Money Management Q&As

February 17, 2006



HSA rules for spouses covered separately

Q. The husband of one of my employees is covered by low-deductible health insurance where he works. Can she contribute to an HSA I've set up for my practice?

A . Yes, if her husband's insurance doesn't cover her. If your plan covers her as a single individual with a deductible of at least $1,050, she can contribute the amount of her deductible up to $2,700 (the limit for 2006), or a prorated amount if she joined during the year. If the couple has children covered under her policy but not her husband's, her contribution can equal the family coverage deductible (at least $2,100 but not more than $5,450 this year). The limits are higher for participants 55 or older.

Q. The Nasdaq stock exchange recently notified a company I own shares in that its stock may be delisted. What does that mean for me?

A. It means it's time to question your faith in the company, if you haven't already. When Nasdaq delists a stock it typically means the bid price has remained below $1 per share for at least 30 consecutive business days, the company hasn't filed the required SEC reports, or it isn't meeting the minimum market capitalization or certain other basic criteria for maintaining a listing.

Once its stock is delisted, the company may have more trouble raising money. And for you, trading the stock at a good price will become more difficult if not impossible. You may have to hunt around for price information. The OTC Bulletin Board ( http://www.otcbb.com), a Nasdaq offshoot, may track the stock if the company still files reports with the SEC. If it doesn't, the next best bet is Pink Sheets ( http://www.pinksheets.com), but this quotation service publishes data provided by OTC market makers.

Nasdaq generally gives companies 30 to 180 days, depending on the infraction committed, to get back in its good graces after it sends a notice of deficiency. Since the company you own shares in has already been notified, you'll want to sell the shares soon if you decide to cut your losses.

Employment taxes on mixed earnings

Q. I may give up my practice at the end of March and accept a salaried position that would pay me $80,000 through December. Would I owe self-employment tax on my prior net earnings, which would come to about $30,000?

A. Yes, in part. The Social Security wage base is $94,200 this year, so all of your $80,000 salary would be subject to Social Security and Medicare taxes, which total 15.3 percent. Your employer must pay half of that and deduct an equal amount from your salary. In addition, you'd owe 12.4 percent (the Social Security tax portion) on $14,200 of your $30,000 self-employment income plus 2.9 percent (the Medicare tax portion) on almost $28,000 of it. So your self-employment tax will come to almost $2,600. Schedule SE (long form), which you'd have to file with your return, will help you calculate the exact figure. The good news is you could deduct half of that from the total income you report.

The easy way to compare fund costs

Q. I've narrowed down my mutual fund search to two funds with good long-term performance records, but I'm having trouble deciding between them. One is a no-load with yearly expenses of 1.75 percent; the other has expenses of just 0.66 percent but adds a 3 percent front-end sales charge. How can I figure out which one would be least costly?