Advisers want Congress to increase HSA contribution limits

Congress might double contribution limits separately if health care bill falls apart in Senate, consultant says

May 22, 2017 @ 4:53 pm

By Mark Schoeff Jr.

If any part of the House's health care reform bill survives in the Senate, it could be a provision that lifts the ceiling on health savings accounts, a move that some advisers welcome.

Under the House bill, the contribution limit would be doubled to $13,300. The increasing popularity of the accounts gives that policy change a chance to make it through Congress as a stand-alone bill or as part of a tax or spending package if the House health care bill collapses, according to Roy Ramthun, founder and president of HSA Consulting Services.

"The one thing they can all agree on is expansion of HSAs," Mr. Ramthun said in an interview following a presentation at the Fi360 annual conference in Nashville, Tenn. "We just need a [legislative] vehicle. It's at the top of the list of things they can do. If they can't do [HSA expansion], they can't do anything."

Health savings accounts are becoming a primary means of managing health care costs, as employers turn to high-deductible health plans. Money can be put into HSAs tax-free and withdrawn tax-free to pay for medical expenses. They are portable and the balances don't expire. After age 65, holders can use funds for any purpose penalty-free, but the money must be used for medical reasons to be tax-free.

Mr. Ramthun recommended that clients maximize contributions to HSAs in the same way that they try to fortify their 401(k) plans.

"There are no better tax-advantaged accounts than HSAs," Mr. Ramthun told the Fi360 audience.

Other advisers at the conference welcomed congressional action on HSAs. There are currently about 20 million accounts. By 2018 HSAs are expected to hold $53 billion in assets.

Ned Hodder, owner of Hodder Investment Advisors, said that he and his wife spent down their HSAs the last two years covering medical expenses.

"They could be a lot more effective, if they allowed you to put more ammunition in them," Mr. Hodder said.

John Jespersen, lead adviser at Buttonwood Financial Group, said that the firm is branding its own HSA.

"We see HSAs as the second-best way to save beyond 401(k)s" Mr. Jespersen said.

In addition to the accumulation benefits, HSAs also ensure that holders have "skin in the game" when it comes to spending on their health.

"It makes an individual be more responsible fiscally and physically," Mr. Jespersen said.

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