Health Savings Account 47 Questions with Verified Answer,100% CORRECT

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Health Savings Account 47 Questions with Verified Answer Types of Health Care Savings Program - CORRECT ANSWER 1. Flexible spending account 2. Health reimbursement arrangements 3. Archer medica... l savings account FSA - CORRECT ANSWER - frequently offered with Section 125 plans - 2 types: Health Care Account & Dependent Care Account Advantages of FSA - CORRECT ANSWER - simplicity - tax benefits that are connected with contributions (which are made on pre-tax basis) - no reporting requirements on fed. income tax return Disadvantages of FSAs - CORRECT ANSWER - use-it-or-lose-it - can use both grace period and carryover - Amount cant be increased or decreased during the year (unless qualifying event occurs) HRAs - CORRECT ANSWER "patient directed health plan or defined contribution plan" How HRAs work - CORRECT ANSWER Employer determines the amount they are willing to pay for medical benefits. Shifts the allocated $ to the control of its employees Employee then decides on the timing of when the funds are spent 4 basic requirements for HRA to meet preferred tax-qualified status - CORRECT ANSWER 1. Must be paid for solely by employer & cant be funded through salary reduction 2. Must reimburse the employee for qualified medical expenses incurred 3. Must provide a maximum dollar amount for specific coverage period 4. Must allow any unused portion of the maximum dollar amount contributed to be carried over to new year Advantages of HRA - CORRECT ANSWER - tax-advantaged benefits for contributions & distributions -Contributions made to employee accounts are exempt from federal income and payroll taxes - Contributions are tax-deductible by the employer -100% of unused funds may be carried over to the next year One of the main reasons HSAs got off to a slow start after their intoduction was that - CORRECT ANSWER few HSA products were immediately available in the marketplace T or F: A financial company must use either Form 5305-C or Form 5305-B to establish HSAs - CORRECT ANSWER False. These forms can either be used actually or just used as a model Which of the following does NOT represent a potential market for HSAs? - CORRECT ANSWER The Retired Alliance, an association of 65-year-old individuals enrolled in Medicare For the comprehensive and latest guidance issued by the IRS and HSAs, you would consult - CORRECT ANSWER Publication 969 Which of the following statements about the current state of health care in the U.S revealed in a recent survey is TRUE? - CORRECT ANSWER Health care and the national deficit ranked just below the high unemployment problem as the most pressing concerns for the country T or F: There is an IRC limit on annual contributions to a health care FSA - CORRECT ANSWER True. Healthcare Reform imposed a $2500 limit on annual salary reduction contribution to health FSAs offered under 125 cafeteria plans (this amount is indexed to cost of living adjustments) At the end of the calendar year or grace period in the new year, if allowed by the plan, the unused funds in an FSA are - CORRECT ANSWER forfeited by the participant The HRA is sometimes referred to as - CORRECT ANSWER A patient-directed health plan What is the result if an HRA is used in conjunction with an FSA? - CORRECT ANSWER Because any unused FSA funds would be forfeited An Archer MSA must be used in conjunction with - CORRECT ANSWER a high-deductible health insurance plan T or F: Archer MSAs are only available to self-employed individuals and employees if qualified small employees who either maintain or can participate in a self-only or family coverage HDHP. - CORRECT ANSWER True Which of the following statements about Archer MSAs is NOT true? - CORRECT ANSWER If a participating employer exceeds the 50-employee limit for Archer MSAs, the plan is terminated Which of the following statements about Health Savings Accounts is FALSE? - CORRECT ANSWER HSAs can invest in life insurance T or F: The Medicare Act of 2003 completely eliminated Archer MSAs and replaced them with HSAs - CORRECT ANSWER False Which of the following is NOT a requirement of an HSA? - CORRECT ANSWER Contributions must be made in the form of securities with an established market value. Which of the following is an advantage that an HSA provides that an Archer MSA does not offer? - CORRECT ANSWER The annual contribution can be equal to or greater than 100% of the minimum annual deductible The max # of employee who are eligible to participate in an employers HSA is - CORRECT ANSWER unlimited Which insurance coverage is NOT a permitted insurance for purposes of determining an individuals eligibility for an HSA? - CORRECT ANSWER Medicare T or F: The minimum annual deductible and max annual deductible and other out-of-pocket expenses for a qualifying HDHP used in conjunction with an HSA are set each year after adjustments of prior year amount for inflation - CORRECT ANSWER True. The complete description of the max out-of-pocket expenses recognized in a qualifying HDHP is the max deductible & other out of pocket expenses. T or F: The max out-of-pocket expenses recognized in a qualifying HDHP used in conjunction