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Another obstacle for health savings accounts, Rev. Rul. 2004-45

by Tony Novak, CPA, MBA, MT
, revised 11/16/11

The IRS and the Department of Treasury issued another significant restriction to health savings accounts with the release of Revenue Ruling 2004-45. Tax adviser Tony Novak of Freedom Benefits Association says the new tax rule restricts an employee from making Health Savings Account (HSA) contributions if they are covered by a employer-sponsored medical plan like a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA). Since the trend in employer provided health plans is moving in the direction of consumer-driven designs defined by FSA and HRA plans, this new ruling severs a large portion of Americans from participating in the benefits of HSA plans.

Health savings accounts were originally anticipated as being a tool widely available to many Americans. Rosy predictions were floated by Washington insiders that as many as 40 million HSA accounts would be opened by the end of the decade. But the availability of HSAs has been restricted by a series of new laws, interpretations and IRS rulings beginning even before the new plans became effective on January 1, 2004. A new tax reform law will be required to reverse the current trend restricting HSAs.

More detail on tax implications of health savings accounts may be found at

This new ruling will likely slow the expansion of HSAs. We predict that eventually cost pressure will push employers into replacing current plans with higher deductible policies. Employees are increasingly turning to allowable supplemental insurance coverage to minimize their risk.

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Opinions expressed are the solely those of the author and do not represent the position of any other person, company or entity mentioned in the article. Information is from sources believed to be reliable but cannot be guaranteed. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues or a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Tony Novak operates as an independent adviser under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator" but is not a representative, agent, broker, producer or navigator for any securities broker dealer firm, federal or state health insurance marketplace or qualified health plan carrier. He has no financial position in any stocks mentioned. Novak does work as an accountant, agent, adviser, writer, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to other companies including the companies listed in the articles on this web site.   |  (800) 609-0683  |  Cell/Text: 856-723-0294  |