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Take Control Of Your Health Care Expenses-Buy A Franchise

HSAHealth savings accounts have exploded in popularity in recent years, but experts say they’re not living up to their potential as savings vehicles for retirement healthcare costs.

At the end of 2014, U.S. health savings accounts (HSAs) held $24.2 billion across nearly 14 million accounts, versus $19.3 billion across nearly 11 million accounts in 2013, according to Devenir, a Minneapolis-based provider of HSA investment products. Underlying this rapid growth is the increased adoption by employers of high-deductible health insurance plans, which shift more medical costs to employees and are typically paired with HSAs. Outside the employer market, Obamacare marketplaces offer individual and family high-deductible plans that are HSA-eligible.

Under high-deductible plans, consumers must pay for most medical expenses out-of-pocket until their spending hits a deductible of at least $1,300 for individual coverage or $2,600 for family coverage. To fund these expenses, consumers can sock away money in their HSA, which is a dedicated, tax-advantaged account for medical needs.

HSAs have only been around for about a decade, so even the earliest adopters aren’t ready for retirement in great numbers. Yet research suggests that HSA holders aren’t thinking of their account as the long-term, retirement savings vehicle that it could be. Only 16% of employees who are contributing to a health savings account plan to use the funds for future healthcare costs in retirement, according to the 2015 Employee Financial Wellness Survey by PwC.

What’s more, less than 5% of all account holders have invested their HSA in mutual funds or other securities. The vast majority of accounts are in cash equivalents, which imply a more short-term focus, according to Devenir. “People just don’t appreciate the full benefit of HSAs at retirement,” said John DiVito, president of Flexible Benefit Service Corporation, a Rosemont, Ill.-based benefits administrator.

The big benefit of HSAs is one that even the 401(k) can’t match: a triple tax advantage. Money in HSAs isn’t taxed on the way in, it grows on a tax-deferred basis, and it can be withdrawn tax-free to pay for qualifying medical expenses—now or in retirement.

Retirement health-care tab

Many people think that Medicare will cover all of their healthcare costs once they turn 65, yet this isn’t the case. Original Medicare, otherwise known as Part A and Part B, covers about 80% of medical costs — beneficiaries are responsible for the remaining 20%. The most comprehensive Medigap supplement plans will cover most if not all out-of-pocket costs, but they can run upwards of $300 a month.

Fidelity projected that an average couple retiring last year at age 65 will need $220,000 for healthcare costs during their retirement years. The study assumed that the hypothetical retiring couple has original Medicare. The $220,000 total includes monthly premium payments for Part B and Part D drug coverage, plus Medicare cost-sharing requirements. This estimate excludes most dental services, which Medicare doesn’t cover.

This whopping amount also excludes long-term care expenses such as nursing home or assisted living costs. Medicare does not cover this so-called custodial care. (Medicaid will, but only for those who have exhausted most of their assets and meet strict income and other criteria.) The national median cost of a private room in a nursing home is $91,250, according to the 2015 Genworth Cost of Care Survey.

HSAs can help with long-term care costs. Premiums for qualifying long-term care insurance can be funded with HSA money while people are still healthy. Once HSA holders reach the stage where they need help in old age, they can tap their HSA funds to pay for qualifying long-term care. (The Internal Revenue Service outlines requirements in Publication 502; generally, the portion of a nursing home or home health aide bill directly attributed to medical or nursing care counts toward eligible medical expenses.)

If workers fully recognized their exposure to health and long-term care expenses in retirement, they’d be more likely to sock away long-term money in their HSA, DiVito said.

Maxing out the accountHSA2

For 2015, the IRS allows HSA contributions of up to $3,350 for an individual and $6,650 for a family. Those 55 and over can add an additional $1,000 in “catch-up contributions.” As with an IRA, account holders have until April 15 to contribute to their HSA and realize tax savings in the prior year.

The small subset of HSA holders who max out their accounts each year tend to be high earners, DiVito said. They see the account as another retirement savings vehicle, and their high tax bracket means they especially can benefit from the savings at tax time when their HSA contributions are excluded from their annual income.

