Taxes+Health Insurance (Recent Marriage, Baby OTW)

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guwop
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Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Tue Sep 11, 2018 12:30 pm

Hi all,

My wife and I got married earlier this year, and we are fortunate enough to be expecting our first child in Feb 2019! We'd like to start planning for our taxes and health insurance (open enrollment just started for both of us).

Age: Both 30
Income: $120,000 ($74k Him, $46k Her)
Emergency Fund: Established
IRA(s): None
Taxable: None
Current Down Payment Saved: $100,000

Our goal is to utilize as much tax-sheltered space as possible, continue saving for an apartment, and select the best health insurance plan (upcoming child).

Taxes
1. How should we file our taxes next year? MFJ or separately? I'd like to reduce our tax bill as much as possible, but we are not at the point where we can max our 401k/403b (saving for an apartment and upcoming newborn expenses). I'm currently contributing 8% to my 401k with no match. With only 4 months left this calendar year, would it be worthwhile for me to increase my contributions by X%? Wife is currently contributing 4% to her 403b, no match.

Health Insurance

His Current Plan: UHC UnitedHealthcare Choice Plus 500
Premium (annual): $1,032.46
Premium (Employee+Spouse): $1,980.42
Premium (Employee+Child): $1,790.62
Premium (family): $2,755.22
His Current Deductible: $500
Deductible (Family): $750
His OOPM: $4,000
OOPM Family: $8,000

His Plan Options:
1. Keep current plan above

2. UHC Choice Plus 250
- Premium (Annual)
Employee Only: $1,755
Employee+Spouse: $3,581.24
Employe+Child: $3,241.94
Employee+Family: $5,100.42
- Deductible
Individual: $250
Family: $750
- OOPM
Individual: $3,000
Family: $6,000

3. UHC Choice Plus HDHP 1500
- Premium (Annual)
Employee Only: $520
Employee+Spouse: $910
Employe+Child: $780
Employee+Family: $1,430
- Deductible
Individual: $1500
Family: $3,000
- OOPM
Individual: $4,000
Family: $7,350

4. UHC Choice Plus HDHP 5000
- Premium (Annual)
Employee Only: $325
Employee+Spouse: $650
Employe+Child: $650
Employee+Family: $1,300
- Deductible
Individual: $5,000
Family: $10,000
- OOPM
Individual: $6,650
Family: $13,300

Her Only Plan Option
1. Empire BCBS EPO (in-network only)
- Premium (Annual)
Employee Only: $416
Employee+Spouse: $1,016.86
Employe+Child: $763.62
Employee+Family: $1,256.58
- Deductible
Individual: $0
Family: $0
- OOPM
Individual: N/A
Family: N/A
Maternity Coverage: 100%
Spending Account Options
Dependent Care Spending Account: $5,000 max annual (can be used for daycare, babysitter?)
Health Care Spending Account: $2,650 max (is this a HSA?)


With the child coming in Feb 2019, what changes, if any, should we make to our health plans? I was thinking of changing my plan to the HDHP 1500 and contributing to a HSA so that we can use the HSA funds to pay for the upcoming baby expenses (delivery). Does this make sense? I currently have a FSA with my current plan, which I contributed $720 to this year. Wife works at a hospital, so her plan is very cheap. Would it make more sense for all of us to switch to her plan, or have the baby added to hers and we keep our individual plans? How would these options affect our OOP costs when the baby comes in Feb?

Would it be possible for me to change to the HDHP plan to open the HSA AND have her dependent care/health care spending account(s)?

Please let me know if there is any other information I should include to point me in the right direction.


TIA for any input and advice!

GuyFromGeorgia
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by GuyFromGeorgia » Tue Sep 11, 2018 4:29 pm

Others are better than me when it comes to taxes. I say save as much as you can and I've always done MFJ without any consideration. I don't know how it works having dual insurance. Ultimately, having a baby will put you into an out-of-pocket max situation. Add that to the annual premium and choose the one with the lowest number. If you get to a high deductible plan you become eligible to contribute to HSA. These a pre-tax dollars that can go toward the OOP max. The birth of a child is a qualifying life event, so you will be able to change your plan(s) usually within 30 days of that event. Depending on when your plan calendar starts/stops this could be very beneficial, especially if your's and your wife's don't align. Being so early in 2019 means you will end up having a good bit of expenses this year. For more than financial reason, I hope everything moves along smoothly. Congrats to you and your wife. Enjoy your new family. Make sure to take a few classes that are offered. It is a wild ride.

