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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Medical Savings Account ? Date: 2/1/1999 6:59 AM
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To TMF Pixy:

What is the story on those Medical Savings Accounts?

Do they still exist?

Are they suitable during retirement? Is some other medical coverage required? Would Medicare satisfy any requirement for other insurance?

Are deductions for contributions available? Is earned income required? Are there onerous restrictions? What happens to the money if one does not get sick?

Are they worth fooling with?

If so, how do they work?

Thanks,

DHatch

P.S. If it is too much trouble, or if you do not believe it would be of interest to anyone else in the world, feel free not to answer.

P.P.S. I strongly suspect that it might be of interest to a number of people who might want to explore all of their options at a time when the future availability of medical services and the future methodology of delivery of same is not really all that clear. What I have heard and seen about some of the HMOs is getting really scary.

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Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8216 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 10:33 AM
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Dhatch: Medical Savings Accounts do exist (though they are under-utilized). They are created to accompany a "high-deductible" major medical health insurance plan for self-employed people. All the MSA plans I've seen are savings accounts to which you deposit monies on a pre-tax basis to be used to pay deductibles & copay amounts (before the major med plan kicks in). Any leftover money is yours at retirement. It's not designed to be a "retirement plan" although remaining balances could be used as such. Contact a good insurance agent in your area to get a more complete explanation. PP

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Author: piz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8217 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:12 AM
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peppermintpatty wrote:
...All the MSA plans I've seen are savings accounts to which you deposit monies on a pre-tax basis to be used to pay deductibles & copay amounts (before the major med plan kicks in). Any leftover money is yours at retirement... [emphasis mine]

NOTE: This is incorrect!

Any money left in a medical savings account at the end of the year is forfeited! If you don't spend it, you lose it. That's what the rules say.

Piz

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8222 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:28 AM
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Dhatch asks:

<<What is the story on those Medical Savings Accounts?

Do they still exist?

Are they suitable during retirement? Is some other medical coverage required? Would Medicare satisfy any requirement for other insurance?

Are deductions for contributions available? Is earned income required? Are there onerous restrictions? What happens to the money if one does not get sick?

Are they worth fooling with?

If so, how do they work?>>


An MSA is available to self-employed persons or firms with 50 or fewer employees. Thus, they are not plans for retirees. To open one, the business/self-employed person must have a high-deductible medical plan in force, and that plan must continue for as long as deposits are made to the MSA. In general, the health insurance in force must have an annual deductible of at least $1,500 and no more than $2,250 for individuals (no less than $3K or more than $4.5K for families). The annual pre-tax MSA contribution can be any amount up to 65% of the individual deductible or 75% of the family deductible amounts. Tax-free withdrawals may be made at any time to pay medical expenses. Other distributions are subject to taxes and a 15% penalty. Money can be taken penalty-free at age 65 for any purpose, but taxes are due on the withdrawal just as they are due on any other retirement account.

As Peppermintpatty mentioned, MSAs are not getting a heck of a lot of play by the self-employed or by small business owners.

Regards….Pixy


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8224 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:30 AM
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Piz wrote:

<<peppermintpatty wrote:
...All the MSA plans I've seen are savings accounts to which you deposit monies on a pre-tax basis to be used to pay deductibles & copay amounts (before the major med plan kicks in). Any leftover money is yours at retirement... [emphasis mine]

NOTE: This is incorrect!

Any money left in a medical savings account at the end of the year is forfeited! If you don't spend it, you lose it. That's what the rules say.>>


You're thinking of a Section 125 cafeteria plan and not an MSA. The money in an MSA belongs always to the contributor.

Regards....Pixy

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Author: DownwardSpiral One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8225 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:34 AM
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piz replied:
<<peppermintpatty wrote:
...All the MSA plans I've seen are savings accounts to which you deposit monies on a pre-tax basis to be used to pay deductibles & copay amounts (before the major med plan kicks in). Any leftover money is yours at retirement... [emphasis mine]

NOTE: This is incorrect!

Any money left in a medical savings account at the end of the year is forfeited! If you don't spend it, you lose it. That's what the rules say.

Piz >>

Y'all are talking about two different things. One is MSA, the other I have always seen referred to as "Flexible Spending Account", or as FSA.

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Author: piz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8226 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:55 AM
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TMFPixy wrote:
Piz wrote:
<<peppermintpatty wrote:
...All the MSA plans I've seen are savings accounts to which you deposit monies on a pre-tax basis to be used to pay deductibles & copay amounts (before the major med plan kicks in). Any leftover money is yours at retirement... [emphasis mine]

NOTE: This is incorrect!

Any money left in a medical savings account at the end of the year is forfeited! If you don't spend it, you lose it. That's what the rules say.>>

You're thinking of a Section 125 cafeteria plan and not an MSA. The money in an MSA belongs always to the contributor.


Eep. Sorry 'bout that.

Piz

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Author: piz Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8228 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 1:01 PM
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TMFPixy wrote:
An MSA is available to self-employed persons or firms with 50 or fewer employees. Thus, they are not plans for retirees. To open one, the business/self-employed person must have a high-deductible medical plan in force, and that plan must continue for as long as deposits are made to the MSA. In general, the health insurance in force must have an annual deductible of at least $1,500 and no more than $2,250 for individuals (no less than $3K or more than $4.5K for families). The annual pre-tax MSA contribution can be any amount up to 65% of the individual deductible or 75% of the family deductible amounts. Tax-free withdrawals may be made at any time to pay medical expenses. Other distributions are subject to taxes and a 15% penalty. Money can be taken penalty-free at age 65 for any purpose, but taxes are due on the withdrawal just as they are due on any other retirement account.

