Health Savings Account - HSA Presentation John Alden Life Insurance Company Welcome to John Alden

About John Alden  United States Individual Medical market leader  In business over 110 years  More than 1,000,000 customers

John Alden – an HSA Leader  First to offer MSAs in the individual market  In the forefront of HSA legislation  John Alden sold the first HSA in the country  Experts in account administration  One of the only custodial accounts in the country that provides seamless administration with no fees.

What is an HSA?  An HSA is a tax-favored savings account designed to allow for the accumulation of funds to pay for qualified healthcare expenses and to save for the future. It works in combination with a qualified high deductible health insurance plan.

Huge New Opportunity HSAs are:  New  Tax-Free  Flexible  Permanent  Portable  A significant improvement over MSAs We make HSAs simple and easy.

Easy to explain  An HSA is a tax-favored savings account designed to allow for the accumulation of funds to pay for qualified healthcare expenses and to save for the future.  The HSA works with a qualified high deductible health insurance plan. Together they provide:  Premium Savings  Tax Advantages  Investment Opportunities

Federal Guidelines  Annual Contribution limits for 2004 are the lesser of: 1) 100% of the amount of the deductible or 2) $2,600 – individual or $5,150 – family.  Individuals 55 and over are allowed to contribute an additional $500 for  Unused funds from an MSA plan may be rolled over into an HSA account with no penalty.  No first dollar benefits except for wellness

HSA Deductibles SingleFamily Qualified high deductible:$1,000$2,000 Maximum Out-of-Pocket:$5,000$10,000 John Alden – New Deductibles $1,000$2,000 $1,500$3,000 $2,050$4,100 $2,550$5,100 $4,950$9,900

Family Deductibles What is a common family deductible? Under John Alden Life Insurance Company plans, a common family deductible refers to the accumulation of all medical expenses for all covered persons to meet a single deductible. In order for a plan to be a qualified high deductible family plan, no one individual can have a deductible of less than $2,000.

HSAs Plus High Deductible Plans  Invested funds are tax-free.  Funds gain interest that’s tax-free.  Withdrawals for qualified expenses are tax-free.  Funds can be withdrawn at age 65 - only ordinary income tax applies.  Funds can be withdrawn, at age 65, tax-free for non Medicare covered medical expenses and prescriptions.  A 10% penalty plus ordinary income tax applies if funds are withdrawn before 65 for non medical expenses.  Funds can be used to pay Medicare Part A&B premiums (not medical supplement premiums).

Eligible Expenses Qualified Withdrawals:  Eligible medical expenses as defined under Section 213 (d) of the IRS Code. — Medically necessary services — Deductibles and Coinsurance — Glasses — Dental — Non-prescription drugs  Qualified Long-Term Care Premiums  COBRA Continuation Premiums  Premiums while unemployed  Medicare Part A&B Premiums (but not supplemental premiums)

Withdrawals after age 65 Non-qualified Withdrawals:  Under age 65 — Ordinary income tax and a 10% penalty on withdrawals for non-qualified expenses  65 or older — No penalty — Subject to income tax but likely at a lower rate – just like a 401k, for non-qualified expenses

Cost Comparison Scenario  Family – Coverage (Husband and Wife are both 37 years old with two children)  28% federal tax bracket  Living in Illinois  $1,500 in claims

Cost Comparison Coinsurance: Premium paid Your share - medical care expenses ($1,500 claim) Expenses subtotal Tax Savings on HSA deposits Net expenses (out-of-pocket minus savings) Total net savings with HSA Plan HSA Account Balance $3,050! Typical Family Plan (three times single deductible) $1,000 80%/20% $7,115 $1,000 for deductibles, $100 for coinsurance, $550 for other non-covered medical expenses +$1,650 = $8,765 $0 $8,765 Fortis Health HSA Plan Common family deductible: $5, % $3,125 $1,500 for medical expenses and $550 for dental/eyewear expenses +$2,050 = $5,175 $1,428 $3,747 =$5,018

Tax-Deferred Investment Options  John Alden HSA  MSAver HSA  Any custodial account the client chooses

John Alden HSA  Several contribution options  Monthly, quarterly, semi-annual, annual  No additional fees  No administrative, set-up or user fees  Very competitive interest rates  Optional automatic claims payment

MSAver HSA  Account options  Checkbook  Debit card  Brokerage account  provides access to stocks, bonds and mutual funds

How Can Funds Be Used?  Withdraw any time for eligible medical expenses glasses … dental … deductible … coinsurance … long term care premium … etc. (See John Alden Medical Expense Sheet, Form # 28557)  Non-eligible withdrawals before age 65  Taxed as ordinary income  Plus 10% penalty  Age 65 or Medicare eligibility withdrawals  Lower tax bracket  No penalty  Tax-free for non-Medicare covered medical expenses and prescriptions

Money Withdrawal Methods  HSA Check book  HSA Mastercard Debit Card

Clients Save Premium, Reduce Taxes and Build Savings  Unused funds accumulate from year to year. —Use the money to pay for qualified expenses tax-free as they occur — Save money tax-free for future medical expenses — Accrue savings and build a tax-sheltered nest egg for retirement

Want More Information? For more information contact: David Velke