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Wed Sep 12, 2018 1:55 am

For the vast majority, MFJ beats MFS. Tax software may let you try both, but expect MFJ to win.

You can't have an HSA if she participates in a general purpose FSA, because in a general purpose FSA, "Qualified medical expenses are those incurred by the following persons. 1. You and your spouse." See https://www.irs.gov/pub/irs-pdf/p969.pdf.

Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.

See Investment Order for general suggestions.

Enjoy the new baby!

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Wed Sep 12, 2018 9:49 am

Thanks for the responses.

I'd definitely want to take advantage of the HSA...

Would the following scenario work?

Wife remains on her individual plan, and converts to 'Employee+Child' plan when baby is born in Feb2019, and DOES NOT sign up for the FSA, or Dependent Care Spending Account. I switch to the HDHP-1500 plan, sign up for the HSA, and fund the max allowed ($3,500?) at the beginning of the new year. Would we be able to use the HSA funds for baby expenses? (hospital, delivery, doc visits), or does the child have to be under my policy?

Thanks!
-guwop

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Wed Sep 12, 2018 10:58 am

guwop wrote:
Wed Sep 12, 2018 9:49 am
Would we be able to use the HSA funds for baby expenses? (hospital, delivery, doc visits)...?
Yes.

See page 8 of https://www.irs.gov/pub/irs-pdf/p969.pdf. For an IRS publication, it's actually comprehensible.

The dependent care spending account will not affect your HSA eligibility, so use that however you wish.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Wed Sep 12, 2018 11:07 am

FiveK wrote:
Wed Sep 12, 2018 10:58 am
guwop wrote:
Wed Sep 12, 2018 9:49 am
Would we be able to use the HSA funds for baby expenses? (hospital, delivery, doc visits)...?
Yes.

See page 8 of https://www.irs.gov/pub/irs-pdf/p969.pdf. For an IRS publication, it's actually comprehensible.

The dependent care spending account will not affect your HSA eligibility, so use that however you wish.
Does this mean that my wife can sign up for the Dependent care spending account while I sign up and contribute to a HSA? Would we be able to use the HSA and Dependent care FSA for the hospital, delivery, and other medical expenses (doc visits, daycare) throughout the year?

This option seems really appealing to me, as long as I know what expenses can be covered under the dependent care FSA and my HSA.

If we were to go with this option, is there any way I can contribute to the HSA at the family level so that I can max it out to $6,900?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Wed Sep 12, 2018 11:38 am

guwop wrote:
Wed Sep 12, 2018 11:07 am
FiveK wrote:
Wed Sep 12, 2018 10:58 am
guwop wrote:
Wed Sep 12, 2018 9:49 am
Would we be able to use the HSA funds for baby expenses? (hospital, delivery, doc visits)...?
Yes.

See page 8 of https://www.irs.gov/pub/irs-pdf/p969.pdf. For an IRS publication, it's actually comprehensible.

The dependent care spending account will not affect your HSA eligibility, so use that however you wish.
Does this mean that my wife can sign up for the Dependent care spending account while I sign up and contribute to a HSA?
Yes.
Would we be able to use the HSA and Dependent care FSA for the hospital, delivery, and other medical expenses (doc visits, daycare) throughout the year?
No. The "dependent care" FSA is for money you paid someone to care for a child or a dependent so you could work.
If we were to go with this option, is there any way I can contribute to the HSA at the family level so that I can max it out to $6,900?
You have to have family HDHP coverage to use the family HSA maximum. "Family" is you plus at least one other. See pub. 969.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Wed Sep 12, 2018 11:46 am

Thanks for all this info, it really is helpful but also a lot to take in!

Given all this, I'm assuming the best option would be this:

1. Wife remains on her individual plan, signs up for the dependent care FSA (max is $5,000 for the year), and adds the child to her insurance.
2. I cancel/do not contribute to FSA next year. Instead, switch to the HDHP-1500 plan and contribute the individual max $3,500 to HSA.

