Question

Cafateria aka Sec 125, HDHP premiums, HSA

Forum|Forum|5 years ago
March 18, 2021
1 reply
0 views

Hi All;

When I worked for an employer who offered health plans, the premiums were deducted from my pay "pre-taxed" under the Cafeteria aka section 125 rule.

I now work for a small company who does not offer health insurance of any kind. I obtain my HDHP through my state market place. I was told by my market place insurance agent I could put my premium money into my HSA and than pay the premiums from there - He gave me the following info: IRS regulations Pub 502, medical expenses include premiums that cover insurance used to cover medical care...

It seems to me, if an employee can take the benefit of pretax dollars being used for premiums, a pink-collar worker should have the same benefit, but my insurance carrier says otherwise.

Thanks for your thoughts and considerations

Not A Product Question

B

BillM223

"When I worked for an employer who offered health plans, the premiums were deducted from my pay "pre-taxed" under the Cafeteria aka section 125 rule."

Yes, but it is more normal now to code the dollars paid towards health insurance premiums using code DD in box 12 (Section 125 stuff appears in box 14 on the W-2).

"I was told by my market place insurance agent I could put my premium money into my HSA and than pay the premiums from there"

Absolutely true.

"It seems to me, if an employee can take the benefit of pretax dollars being used for premiums, a pink-collar worker should have the same benefit, but my insurance carrier says otherwise."

But a "pink-collar" worker (I haven't hear that phrase before) CAN use pre-tax dollars to pay for health insurance premiums.

You see, when you contribute to an HSA, you receive an above-the-line tax deduction for any HSA contributions made directly to your HSA (I assume that your current employer is not handling the HSA contributions for you, but they could). This makes the HSA dollars "pre-tax".

So, by contributing to an HSA, then using the HSA dollars to pay the health insurance premiums, then you have used pre-tax dollars to do so.

Make sense?

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Y

ytwiggyAuthor

Thanks BillM223 for your reply - and yes that does make sense to me.

I'm concerned that if I should ever get audited (by random picking, not because I have anything unusual that would put me at risk of an audit), that it will be disallowed. This is exemplified by the fact that health insurer is giving me a hard time accepting payment via my HSA, saying that it is not allowed.

So do you think this logic will hold up in an audit? (I do)

FYI (from Wikipedia) "A pink-collar worker is also a member of the working class who performs in the service industry. They work in positions such as waiters, retail clerks,..."

B

BillM223

I owe you an apology.

I am glad you came back, because I now see that only some health insurance premiums are payable from your HSA. I routinely pay for my long-term care premiums from my HSA (which is permitted), but the Tax Code explicitly says that you can't use HSA to pay for health insurance premiums EXCEPT in these four cases;

1. Long-term care insurance.

2. Health care continuation coverage (such as coverage under COBRA).

3. Health care coverage while receiving unemployment compensation under federal or state law.

4. Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

(see IRS Pub 969)

Unfortunately, this does not include Marketplace insurance, even though you normally pay part of it with after-tax dollars.

So, unless you qualify for one of the 4 exceptions above, no using HSA funds for your Marketplace policy. Any chance that some of the premiums were paid between jobs while you were on COBRA or on unemployment?

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"