HSA Overview What is a Health Savings Account (HSA)? Financial account that is owned by an individual. o Associated with a High Deductible Health Plan (HDHP) o Contributions to the account are to pay for current and future medical expenses o No “use it or lose it”, unused funds rollover o Interest earned is tax free o Investment opportunities o Portable o Beneficiary can be named to account o Post age 65 non-medical distributions without penalty
HSA Employee Advantages o Control over the account o Ability to contribute tax free $ to HSA account (2014: single $3,300, family $6,550) o Rollover provides opportunity to save for future health care expenses o Tax-exempt withdrawals for qualified medical expenses not covered by the health plan o Interest and earnings grow tax free w/ investment opportunities o Portability o Post 65 non-medical withdraws This is the employee’s account and the entire balance belongs to the employee, regardless of your present or future employment and/or who deposited the funds.
VEBA Overview What is a VEBA Account? Financial account that is held in the employee’s name. o Contributions to the account are to pay for current and future medical expenses o No “use it or lose it” - unused funds rollover o Interest earned is tax free o Investment opportunities o No beneficiary can be named to the account o Employer only contributions
VEBA Overview Who is eligible to enroll and contribute to a VEBA? Enrollment: Any individual employee that: o Enrolls in the VEBA option medical plan o No conflict being covered by any other health insurance (including FSA) – VEBA accounts coordinate with other benefits Contributions: o Employer Only – No Employee Contributions
VEBA Employee Advantages o Control over your account for qualified distributions o Rollover provides opportunity to save for future health care expenses o Tax-exempt withdrawals for qualified medical expenses not covered by the health plan o Interest and earnings grow tax free with investment opportunities o Spend down – post employment o VEBA $ can be used to pay medical premiums (post employment)
VEBA / HSA Product Review P R O D U C T H I G H L I G H T SHSAVEBA EMPLOYEE CAN ACCUMULATE FUNDS TO PAY FUTURE EXPENSES xx NO "USE IT OR LOSE IT" PROVISION xx DEPOSITS EARN INTEREST AND ROLLOVER FROM YEAR TO YEAR xx ACCOUNT BELONGS TO THE EMPLOYEE AND IS PORTABLE x VEBA FUNDS ARE HELD IN TRUST IN THE NAME OF EMPLOYEE AND AVAILABLE FOR SPEND DOWN x SECTION 213D EXPENSES ARE ELIGIBLE xx PRESCRIPTION DRUGS ARE SUBJECT TO DEDUCTIBLE AND LIMITED TO FORMULARY ONLY ** Based on Employers health plan. xx INVESTMENT OPPORTUNITIES ARE AVAILABLE FOR ACCOUNT BALANCES OVER $1,000 xx AVAILABILITY OF FUNDS AS CONTRIBUTIONS ARE MADE xx
VEBA / HSA Product Review MEMBERS CAN ELECT CROSSOVER (must have BCBS coverage) AND DIRECT DEPOSIT xx THE HEALTH PLAN DESIGN MUST MEET CERTAIN DESIGN REQUIREMENTS PER IRS REGULATIONS x EMPLOYER CONTRIBUTIONS ONLY - EMPLOYEE CONTRIBUTIONS NOT ALLOWED x EMPLOYER AND EMPLOYEE PRE AND POST TAX CONTRIBUTIONS ALLOWED x NO MAXIMUM ANNUAL CONTRIBUTION LIMITATION - ALLOWS FOR LARGE SUMS OF SEVERANCE AND SICK LEAVE TO BE DEPOSITED x MAXIMUM CONTRIBUTION LEVELS SET BY IRS ON AN ANNUAL BASIS FOR 2014, $3,300 SINGLE/$6,550 FAMILY * CATCH-UP CONTRIBUTION OF $1,000 OVER AGE 55 x DEDUCTIBLE MINIMUMS AND OUT-OF-POCKET MAXIMUMS ARE ANNUALLY INDEXED BY IRS x DEDUCTIBLE AND OUT-OF-POCKET MAXIMUMS ARE ANNUALLY REVIEWED BY SERVICE COOPERATIVE x DUAL COVERAGE LIMITED - CAN ONLY COORDINATE WITH ANOTHER HDHP AS DEFINED BY IRS REGULATIONS x DUAL COVERAGE ALLOWED - COORDINATES WITH OTHER HEALTH PLANS x MEDICAL FSA'S ARE LIMITED TO DENTAL AND VISION EXPENSES ONLY (Once Medical Deductible has been met, FSA becomes full medical FSA) x
VEBA / HSA Product Review CAN BE USED IN CONJUNCTION WITH A FULL MEDICAL FSA x FUNDS CAN BE USED TO PAY RETIREE MEDICARE SUPPLEMENT PREMIUMS, RETIREE MEDICARE PART B AND D, AGE 65 OR OLDER. RETIREE GROUP HEALTH INSURANCE PREMIUMS AND OTHER INDIVIDUAL HEALTH INSURANCE **Consult your tax advisor x FUNDS CAN BE USED TO PAY MEDICARE PART B AND D IF AGE 65 OR OLDER, AND POST-65 RETIREE GROUP HEALTH INSURANCE PREMIUMS **Consult your tax advisor x WITHDRAWALS ARE LIMITED TO ELIGIBLE MEDICAL EXPENSES INCLUDING SECTION 213(D) x WITHDRAWALS FOR NON-MEDICAL EXPENSES ARE ALLOWED, BUT SUBJECT TO TAX AND 20% PENALTY UP TO AGE 65. AFTER AGE 65, SUBJECT TO TAX ONLY. x IN THE EVENT OF YOUR DEATH, THE VEBA BALANCE IS TRANSFERRED ONLY TO A TAX DEPENDENT FOR MEDICAL SPEND DOWN ONLY x ACCOUNT HOLDER CAN NAME A BENEFICIARY x MEMBERS ARE RESPONSIBLE FOR MAINTAINING SUBSTANTIATION RECORDS x MEMBERS WILL HAVE ADDITIONAL TAX RECORD KEEPING RESPONSIBILITIES **Consult your tax advisor x
What happens to my VEBA account if I move to the HSA plan? o Active VEBA accounts make employees not eligible to contribute to the HSA account o VEBA account will be limited to Dental and Vision claims only if you choose the HSA option o Dental and vision claims are also eligible expenses from the HSA o VEBA accounts can be completely frozen at the individual employee’s request, thus making the VEBA not eligible to pay dental and vision (complete VEBA stop form) Once you are no longer eligible to contribute to the HSA, the VEBA can be opened up to all IRS 231D expenses giving you the option of which account pays which eligible expenses.
Account Funding Strategy o Use the preventive care portion of your plan o Minute clinic or retail clinics o Use 911 if necessary – If not a life or death situation, evaluate ER needs o Use Generics o Inform your doctor/provider that you are on a HDHP o Shop for medical value – compare charges
Flexible Spending Account o Flex limits for Medical $2,500 o Full election available on 1 st day of plan o Pre tax savings o Use it or lose it – make your election carefully o Crossover - Automatic claims reimbursement with POS o VEBA – FSA is very complementary o HSA must have a limited FSA (dental & vision only)
Flexible Spending Account Administration o Dependent Care $5,000 limit o Election available as withheld from payroll o Children and adult daycare expenses eligible o Pre tax savings o Use it or lose it o Separate election from Medical FSA