This brings me to my next question: what can we use the $3,500 HSA for? Should we even use it?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Wed Sep 12, 2018 12:03 pm

guwop wrote:
Wed Sep 12, 2018 11:46 am
Thanks for all this info, it really is helpful but also a lot to take in!

Given all this, I'm assuming the best option would be this:

1. Wife remains on her individual plan, signs up for the dependent care FSA (max is $5,000 for the year), and adds the child to her insurance.
Could be - I leave it to you to run those numbers, perhaps using one of the tools mentioned earlier.
2. I cancel/do not contribute to FSA next year. Instead, switch to the HDHP-1500 plan and contribute the individual max $3,500 to HSA.
Note that you also cannot have any of "this year's" FSA money carried over to next year. See pub. 969 for details.
This brings me to my next question: what can we use the $3,500 HSA for? Should we even use it?
Any medical expenses incurred after the HSA has it's first $1 contributed to it. See pub. 969 for details.
Whether you should use it for current expenses, or pay current expenses from cash flow while the HSA grows tax-free and you withdraw later to reimburse yourself for all medical expenses incurred since the HSA was established, is up to you. The tax-free growth and withdrawal is appealing, but if you need the money now to pay the doctors, you need the money now.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Fri Sep 14, 2018 8:34 pm

Would my wife and I be able to contribute to the HSA to max it out ($7,000 for 2019)? Or is the HSA restricted only to me?

My plan is to apply for the for the family HSA, if possible, and have my wife open the dependent care FSA. Is this allowed?

HereToLearn
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by HereToLearn » Fri Sep 14, 2018 9:15 pm

FiveK wrote:
Wed Sep 12, 2018 1:55 am
For the vast majority, MFJ beats MFS. Tax software may let you try both, but expect MFJ to win.

You can't have an HSA if she participates in a general purpose FSA, because in a general purpose FSA, "Qualified medical expenses are those incurred by the following persons. 1. You and your spouse." See https://www.irs.gov/pub/irs-pdf/p969.pdf.

Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.

See Investment Order for general suggestions.

Enjoy the new baby!
There is an FSA called a Limited Purpose FSA. It operates the way FSAs always did (use it or lose it each year, usually with a filing deadline up to three months after year end). They can be offered alongside the HDHP HSA. The Limited Purpose FSA can only be used to reimburse dental & vision care expenses. It was very useful during the years my children wore braces.

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Fri Sep 14, 2018 10:08 pm

guwop wrote:
Fri Sep 14, 2018 8:34 pm
Would my wife and I be able to contribute to the HSA to max it out ($7,000 for 2019)? Or is the HSA restricted only to me?

My plan is to apply for the for the family HSA, if possible, and have my wife open the dependent care FSA. Is this allowed?
An HSA is like an IRA: no joint ownership.

A family HDHP requires that "you plus at least one other" be covered. E.g., it could be you and the new baby. Up to you to decide if that will be beneficial or not.

Dependent care FSAs, because they have nothing to do with medical care, are completely separate from and do not affect HSAs.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Sat Sep 15, 2018 6:44 am

If I add the new baby to my HDHP HSA, would this would allow me to contribute the $7,000 limit? Why can’t I add my wife? Is it because she’ll already be covered by her own insurance? But then we can still get the dependent care FSA?

Would we be able to add the baby to my wife’s individual non-HDHP plan AND to my HDHP?

Since the baby isn’t due until feb, should I sign up for the HDHP via open enrollment now? I won’t be able to apply for the HSA until Jan 1st since I still have FSA funds for this year, and that’s when the HDHP coverage begins.

So..on Jan 1st, I’d be applying for an individual HSA, with the $3,500 contribution limit. But would I be able to add the baby after they’re born to convert to family coverage that same year? I’m assuming I can’t add the baby prior to birth since they require a SS#.

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Sat Sep 15, 2018 11:06 am

guwop wrote:
Sat Sep 15, 2018 6:44 am
If I add the new baby to my HDHP HSA, would this would allow me to contribute the $7,000 limit? Why can’t I add my wife? Is it because she’ll already be covered by her own insurance?
You could add her. As it says in Pub. 969,
Self-only HDHP coverage is an HDHP covering only an
eligible individual. Family HDHP coverage is an HDHP
covering an eligible individual and at least one other indi-
vidual (whether or not that individual is an eligible individ-
ual).
But then we can still get the dependent care FSA?
Dependent care FSAs, because they have nothing to do with medical care, are completely separate from and do not affect HSAs.
Would we be able to add the baby to my wife’s individual non-HDHP plan AND to my HDHP?
Yes, but it would then cease to be an individual plan, with whatever premium increase that entails.
Since the baby isn’t due until feb, should I sign up for the HDHP via open enrollment now? I won’t be able to apply for the HSA until Jan 1st since I still have FSA funds for this year, and that’s when the HDHP coverage begins.

