Salespeople often are advised not to talk about politics orreligion, and for good reason. People have strong opinions aboutthese two issues, and being too open about our views is a good wayto run off potential customers. Brokers seem to take the “mum's theword” approach on two other subjects as well: COBRA and taxes. Thedifference is that, in this case, it's our silence that could costus the business.

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So why would an advisor steer clear of these topics inparticular? The reason we give our clients is that they fall underthe category of employer or tax law, not insurance law, and anyadvice we provide is not covered by our errors & omissionsinsurance. The real reason, of course, is that we sometimes don'tknow the correct answer. If we did, we wouldn't be so worried aboutmisadvising them. Unfortunately, health reform is a game changerthat's forcing brokers to redefine themselves as consultants.

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Going forward, we'll need to do a much better job of proving ourvalue to our clients; in this new role, “pass” is not anappropriate answer when they ask us a difficult question. Does thatmean we need to become experts on everything? Of course not. But wedo need to know the basics and be able to point our clients in theright direction. With COBRA that's fairly easy — a number ofreputable third party administrators provide COBRA administrationservices for a very reasonable price.

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Convincing our clients they need professional help in this areaisn't a difficult sell, and they'll usually go with whatever TPA werecommend. For health savings accounts, though, it's a differentstory. HSAs are individually owned accounts, and the employee, notthe employer, is responsible for keeping up with the paperwork.There are things account holders need to know up front — when theysign up for an HSA — so they're not surprised at tax time, and it'sthe broker's job to tell them.

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So here's a little tutorial that should teach you just enough tobe dangerous. When an individual has an HSA, he needs to file IRSForm 1040, the long form. He can no longer file form 1040-EZ. He'llalso need to complete form 8889.

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This form is a page-and-a-half long and is designed to find outfour things:

  1. How much we contributed to our HSA through payroll (pre-taxemployer or employee contributions, reported in box 12 of ourW-2);
  2. How much we contributed directly to our account (after-taxcontributions determined from our records or from calling the HSAadministrator; later reported on Form 5498-SA, an informationaldocument we receive from our HSA administrator in May);
  3. How much we withdrew from our account (reported on Form1099-SA, sent to us by our HSA administrator in late January),and
  4. How much of what we withdrew was for eligible expenses(determined from the receipts, EOBs, and other records we should bekeeping in a file folder or shoebox). Form 8889 also helps uscalculate any taxes and/or penalties we may owe forover-contributing to our HSA or for spending HSA money onnon-qualified expenses.

To help determine what expenses are eligible, we can refer toIRS publication 502: Medical and Dental Expenses. This publicationis actually for people who are deducting medical expenses thatexceed 7.5 percent of their income (10 percent beginning in 2013)but is useful for HSA account holders as well. For more informationon HSAs and other tax-advantaged accounts, refer to IRS Publication969.

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This booklet has basic info on health savings accounts, healthreimbursement arrangements, and flexible spending accounts andexplains who is eligible and how much they can contribute. This isnot a comprehensive list, but it will get account holders off to agood start and help them overcome the concern they have about thepaperwork required if they select the HSA option. For more HSA taxinfo, check out my BenefitsPro blog posts on this topic.

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Eric Johnson can be reached at 817-366-7536 or on LinkedIn atwww.linkedin.com/in/ericjohnson262.

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