Gs Pay Scale For Dc Area – Why Every Federal Employee Should Consider a Health Savings Account The annual HSA contribution limit increases in 2024. Here are some of the benefits of having an account.
Premium Health Plans, which include Health Savings Accounts, are one of the most affordable health plan options available to federal employees. With HSA contributions increasing for the 2024 plan year, HDHPs will provide additional value in the future. If you haven’t considered an HDHP before, now is a good time to evaluate whether it can help you save money for your current and future health care costs or be an additional income in retirement.
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HDHPs encourage enrollees to be prudent health care consumers by having high deductibles in place. Here’s how it works: Before the deductible, you pay the full amount allowed by the health care plan. After the deductible, you generally pay a percentage of the costs covered, or coinsurance, which varies by plan and typically ranges from 5% to 20%. In some cases, depending on health care, it can be higher.
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To help you before the deductible, all HDHPs offer free in-network preventive care including annual wellness visits, well-child visits, mammograms and immunizations.
Additionally, all FEHB HDHPs fund an HSA that you can use to pay for out-of-pocket costs. The amount funded by the program ranges from $750 to $1,200 for independent enrollment only and from $1,500 to $2,400 for individual and individual and family enrollment. Plan contributions to an HSA are made monthly.
You can also make voluntary contributions to an HSA that are triple tax-advantaged—given tax-free (either as a pre-tax deduction or as a deduction when you file your taxes if you make a lump sum contribution), growing. tax-free, and leave tax-free if used for eligible health care expenses.
An HSA is managed by a financial services company, and you can choose how to invest your money using investment options similar to an Individual Retirement Account (IRA) with more options than available through a Thrift Savings Plan. Any unused funds carry over to the next year, and there is no rollback limit. Your HSA belongs to you, the enrollee, which means it’s completely portable if you leave federal service or change FEHB plans.
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Depending on your current FEHB plan, you could save thousands of dollars by switching to an HDHP. Note that HDHPs tend to have lower premiums than the most popular non-HDHPs and have the added benefit of HSA plan contributions.
The Checkbook Health Plan Guide ranks all FEHB plans based on total cost estimates that are a combination of guaranteed (premium) costs and likely out-of-pocket costs you’ll face based on age, family size and expected expenses in health.
For 2023 usage, we calculate that a family of four in the Washington, D.C. area. could save $3,850 in estimated total cost this year by switching from BCBS Standard to GEHA HDHP, or $1,750 in estimated total cost by switching from BCBS Basic. for GEHA HDHP.
As you get closer to retirement, you have the opportunity to contribute more to your HSA. Once you turn 55, you can contribute an additional $1,000 each year as a “follow-up” contribution above the maximum standard contribution.
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When you turn 65, a big change happens to your HSA: You’re allowed to make non-medical distributions and pay only your regular tax obligations. Before age 65, non-medical distributions can create a 20% income tax penalty in addition to your regular taxes. These changes give you more flexibility in how to use your HSA funds, including as supplemental income in retirement.
There are other health care-related expenses that you can choose to use your HSA for in retirement and not pay taxes on. Long-term care insurance premiums, which pay for nursing homes and assisted living facilities, are an approved expense, as are Medicare Part B and D premiums for you and your spouse.
In May, the IRS announced higher HSA contribution rates for plan year 2024. For independent enrollment only, the combined HSA contribution among plan enrollees will increase by $300 from $3,850 to $4,150. Increase individuality and independence. and family enrollment will see HSA contributions increase by $550 from $7,750 to $8,300.
Additionally, the HDHP minimum deductible will increase slightly next year to $1,600 for single-only enrollment and $3,200 for both single and individual and family enrollment. Also, maximum out-of-pocket costs (deductible, copayment, coinsurance, coinsurance) will increase to $8,050 for independent enrollment only and $16,100 for individual plus single and individual and family enrollment. Finally, follow-on HSA contributions are unchanged through 2024 and remain at $1,000.
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While an HDHP with an HSA will be the most affordable option for many, it may not be the best option for everyone.
If you have an accident or unplanned hospitalization at the beginning of the plan year, you will be responsible for paying the full deductible and possibly a portion of the cost in excess of the cost-of-service deductible. This event can produce an unexpected health bill of several thousand dollars. If that causes financial problems, a non-HDHP with no deductibles or low co-pays for health care will serve you better.
Additionally, any employee with high drug costs would likely be better served by a non-HDHP. You pay an allowable premium for most prescription drugs before the HDHP deductible is met. A non-HDHP that covers your prescription and has fixed co-payments will be cheaper for most.
For many federal employees, the HDHP will be the most cost-effective plan option available, especially when considered as a long-term option. If you can save a plan contribution and make additional contributions to the account, an HSA can grow quickly. We have heard from many federal employees who have HSAs with balances of $50,000 or more because they have been enrolled in an HDHP for many years and contributed the maximum amount each year. And, by the time you’re 65, an HSA can be a powerful, multipurpose weapon that can help cover almost any health care expense you face or serve as an additional source of income.
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However, federal employees borrow to maximize the tax-advantaged benefits of HSAs. Once you are retired and on Medicare, you are no longer eligible to receive an HSA from an HDHP and you can no longer make voluntary contributions to your HSA.
With increased contribution limits, you’ll be able to put more money into an HSA next year. Check out HDHP this Open season to see if this type of plan can help you save money now and in the future.
Kevin Moss is editor-in-chief at Consumer Review. The Checkbook Guide to Health Plans for Federal Employees is available to most federal employees at no charge; Look
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