Health Savings Accounts (HSAs) Everything You Need to Know
What is an HSA? A health savings account (HSA) is an account that you can use to pay medical expenses Must be in conjunction with a qualified high- deductible health plan (QHDHP) You own the account, but both you and others can contribute funds Tax-advantages: contribute pre-tax money, funds accrue tax-free and withdraw funds tax- free (if they are for eligible medical expenses) Go to optumhealthbank.com for more information. (You will be able to complete enrollment and bank account set up process through the online enrollment system.)
Benefits of an HSA Decreases Taxable Income and Increases Spendable Income for medical expenses Funds rollover each year, so you can use your HSA to save tax-free money for retirement You own the account, even if you leave the company Lower monthly premiums than a traditional health plan
Qualified High-Deductible Health Plan HSAs can only be offered with a qualified high-deductible health plan (QHDHP) No Office or Prescription Drug Co-pays (first dollar expenses) Preventive/Routine services covered 100% This is a plan that must provide coverage as defined by the IRS Minimum Deductibles Maximum Out of Pocket
How Does The HSA/QHDHP Work? You contribute money to the HSA (either a lump sum payment or periodically through payroll deductions) If you have an existing HSA account, you can request a Roll-over of funds to your OptumBank account. You can use HSA dollars to pay: Section 213(d) medical expense, such as out-of-pocket expenses you may have for items such as medical, dental and vision including health insurance deductibles. COBRA premiums QLTC premiums (Qualified Long Term Care) Health premiums while receiving unemployment benefits If Medicare eligible due to age, health insurance premiums except Medicare supplement policies
You pay first dollar charges up to the deductible for medical expenses: No Office co-pays No Prescription Drug Co-pays: (You will receive discounted rates when you stay ‘in-network’) Once deductible is met, eligible medical expenses are covered at 80% Once the out of pocket maximum is met, eligible medical expenses are covered at 100% for the remainder of the calendar year. Preventative/Routine medical services are covered at 100% No Deductible No co-pay No annual limit How Does The HSA/QHDHP Work?
Who is Eligible for an HSA? Anyone who is: Covered by an QHDHP Not enrolled in Medicare (Note: Medicare Part A is automatic when you turn age 65) Not covered under other health insurance* (A spouse who is covered under Arrow’s plan and also covered under another plan that is NOT a QHDHP would impact eligibility for the HSA Account) Not another person’s dependent *Other health insurance does not include: specific disease or illness insurance, accident, disability, dental care, vision care and long-term care insurance *Other health insurance does include: SHOP (Supplemental Hospital) Plans, Tri-Care, or Medical Coverage you receive as a Retired employee from a prior employer.
HSA Contribution Limits Each year, the IRS sets contribution limits These limits are for the total funds contributed, including company contributions, your contributions and any other contributions For 2014, total limits are: $3,300 for individual coverage $6,550 for family coverage (all other coverage levels) Note: IF you enroll in the QHDHP - Arrow will contribute $125 into your HSA accounts effective January 1, 2014. If you are age 65 or over and not eligible for the HSA account, Arrow will contribute $125 to an FSA account on your behalf
HSA Contributions HSA Contribution amounts are flexible. You can change your payroll deductions on a monthly basis. You are not locked in for the year. Per pay period premium deductions are lower if you enroll in the HSA Plan. The savings in your premium deductions should be contributed to your HSA accounts.
HSA Contributions You are allowed to contribute the entire year’s limit whenever you first become eligible for the HSA (even if that is in December) However, you must remain eligible for at least 12 months after that date, or you will be subject to taxes and penalties on the amount you contributed. When contributing lump sums outside of payroll deductions, you must claim on your tax return to take advantage of the tax savings. Section provided on tax return – after tax contributions to HSA
Catch-Up Contributions For individuals ages 55+, the IRS allows additional “catch-up contributions” Eligible individuals may contribute an extra $1,000 for the year 2014 This is to help save additional money for retirement
HSA Distribution Rules Distributions from your HSA are tax-free if they are taken for “qualified medical expenses” Your HSA can only be used for expenses that are incurred on or after the date the HSA was established However, HSA funds can be used for expenses from a prior year, as long as the expenses incurred on or after the date the HSA was established There is no annual plan year as with an FSA and the “Use it or lose it rule” does not apply.
HSA Distribution Rules HSA distributions can be taken for qualified medical expenses for the following: The account holder (person covered by the QHDHP) Spouse and Dependent Children of that individual (even if not covered by the QHDHP)
Distributions (Age 65+) For individuals age 65 and older, HSA distributions can be used for non- qualified medical expenses without facing the 20% penalty However, income taxes will apply for non- medical distributions This rule is regardless of whether the individual is enrolled in Medicare
Qualified Medical Expenses The IRS defines expenses that are considered “qualified medical expenses” for HSA distributions Expenses must be used primarily to treat or prevent a physical or mental defect or illness If you use HSA funds for expenses beyond what the IRS defines as qualified, you will be subject to income tax on the distribution and an additional 20% penalty
Qualified Medical Expenses (Posted on www.buscobenefits.com) Examples of qualified medical expenses include: Most medical care that is subject to your deductible (doctor visits, inpatient or outpatient treatment, etc.) Prescription drugs Over-the-counter drugs (only if you obtain a prescription) Insulin (with or without a prescription) Dental and vision care Select insurance premiums COBRA, qualified long-term care insurance, health insurance premiums paid while receiving unemployment benefits, health insurance after you turn 65 except for a Medicare supplemental policy
Ineligible Medical Expenses (Posted on www.buscobenefits.com) Expenses that are not considered “qualified medical expenses” include: Insurance premiums (other than the exceptions listed on the previous slide) Over-the-counter drugs (unless a prescription is retained from a physician – insulin is an exception) Surgery purely for cosmetic reasons Expenses covered by another insurance plan General health items such as tissues, toiletries, hand sanitizer
Recordkeeping Whenever you use HSA funds to pay for a medical expense, you should keep your receipt You may need to demonstrate to the IRS that HSA distributions were for qualified medical expenses If the IRS requests receipts for verification purposes, failure to provide those receipts could result in having to pay a 20% penalty and income tax.
Contribution Savings Examples Sample Tax Savings Estimate $5,000 election: ($208.33 per pay check) $1,150.00 tax savings* $3,000 election: ($125.00 per pay check) $690.00 tax savings* $1,000 election: ($41.66 per pay check) $230.00 tax savings* *On average people save 23% savings in taxes Based on 24 pay-periods in a year
Differences Between FSA & HSA FSAHSA Does ‘Use it or lose it’ apply? YesNo Is Rollover available?NoYes Does it earn interest?NoYes When are funds available?1 st day of plan year Date of deposit Is the balance portable if employee terminates? NoYes Are age 55+ catch up contributions allowed? NoYes: $1,000
How to Set Up an HSA Account You will enroll in the HSA plan online during the annual enrollment process. You will be directed to set up your HSA account via a link that will be included in the Online enrollment system. Once enrolled, you will receive a debit card for the HSA plan. You will also receive a welcome kit with important information about your HSA Account. Note – Arrow will pay the account fees for the first year (as you build up your account balances).
Which Plan Works for You? Both Plans provide valuable protection. Both Plans provide maximum out of pocket protection during the year. Both Plans provide 100% coverage for Preventive and Well Child Care.