Wait a sec! I just started a new job with a company that doesn't fit any of the requirements you list, and at my orientation they discussed something where I could put pre-tax dollars into an account for medical expenses, but I would forfeit anything I didn't use by the end of the year. This account was funded by money taken from my paycheck, not from the dollar amount I could use to pick and chooose benefits. What were they talking about?

Piz

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8232 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 3:01 PM
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Piz writes:

<<Wait a sec! I just started a new job with a company that doesn't fit any of the requirements you list, and at my orientation they discussed something where I could put pre-tax dollars into an account for medical expenses, but I would forfeit anything I didn't use by the end of the year. This account was funded by money taken from my paycheck, not from the dollar amount I could use to pick and chooose benefits. What were they talking about?>>

They're talking about a Section 125 plan, or Flexible Spending Account. It's a different animal entirely. It allows the use of pre-tax dollars for payment of medical premiums on health insurance, child care and few other things. It's not an MSA, though. Additionally, any dollars left over from your contibutions in the FSA get forfeited to the company's employee welfare fund if unused by you during the year.

Regards....Pixy

Regards...Pixy

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8235 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 3:32 PM
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Regarding #8232, my Flexible Spending Account is what I use to pay for unreimbursed expenses like drug co-payments and dentist's bills. There's some limit, I forget what it is. Anyhow, I was cruising along at $3 deduction a week, until I broke a tooth in November. I had to dash down to our HR department to increase my deduction for 1999 to pay for that. The HR lady was sort of upset, I hadn't done it in their standard enrolment period and it took her all of 25 seconds to make the change.

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8237 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 3:53 PM
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Regarding #8232, my Flexible Spending Account is what I use to pay for unreimbursed expenses like drug co-payments and dentist's bills. There's some limit, I forget what it is. Anyhow, I was cruising along at $3
deduction a week, until I broke a tooth in November. I had to dash down to our HR department to increase my
deduction for 1999 to pay for that. The HR lady was sort of upset, I hadn't done it in their standard enrolment period and it took her all of 25 seconds to make the change.


JABoa, I was surprised that you could do this. I thought most employers did not allow mid-year changes to their deductions.

..IF

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8238 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 4:12 PM
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I did it right at the end of December. I might have been technically outside of their open enrolment time, but not legally -- technical according to them was first 10 days of December, legal was all of December. Or something like that. I'll find out in a month or 3 when I submit the bill how right I was.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8244 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 6:04 PM
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IF wrote:

<<JABoa, I was surprised that you could do this. I thought most employers did not allow mid-year changes to their deductions.>>

They don't, and they can't. The election must be made by 1/1 for the year and can't be changed thereafter.

Regards….Pixy


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8245 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 6:05 PM
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JABoa sez:

<<I did it right at the end of December. I might have been technically outside of their open enrolment time, but not legally -- technical according to them was first 10 days of December, legal was all of December. Or something like that. I'll find out in a month or 3 when I submit the bill how right I was.>>

You are correct. You were outside the bureaucracy's time limit, but within that specified by the IRS. As long as the election was made by 1/1 of the year in which it was effective, then all is okay.

Regards….Pixy


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Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8252 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 10:52 PM
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Sorry, but I think you are thinking about an employer's "cafeteria plan", or "Employee Spending Account". I have an ESA where I work, and I will lose any leftover money at the end of the year. The true MSA plan is different & operates as I described. PP

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8254 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:05 PM
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Regarding #8232, my Flexible Spending Account is what I use to pay for unreimbursed expenses like drug co-payments and dentist's bills. There's some limit, I forget what it is. Anyhow, I was cruising along at $3 deduction a week, until I broke a tooth in November. I had to dash down to our HR department to increase my deduction for 1999 to pay for that. The HR lady was sort of upset, I hadn't done it in their standard enrolment period and it took her all of 25 seconds to make the change.

JABoa,

Does this mean you waited until 1999 to have the tooth repaired? I would think if it was repaired in November 1998, the bill would go towards 1998 deductions.

..IF

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8261 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:34 PM
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IndecisiveFool, I'm glad you care about me and my big mouth. The temporary crown went on in Nov. 1998 and I will have to submit the form for that before the end of March. The permanent one went on last week. I must have drooled as the cement was setting up, because a piece of cement hardened between my 2 teeth. It took him an extra half hour to clean it out. I broke many pieces of floss, 2 of what looked like razor wire, and finished off a blade from his teeny hacksaw.

And this all happened because I bit into a seedless tangerine. Take it from me, don't get old.

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8262 of 74759
Subject: Re: Medical Savings Account ? Date: 2/1/1999 11:42 PM
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JABoa,

I will get my third crown in the past 3 years. I have been interested in your posts because I broke a tooth in January. I always break something one month too late. With the dental bills for my teeth, my dentist is planning to send their kid to a private university.

>>IF

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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8312 of 74759
Subject: Re: Medical Savings Account ? Date: 2/3/1999 1:17 PM
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<< Take it from me, don't get old. >>

However, it does beat the living heck out of any known alternatives.



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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8313 of 74759
Subject: Re: Medical Savings Account ? Date: 2/3/1999 1:19 PM
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To TMF Pixy, et alia:

Thanks to all of you who so generously responded to the question.

DHatch



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