So..on Jan 1st, I’d be applying for an individual HSA, with the $3,500 contribution limit. But would I be able to add the baby after they’re born to convert to family coverage that same year? I’m assuming I can’t add the baby prior to birth since they require a SS#.
That all seems reasonable. Check with the insurance providers for the best way to handle adding the baby to their system.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Sat Sep 15, 2018 2:40 pm

Would it make more sense to add my wife to my HDHP, or the baby? Can I add both?

Looking at the plan costs, it may make more sense for me to keep myself the only individual on my HDHP plan, since the HSA funds can automatically be used for my family. My wife would just add the baby to her plan (much cheaper since it's a hospital).

Also, we found out that the delivery is 100% covered by my wife's insurance, however the hospital stay is not. Depending on how much it comes out to, I'll decide whether to pay OOP or from HSA funds. Any advice on this one?

I'm a fairly healthy person (I hope), and don't frequent doctor visits. Would having the HSA be worth the higher deductible?

One question I can't seem to find the answer to is, can I open the family HSA(even though I'm the only person on my HDHP plan) as opposed to an individual HSA? I'd like to contribute the $7,000 max if possible for tax reasons. And my wife would NOT be able to contribute to the HSA because she is not on my HDHP plan?

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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by niceguy7376 » Sat Sep 15, 2018 4:30 pm

guwop wrote:
Sat Sep 15, 2018 2:40 pm
Looking at the plan costs, it may make more sense for me to keep myself the only individual on my HDHP plan, since the HSA funds can automatically be used for my family. My wife would just add the baby to her plan (much cheaper since it's a hospital).
I am really curious/doubtful about using HSA funds for any expenses of wife or kid when you have the individual HSA.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Sat Sep 15, 2018 5:48 pm

niceguy7376 wrote:
Sat Sep 15, 2018 4:30 pm
guwop wrote:
Sat Sep 15, 2018 2:40 pm
Looking at the plan costs, it may make more sense for me to keep myself the only individual on my HDHP plan, since the HSA funds can automatically be used for my family. My wife would just add the baby to her plan (much cheaper since it's a hospital).
I am really curious/doubtful about using HSA funds for any expenses of wife or kid when you have the individual HSA.
Per the IRS, qualified medical expenses are those incurred by:
1. You and your spouse.
2. All dependents you claim on your tax return.
3. Any person you could have claimed as a dependent
on your return except that:
a. The person filed a joint return,
b. The person had gross income of $4,050 or more,
or
c. You, or your spouse if filing jointly, could be
claimed as a dependent on someone else's 2017
return.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Mon Sep 17, 2018 8:00 am

After doing some more reading, I learned that ANYBODY can contribute to my HSA on a post-tax basis, with myself reaping the tax benefits. So technically, my wife would be able to contribute post-tax money to my individual HSA?

What’s the cheapest, or most efficient way for me to be able to contribute $7,000 to the HSA?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Mon Sep 17, 2018 10:31 am

guwop wrote:
Mon Sep 17, 2018 8:00 am
After doing some more reading, I learned that ANYBODY can contribute to my HSA on a post-tax basis, with myself reaping the tax benefits. So technically, my wife would be able to contribute post-tax money to my individual HSA?

What’s the cheapest, or most efficient way for me to be able to contribute $7,000 to the HSA?
Does it matter to you and your wife where the money comes from, or does all the income go into one checking account and get spent from there?

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Mon Sep 17, 2018 10:35 am

It does not matter to us where it comes from...the majority/entire amount will most likely come from my income. My goal is to maximize HSA contributions while saving on health insurance costs and taxes.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Mon Sep 17, 2018 1:02 pm

I'm using the HDHP Analysis tool from BH...but I'm not too sure on the values I should be entering...

