Presentation on theme: "HSA 101 A Quick Review of Health Savings Account Basics"— Presentation transcript:
1 HSA 101 A Quick Review of Health Savings Account Basics
2 Agenda Health Savings Account Features Eligibility Contributions Tax InformationDistributionsHSA-Qualified ExpensesPreventive CarePaying for Medical ServicesMaximizing Your HSAResources
3 What is a Health Savings Account? High Deductible Health Plan Component (HDHP)Health Savings Account Component (HSA)HDHP + HSA SolutionTax-Advantaged account which can be used to cover medical expenses before the insurance deductible is met. Funds may also be saved for future medical expensesControl Healthcare Expenses! Increase Tax Savings!Lower Insurance Premiums!Flexibility & Portability! Savings for Retirement!Health Insurance used to cover expenses for illness or injury after meeting a minimum deductible amountLower premiums Protection from big medical bills Covers same eligible expensesSame provider networkHelps pay deductiblePre-tax contributionsTax-deferred growthTax-free withdrawals for medical
4 HSA Key Features Funds roll over year to year! Funds are portable! Use HSA dollars to pay for medical expenses tax-free!HSAs are owned individuallyNo “use it or lose it” rulePre-tax contributions!Preserve patient choicesPreserve patient-doctor relationshipBuilt-in cost-effectiveness incentivesPromote savings for employers and employeesReduce health care costsPortabilityPromote preventive medicineReduce the number of uninsuredDecrease administrative costSimple payment mechanismAuthorized expenditures defined by IRS and insurance policyHSAs can build up significantly…no balance limit!HSAs earn interest!Funds can be invested!
5 HSA EligibilityHSA account holders:Must be enrolled in an HSA-qualified High Deductible Health Plan (HDHP)Cannot be covered by any other insurance that reimburses for health expensesCannot be enrolled in any part of Medicare or MedicaidCannot be eligible to be claimed as a dependent on another person’s tax returnMust be over 18 years of ageTo open and/or continue contributing to a Health Savings Account
6 HSA Contributions 2013 IRS Maximum Contribution Limits THIS YEAR2013 IRS Maximum Contribution LimitsIndividual $3250Family $6450HSA ContributionsNEXT YEAR 2014 IRS Maximum Contribution LimitsIndividual $3300Family $6550
7 IRS Contribution Rules HSA Contributions are not subject to income taxContributions can be made by anyoneYou can change your contributions at any time throughout the yearContributions in excess of the allowable limits must be withdrawn (Otherwise incur a 6% excise tax and claim as income)Eligible individuals aged 55 or older may contribute “catch-up” contributions of $ each year until enrolling in Medicare (one catch-up per account)
8 Maximizing Contributions With The IRS Last-Month Rule Sometimes health plans begin part-way through a calendar year If you are HSA-eligible by Dec. 1st, you are considered eligible for the entire year in terms of contributions. BUT – there is a “testing” period where you must remain an eligible individual through the end of the next calendar year.
9 How HSA Contributions Impact Taxes HSA contributions are exempt from the following payroll taxes: Social SecurityMedicareFederal Income taxState income tax/unemployment tax (depending on the state)Pre-tax contributions facilitated by an employer are documented on employee W-2’s in Box 12 with a Code W.
10 Tax Saving Estimates Insurance Coverage Tax Bracket Annual Tax Savings by ContributionMaximum Family Contribution Plus 1K Catch-up$1,200$2,000$3,250$4,250Single Coverage15%$180$300$488$63825%$500$813$1,06328%$336$560$910$1,19033%$396$660$1,073$1,403$4,000$6,450$7,150Family Coverage$600$968$1,000$1,613$1,788$1,120$1,806$2,002$1,320$2,129$2,360Single FilingMarriedSalary Range$8, ,550$16, ,100$32, ,850$65, ,450$78, ,550$131, ,300$164, ,700$200, ,700
11 Annual Tax Documentation IRS Form 8889HSA account holders utilize this form to file taxes All information to file taxes is available through your bank account information and your employer W-2Details distributions; Customer and IRS receive by January 31st Details contributions; Customer and IRS receive by May 31stIRS Form 1099-SAIRS Form 5498-SA
12 What can you do with your HSA dollars? According to the IRS, funds within an HSA can be used to pay for qualified medical expenses(See publication 502)What can you do with your HSA dollars?HSA dollars may be used by the account holder, the account holder’s spouse, and any tax dependentsDistributions can be taken at any timeHSA reimbursements can be taken for expenses from prior years if the HSA was already established
13 DOCTOR Qualified Medical Expenses Taxes or penalties do not apply for these types of HSA withdrawals:Most medical care & services covered by your insuranceDental & Vision ServicesAlternative RemediesCertain premiums - in rare circumstancesOTC Drugs (with prescription)Medical suppliesDOCTOR
14 Preventive CareThe Affordable Care Act requires non-grandfathered insurance plans to cover preventive or “wellness” visitsFor these plans, individuals would not need to satisfy their deductible before preventive care visits are covered by insuranceExamples: Annual Physical (non-sick visit), Mammogram, Children’s Immunizations, etc.Review your insurance carrier’s guidelines regarding eligibility for specific preventive careRemind your Doctor’s office if your visit should be coded as “preventive” to avoid inaccurate billing
15 Non-Medical HSA Distributions Under Age 65 65+ Years Old It is possible to withdraw funds, but may not be advisablePay income taxes plus 20% penalty65+ Years OldNo penalties for non-qualified distributionsPay income taxes on withdrawals
16 Saving ReceiptsAccount holders are responsible for maintaining receiptsto prove HSA funds were used for qualified expensesif audited by the IRS
17 Paying for Medical Expenses Payment to a Medical Service Provider (Doctor, Lab or Hospital, etc.): Provide your insurance card & explain you have an HDHP. Most physicians allow you to pay after you receive their bill. Match your bill to the EOB (Explanation of Benefits) sent by your insurance.Payment at the Pharmacy:Pharmacies immediately access the negotiated rate for prescriptions. You can use your HSA debit card to pay for qualified expenses, or pay with another method and reimburse yourself later.Payment Arrangements:Medical bills can often be broken down into smaller payments.If you do not have available funds in your HSA, ask your provider’s billing office about arranging a simple payment plan.Set up payments directly from your HSA as needed.
18 Maximizing Your HSA Contribute to your HSA Explore Medical Service AlternativesGeneric vs. Brand-name prescriptionsCompare Prescription CostsNegotiate if possibleSave receipts to allow for tax-free withdrawals
19 Check out the IRS Website: www.irs.gov ResourcesCheck out the IRS Website:andReview your Bancorp client website (specific to your insurance provider or benefit administrator)
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