2015 is here: What does a new year and a new Congress mean for IRAs & HSAs?
The calendar has flipped and we’re charging into 2015. Those of us in the financial services industry do so with questions about what changes have gone into effect that impact IRAs and HSAs, as well as what new compliance challenges and opportunities can be expected. We also wonder what a new Republican-dominated Congress may try to do (or not do) that might impact these tax-favored savings vehicles. What can we expect in 2015? It is too early to know what unexpected changes might come as a result of a new Congress—rest assured there are plenty of twists and turns in store.
IRA Changes, Challenges, and Opportunities
The combination of the Affordable Care Act (ACA) completing its second season of open enrollment, a Supreme Court ruling in Bobrow v. Commissioner creating a huge rule change for IRA-to-IRA rollovers, and demographic-trend shifts will create new IRA compliance concerns and heighten existing ones. And with hundreds of credit unions looking to offer HSAs in 2015, there also is no shortage of HSA compliance questions.
As of January 1, 2015, IRA owners may complete only one IRA rollover in any 12-month period, regardless of how many IRAs they own. This is a big change from the previous rule that allowed IRA owners to rollover one distribution per IRA that they ownedduring any 12-month period. There are huge tax and penalty implications, and there is no way to tell which members are using the old practice. The best way to protect your credit union is to amend your IRA disclosure statements as soon as possible to inform your members of the change.
With 500 baby boomers turning age 65 every hour for the next 15 years, there will be no shortage of rollover money coming to your credit union in the months and years ahead—regardless of what the stock market is doing. One recent study states that $324 billion rolled from 401ks to IRAs in 2013, and that’s a lot of money looking for a safe haven.
HSA Challenges, Growth, and Opportunities
While there are no changes in HSA reporting or rules for 2015, the sheer number of credit unions entering the HSA space is raising many questions throughout the credit union market on how best to handle offering HSAs—and it’s about time. In 2013, twice as many banks offered HSAs versus credit unions, creating a void in the product set for many existing and potential credit union members. Informal polling suggests that many credit union executives are resistant to offer HSAs because they have an outdated understanding of how ubiquitous HSAs are becoming and even subscribe to some of the myths surrounding these accounts. HSAs are not going away, regardless of which party is the majority. Even if ACA is struck down by the Supreme Court or repealed by a Republican Congress, HSAs will remain and continue to grow exponentially. HSAs also have become a cornerstone of many health plans offered through the federal and state-run healthcare exchanges so even if the Democrats gain an upper hand, this also is unlikely to change. Offering HSAs to your members is not without its challenges; they are similar to IRAs in some ways but drastically different in others. Compliance is key. But so is a good understanding of what your credit union can and cannot do to help prevent your members from a potential tax headache.
In 2015, thousands of employers will switch from traditional, defined-benefit health plans like HMOs and high-end PPOs to high deductible health plans (HDHPs) that pair with HSAs—that trend is well-documented. Couple that with a huge surge in individuals purchasing HDHPs on the ACA healthcare exchanges, and it’s easy to see why the final HSA numbers for 2014 are expected to blow away the previous record for expansion in any given year.
IRAs and HSAs are not going away, and the importance of their role in your members’ lives is going to continue to increase steadily. It is every credit union’s duty to provide products for the financial needs of their membership and to align their values with those of their members. 2015 is going to see a big increase in both IRAs and HSAs challenging your credit union from a compliance perspective, from a member service perspective and, maybe most importantly, a member retention and acquisition perspective.