with an HSA include amounts paid toward the plan's deductible - CORRECT ANSWER True. This limit doesnt necessarily need to apply to deductibles & expenses associated with out-of-network services if the plan uses network of in-network providers T or F: A preferred provider organization (PPO) plan may still qualify as an HDHP even if it has different limits for in-network and out-of-network expenses - CORRECT ANSWER True. PPO can set greater max annual deductible & other out-of-pocket expenses amounts for out-of-network provides & still qualifying as HDHP for HSA purposes Employer contributions to the accounts of employees are - CORRECT ANSWER exempt from both individual tax and federal payroll taxes Excess contributions to a HSA can be subject to an excise tax of: - CORRECT ANSWER 6% Which of the following is strictly prhibited from serving as a custodian of an HSA? - CORRECT ANSWER None. As long as the organization meets the suitability requirements of the U.S treasury Department Eva Lopez, age 52, has family coverage through a HDHP. The plan has a minimum annual deductible. Assuming no limiting circumstances for her contributions, the maximum amount Eva can contribute to an HSA is - CORRECT ANSWER dollar limit set each year by IRC. An eligible individual under the age of 55 with family HDHP coverage can contribute up to the max limit set by the IRC but they are eligible for any catch-up contributions. T or F: The maximum annual contribution that can be made for a partial-year HSA participant depends on the month of the year in which the HSA is first established. - CORRECT ANSWER False. The max contribution for a partial year HSA participant depends on the # of months and the particular month of the year in which coverage y=under the HDHP existed Henry Kim, a 60-year-old employee, has self-only coverage for the entire year in his employer's HDHP. The plan has a required minimum annual deductible. The max total contribution Henry can make to his HSA is - CORRECT ANSWER dollar limit set each year by IRC plus $1,000 catch-up contribution Marcy Stein, a 30-year-old employee, has self-only coverage through an HDHP for the entire year. The plan has a minimum annual deductible. If the company contributes $1,500 to an HSA on Marcy's behalf, her individual contribution is reduced by - CORRECT ANSWER $1,500 Steven Moore, a 50-year-old employee, has self-only coverage in an HDHP provided by his employer during the full year. The HDHP has a minimum annual deductible set for that year. The other employees in Steven's company with self-only HDHP coverage receive an employer contribution of $500. The employer's HSA contribution for Steven's HSA must be - CORRECT ANSWER limited to $500 because of the comparability rules Which of the following statements about the tax treatment of HSA contributions is NOT true? - CORRECT ANSWER Contributions by both employees and individuals are tax-deductible as itemized deductions T or F: The tax penalty for excess contributions to an eligible individual's HSA in any tax year is waived if the excess amount is distributed by the due date (including extensions) for filling the participants tax return for that year, even id the funds are not used for medical expenses - CORRECT ANSWER True T or F: The participant in a HSA may use tax-free distributions from the HSA to pay a dependents medical expenses only if the dependent is covered under the participants health plan - CORRECT ANSWER False. There is no requirement that the dependent be covered under the participants health plan An otherwise eligible individual is eligible to receive tax-advantage distributions from an HSA - CORRECT ANSWER at any age T or F: An individual is required to take distributions from an HSA for qualified medical expenses in an calendar year in which contributions are made, but the unused account balance can be rolled over to a new year. - CORRECT ANSWER False. An eligible individual is permitted to take a distribution from her HSA at any time, whether of not contributions have been made for a particular year, provided there is sufficient balance in the account George and Maria have two children, Irene and Frank. George works for a company that provided an HDHP, so he has established an HSA. Irene is 25 y.o. single recent college graduate who is now working full time in the new year. Frank is a 22 y.o. single college senior. All 4 memebers of the Hauser family have experienced qualified medical expenses during the past calendar year. It is likely that George may use HSA funds to cover the qualified medical expenses of which family members? - CORRECT ANSWER George, Maria, Irene and Frank Are HSA contributions tax deductible? - CORRECT ANSWER Deductible as an adjustment to income Are HSA withdrawals tax free? - CORRECT ANSWER The taxpayer can take tax-free withdrawals from the HSA once it is set up to pay for his qualifying medical expenses. HSA must be established exclusively to pay medical expenses for - CORRECT ANSWER Taxpayer, his spouse, and his dependents Who makes contributions to an HSA - CORRECT ANSWER An employee and his employer are both allowed to contribute to the employee's HSA in the same year [Show More]

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