Instead of tapping their HSA for medical expenses, these people pay their medical bills with after-tax dollars until they reach their deductible. Eric Remjeske, president and co-founder of Devenir and himself an HSA holder, has found doctors and other providers readily agree to charge his credit card a fixed monthly amount until his bill is paid off, without interest or other fees. Not only does this break the bill into manageable monthly chunks, but it also allows him to earn rewards points on his card.

HSA accounts are still relatively new, and it’s understandable that workers are still learning their ins and outs. When more do, DiVito said, they’ll realize that the HSA is “the quintessential vehicle for retirement healthcare costs.”

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SEIU could make millions from unionized franchise industry

 
The Service Employees International Union, buoyed by a recent National Labor Relations Board ruling concerning McDonald’s, is working to destroy the franchise business model to more easily unionize its workers, writes James Sherk, senior policy analyst in labor economics for the Heritage Foundation’s Center for Data Analysis. The labor group, which has struggled for membership in recent years, could make tens of millions each year in initiation fees alone, due to high employee turnover in the industry, he writes. National Review(8/4)

Nestle Toll House Cafe by Chip serves up smiles in Taylor, Mich.


Nestle Toll House cookies are in the oven at Southland Center Mall in Taylor, Mich. The location marks the eighth cafe in Michigan and one of 18 cafes set to open this year under a long-term master lease agreement signed in October 2013 with Rouse Properties, Inc., national owner and operator of regional enclosed malls. It also marks the 12th cafe in the Midwest market and the 133rd system-wide

Consumers favor basics for summer food trends

 
Restaurants are seeing success when they trim menus to reflect updated classics, according to this roundup of the top five food trends of the summer. Wendy’s Pretzel Bacon Cheeseburger and Carl’s Jr. and Hardee’s Big Chicken Fillet Sandwich are examples of revitalized basic menu items. Adding meat to meat-based menu items and capturing the freshness of seasonal produce are also proving to be popular trends. Nation’s Restaurant News (free 

Planning, accountability are key for managing change


Business leaders can help their companies cope with change by following the eight tips in this article. From developing a plan to communicating with employees and focusing on accountability, the advice gives leaders a road map for managing change. Entrepreneur online (8/1)

Get ready for a new management era


The predominant style of management periodically changes, writes Rita McGrath, who argues that we’re entering a phase in which empathy and emotional intelligence are priorities. “All the questions about management are back on the table — and we can’t find the answers soon enough,” McGrath writes. Harvard Business Review online/HBR Blog Network (7/30)

Childrens Lighthouse franchisees plan to expand concept in Calif.


Brian and Aubree Fuentes invested $3 million in bringing the Texas-based child learning center franchise Childrens Lighthouse to California in 2009, and they have seen their business achieve steady growth over the past five years. The couple are planning to open a second location soon, and they expect more in the future as their 15% to 20% profit margin increases. The Press-Enterprise (Riverside, Calif.) (free registration) (8/1)

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Puzder: NLRB ruling threatens the future of franchising
 
About 750,000 franchise businesses employed 8.1 million people in the U.S. as of 2012, but last week’s National Labor Relations Board ruling threatens future growth, writes CKE Restaurants CEO Andrew Puzder. “Imagine the upheaval in the fast-food industry if tens of thousands of restaurants accustomed to operating independently suddenly were forced to work hand in hand with franchisers on every employment-related decision,” he writes. The Wall Street Journal (tiered subscription model) (7/31

Prospective franchisees must pursue passions

Fastsigns CEO: Prospective franchisees must pursue passions, do “due diligence” 
Successful franchisees must operate within the framework of the franchisor business model, advises The Entrepreneur’s Source, and aspiring franchisees should choose a brand that they can “be passionate about” and then “do really good due diligence” to find the right business, says Fastsigns CEO Catherine Monson. Kono Pizza co-founder David Ragosa is one such entrepreneur who rode out the initial risks of business ownership to find the gratification of owning his own franchise. Entrepreneur online