with PEOs. To read the entire article visit the "Winning" blog.

Direct Deposit Saves Time And Money

A direct deposit is when your employer deposits your paycheck into your bank account rather than handing you a paper check. Direct deposits save employers money and employees time. Employees no longer have to wait for their paycheck to clear the bank before paying bills or making purchases. Paper checks can be lost, torn or stolen. Direct deposits are secure, confidential and require very little paperwork to set up. Direct deposits are routinely offered by Professional Employers Organizations (PEOs) and Employee Leasing Companies. If your employer does not offer direct deposits ask them to consider working with an employee leasing company that offers this benefit.

Arizona Startup Company Blog

The Arizona Startup Company Blog has an interesting post about Professional Employer Organization (PEO) here. The article covers an explanation of what a PEO is and what services a PEO typically offers.

If you would like to explore working with a PEO visit http://www.peo-quote.com