With open enrollment happening, millions of Americans are weighing their 2020 health insurance options. Some employers offer a Health Savings Account (HSA) in conjunction with a high-deductible health care plan. This option allows individuals to pay for out-of-pocket medical costs with their pre-tax earnings. What you may not know is that structured settlement annuities for injured claimants are designed similarly to HSAs but with more flexibility and long-term benefits.
Exemption from Income Tax: HSA accounts grow tax-free, which means any payments used from an HSA account for qualified medical costs (including deductibles, copays, and other out-of-pocket medical costs) aren’t taxable as income.
Physical injury settlement proceeds used to fund a structured settlement annuity also grow income tax-free. In contrast to an HSA, claimants can use structured settlement annuity payments for medical and non-medical costs.
Non-Restrictive Payments: Before age 65, individuals can use HSA funds for qualified medical expenses. Any funds that are withdrawn and used for non-qualified distributions will be subject to a 20% penalty in addition to income tax. After age 65, individuals can withdraw unspent funds for any reason; however, funds used on non-medical costs will still be subject to income tax.
Structured settlement annuities, while fixed, do not have any usage stipulations. The injured claimant can use the payments to cover out-of-pocket medical costs, or any range of other expenses, from daily living expenses to longer-term costs, like college tuition or retirement.
No Ongoing Fees: Some HSAs charge a monthly fee or a per-transaction fee. Structured settlement annuities do not have any overhead or annual fees, which, on top of a guaranteed rate of return, allow them to remain competitive with many traditional bank investments.
No Contribution Limits: HSAs have annual contribution limits (currently $3,500 for individuals and $7,000 for families, plus an extra $1,000 for anyone 55 or older). Structured settlement annuities have no contribution limits, so injured claimants have complete control over the amount they want to contribute to the annuity.
Many individuals choose to use HSAs as tax-advantaged retirement savings vehicles. Structured settlements can provide the same savings as an HSA without a contribution threshold.
Whether your client wants a steady source of income now or a head start on a retirement nest egg, a structured settlement provides a guaranteed source of income with more flexibility than an HSA. Our team has extensive experience creating customized structured settlement plans for injured claimants. For more information about structured settlements, contact Kaas Settlement Consulting today.