HSA – Transfer K
Our Intellectual Property Patent Pending Concept for the Enhancement of Health Care Affordability for Americans
HSA-Transfer K – Health Care Affordability for Americans
Problem 1-Health Care Costs:
The main concern of Americans today is to lower their Out-of-Pocket Medical Costs.
According to The Kaiser Foundation, the 2015 average group health insurance premium in the US (single covered) is $5,963/yr, with the employee paying $1,255 (21%) and employer paying $4,708 (79%)
In 2016, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,826, according to the Milliman Medical Index (MMI).
|EE Out of Pocket
@Time of Service
- Family 1 uses limited health services—some preventive visits for which they pay nothing out-of-pocket and copays for prescription drugs and office visits.
- The second family is fairly healthy as well, with similar services, but their oldest child had a single visit to the emergency room (ER) and follow-up visits that cost $6,000, of which the family paid $964 out-of-pocket.
- Family 3 welcomed a new baby. Maternity care, a hospital stay, and newborn visits cost $22,000, of which the family’s out-of-pocket cost was $5,000.
- Last is Family 4: The father has a chronic condition that put him in the hospital once, along with multiple visits to the ER and physicians, and multiple prescriptions. The mother also has health issues and the resultant ongoing costs, including specialty drugs. The children have only routine healthcare services. The family’s costs were capped by an out-of-pocket limit of $11,000, but, total expenditures were nearly $75,000.
Problem 2-Retirement Savings, needed to pay for Problem 1:
According to Fidelity, one of the largest 401k providers in the world with over 12 million accounts, the average 401k balance is now around $91,800 as of 7/1/2015, while the average company contribution in 401k plans is 2.7% of pay.
Nationwide, the average American under age 65 is earning $46,409 per year, according to the Census Bureau’s Current Population Survey, at 2.7%, this would represent a meager $1,253.04 in contributions.
Vanguard’s “How America Saves 2016” report finds in 2015, Americans earning less than $30,000 per year contributed an average 4.4%, which works out to $1,320, or less, per year. Alternatively, workers earning between $75,000 and $99,999 contributed an average 7.7% of their earnings to these plans, and workers earning $100,000 or more contributed an average of 8.3% of their income.
Solution: HSA-Transfer K
Premise: The following expanded benefits of the ability to “Transfer” assets from Retirement Plan Benefits to an HSA-Transfer K account are predicated upon the participant having a current qualified High Deductible Health Plan (HDHP) plan (Group or Individual) in effect at the time of the “Transfer”
The proposed doubling of the available tax deductible contribution to the current individual HSA account of $3,400/Single or $6,750/Married is a wonderful relief for those who can afford to do so, but as Problem 1 and Problem 2 expose, this will not result in a viable solution for the majority of Americans.
The HSA-Transfer K would allow Retirement Plan participants to make a yearly (open window opportunity) non-deductible “Tax Free Transfer”, much like the FSA-Flexible Savings Account rules, and transfer a portion, or all of the participants vested benefits into their Individual HSA-Transfer K account, not to exceed the current yearly HSA eligible amounts from all accounts then in effect.
Any Employer/Employee Retirement Plan contributions or matching arrangements would remain unaffected, regardless of the employee’s subsequent transfer to have his/her Vested Retirement Plan assets “Transferred” into the HSA-Transfer K. This will assure that the employer is providing the identical Plan(s) formula(s) and contributions to the eligible participants Retirement Plan Account.
Note: Due to the requisite actuarial assumptions required for Defined Benefit Plans (et al), the exchange of “Vested” benefits from these plans will be prohibited.
Acknowledging that employer contributions to an HSA account are 100% vested, while similar contributions to Retirement Plans require “Vesting Schedules”, the participant would not be allowed to make any election to “Transfer” vested benefits to their HSA-Transfer K Account that would exceed their vested Retirement Plan account balance at the time of election (or 12/31 of the year of election).
The initial concern might be that we would significantly reduce the employees Retirement Benefit. However, using the Census Bureau’s Current Population Survey, indicating that the average wage earner ($46,409) is only contributing at a rate of 2.7%, or $1,253.04, per year, which would ultimately be 100% taxable upon distribution/withdrawal, would leave very little to help offset the future, let alone the current escalating costs of health care, while providing a system allowing for the pre-tax payment of Health Care, as intended by the current HSA rules governing HSA Accounts.
This is of special concern as it pertains to the Millennials, who are estimated to live significantly longer and are currently devoid of savings, or the financial ability to save, while we continue to struggle with how to fund our Medicare plans and Social Security Benefits, which they will undoubtedly require.
HSA-Transfer K for IRA’s
In the furtherance of expanding the use of qualified High Deductible Health Plans (HDHP), any individual having or contributing to an IRA (Individual Retirement Account) could similarly elect to “exchange” their IRA balances to an HSA-Transfer K, which would then maintain all of the current HSA regulations and benefits, including tax free withdrawals in accordance with the Qualified Expenses reflected in Publication 502.
In an effort to expedite the transfer, tracking and reporting of Retirement Plan Assets to the HSA-Transfer K to the Plan Employer, Fiduciary and/or TPA, we (HSA Specialists of America, Inc.) will develop programs that will expedite the automated online HSA-Transfer K enrollment, yearly calculation of the employees vested benefit, and eligible HSA-Transfer K amount, including advanced flag notification of the yearly open window opportunity.
In the case of IRA Accounts, we will be the liaison to acceptable HSA providers and assist in the ability for the automated online HSA-Transfer K enrollment and transfer of such eligible IRA Accounts.
HSA Specialists of America, Inc. will be responsible for all partner licensing required to meet the aforementioned stated services.
In keeping with the government’s desire to return the government and Health Care choices to the people, along with the necessity for the taxpayer to be able to make their own personal decisions regarding how their monies will be spent, The HSA-Transfer K would provide for individual engagement of how best to manage either their Health Expenses, by encouraging them to actively participate in the shopping process of deciding what their individual/family needs require, or how the investible portion will be used to handle their future Medical and/or Retirement requirements.
The added advantage of the HSA-Transfer K would be the complete avoidance of taxation when utilized for those HSA approved expenses, as currently shown in Publication 502, which includes the tax free use for Long Term Care, which is already a major concern, as reflected by the significant reduction of available carriers, plans and increased premiums, otherwise out of reach for most Americans.
In addition to the potential Tax-Savings for the public, the promotion of the HSA-Transfer K could provide Group Health Insurance savings to those employer’s that embrace the HSA concept by assisting their employees in the mutual savings of a High Deductible Health Plan.
Higher HSA deductibles typically translate to lesser premiums to both the employer and employee. If employees can be provided with the assurance that they will receive the employer’s assistance in being the co-provider of their deductible through the optional transfer of retirement plan contributions to their HSA-Transfer K account and encouraged to use their new found savings in premium sharing to be deposited into their respective HSA-Transfer K accounts, we may be able to refocus individual responsibility for both Health Care and Retirement and reduce the governments perceived obligations for these otherwise personal responsibilities.
If you would like to view our Patent, you can view it here: transfer-k-patent (Confirmation No 5008)