Can anybody tell me my 'Total after-tax cost' using the following options?

1. Entire family is covered by Wife's EPO plan (not HSA eligible, but FSA eligible and dependent care FSA eligible)
2. Entire family is covered by my HDHP plan (+HSA and Dependent care FSA)
3. Wife and baby are on wife's EPO plan, I switch to the individual HDHP plan (contribute $3,500 to HSA)
4. Wife stays on her plan, baby gets put on my family HDHP plan (contribute $7,000 to HSA)

Since my wife's plan is so cheap (no deductible and no OOPM), would it make the most $ sense if all of us moved to her plan, then put the pre-tax $ I would've allocated for my plan into my 401k and max it out? I know we'd be giving up the HSA, but I think cashflow is most important once the baby is here. Not to mention we're planning to buy a home in the next few months.

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Mon Sep 17, 2018 1:29 pm

Below is what I get. Don't know if I interpreted your options correctly.
Image

Note also that this tool assumes a constant co-pay percentage. Some insurance plans work that way, and some do not.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Mon Sep 17, 2018 1:55 pm

FiveK wrote:
Mon Sep 17, 2018 1:29 pm
Below is what I get. Don't know if I interpreted your options correctly.
Image

Note also that this tool assumes a constant co-pay percentage. Some insurance plans work that way, and some do not.
Are these the results of the entire family being covered under either spouse's plan?

Do these numbers apply only under certain conditions? (medical bills under X amount, etc, infrequent doctor visits, newborn expenses)

So is it a no-brainer to have everyone on the family HDHP?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Mon Sep 17, 2018 2:09 pm

guwop wrote:
Mon Sep 17, 2018 1:55 pm
Are these the results of the entire family being covered under either spouse's plan?
I think so, but you should verify based on the premiums entered.
Do these numbers apply only under certain conditions? (medical bills under X amount, etc, infrequent doctor visits, newborn expenses)
The chart is the important part. It shows which plan costs more as a function of the before-insurance-pays-its-part medical expenses incurred for the year.
So is it a no-brainer to have everyone on the family HDHP?
That's not how I read it. Seems "it depends"....

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Tue Sep 18, 2018 11:12 am

If I enroll in the single-HDHP plan now for coverage starting 1/1/2019, I'd be able to contribute $291.66 in January, and $291.66 in February = $583 because I'd be eligible for 2/12 months.

When the baby is born (sometime in feb, or could even be late jan), would I be eligible for the qualifying event enrollment? At which point I'd change to the family-HDHP (me+child). Family coverage would begin 3/1/2019? How does this affect my contribution limit?

So I can contribute the $583 total for Jan and Feb towards single-HDHP coverage, then ($7,000/12)*10 = $5,833.33 ($583.33/month starting in March) towards the family-HDHP for the remainder of the year?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Tue Sep 18, 2018 11:33 am

guwop wrote:
Tue Sep 18, 2018 11:12 am
When the baby is born (sometime in feb, or could even be late jan), would I be eligible for the qualifying event enrollment?
Ask the insurance provider.
At which point I'd change to the family-HDHP (me+child). Family coverage would begin 3/1/2019? How does this affect my contribution limit?
See Pub. 969 for the "last month" rule.

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guwop
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by guwop » Thu Sep 20, 2018 12:16 pm

I just checked with my benefits administrator. If I change to the HDHP plan during this current enrollment period, my HDHP coverage will start October 1, 2018.

I still have $ in my FSA for 2018, which I'm planning on depleting. How does this affect my HSA eligibility and contributions?

If I deplete the remainder of my FSA funds by October 1st, when would I be able to contribute to the HSA?

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FiveK
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Re: Taxes+Health Insurance (Recent Marriage, Baby OTW)

Post by FiveK » Thu Sep 20, 2018 1:07 pm

guwop wrote:
Thu Sep 20, 2018 12:16 pm
I just checked with my benefits administrator. If I change to the HDHP plan during this current enrollment period, my HDHP coverage will start October 1, 2018.

I still have $ in my FSA for 2018, which I'm planning on depleting. How does this affect my HSA eligibility and contributions?
It makes you ineligible (assuming it is a general purpose FSA) for all of 2018.
If I deplete the remainder of my FSA funds by October 1st, when would I be able to contribute to the HSA?
1-Jan-2019.

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