1. Health Savings Accounts (HSA) by Paige McNeal

2. agenda What is a Health Savings Account? HSA eligibility requirements
Plan eligibility
Employee eligibility
HSA Reporting
HSA Eligible Expenses
HSAs and beneficiary
Implementing HDHP + HSA mid plan year
5/21/2019
EBC for Training Purposes Only

3. What is a Health Savings Account?
An HSA is a trust created exclusively for the purpose of paying eligible medical expenses on a tax-favored basis. The HSA was created via the Medicare Prescription Drug, Improvement, and Modernization Act of 2003
Trustees are generally banks, insurance companies or any entity already authorized by the IRS to administer an IRA
HSAs are individual contracts owned by the account holder and are portable

4. HSA: Plan Eligibility
The IRS provides the plan design rules that will qualify a HDHP for an HSA benefit component
Criteria for 2019: For calendar year 2019, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co- payments, and other amounts, but not premiums) do not exceed $6,750 for self-only coverage or $13,500 for family coverage. (Rev. Proc )

5. HSA: Plan Eligibility
Can’t have separate prescription drug coverage that ignores deductible requirement
Can have preventative services provided

6. HSA: plan Eligibility
You may have a HDHP without an HSA, but you can’t have an HSA without enrolling in a HDHP

7. Hsa: individual eligibility
Easy Part
Hard Part
You MUST be enrolled in a HDHP in order to contribute to an HSA
Some of the other benefits you may have will make you ineligible to contribute to your HSA

8. Hsa: individual eligibility
Can’t contribute to an HSA if :
You are claimed as a dependent on another person’s tax return
You are covered by any other health plan other than a HDHP
You are enrolled in Medicare
You receive 1st dollar benefits from TriCare
You have access to a “Full-Use” Medical Flexible Spending Account
You have access to a “Full-Use” Health Reimbursement Arrangement

9. Hsa: individual eligibility
Since the inception of HSAs the IRS has provided us with ways to redesign our current benefits to maintain HSA funding eligibility

10. New “Medical” FSA Options
Original Option
“Full-Use” Med FSA
Co-pays
Deductibles
Health out-of-pocket expenses
Over-the-counter items
New Allowed Option
“Limited-Use” Med FSA
Vision & Dental Only
5/21/2019
For Training Purposes Only - EBC Work Product

11. New “HRA” Options Original Option “Full-Use” HRA Co-pays Deductibles
Health out-of-pocket expenses
Over-the-counter items
New Allowed Options
“Limited-Use” HRA
Vision & Dental
“Premium Only” HRA
No reimbursement of out-of-pocket expenses
“Suspended” HRA
Deny access on annual basis
5/21/2019
For Training Purposes Only - EBC Work Product

12. Your ARE ELIGIBLE! HOW CAN You CONTRIBUTE?
Pre Tax Contributions
After Tax Contributions
A contribution may be made via an employer-sponsored Cafeteria Plan
All employer and pre-tax employee contributions will be reported on Form W2, box 12, the amount will be coded with a “w”
After tax contributions provided, outside Cafeteria Plan, via employer, employee, or anyone else, will be reported on Form , as part of your federal income tax return

13. HSA Reporting
You will receive a Form 1099 SA from your HSA trustee so you may refer to it when you complete your personal income tax
This form reports total distributions from the account
This form should arrive by Jan 31st
You will receive Form 5498 SA from your HSA trustee
This form reports total contributions
This form may not arrive until after May 1st (because you can make contributions to account until April)
The trustee sends a copy of this form to the IRS
You may use other items such as receipts and statement to prepare your taxes before the deadline

14. HSA Reporting
Complete and submit Form 8889 as part of your federal income tax return This Form is where you list your contributions; except contributions made via the 125 Cafeteria Plan. You will note total distributions and make adjustments to taxable income and penalties for non eligible expenses.

15. Annual CONTRIBUTION LIMITS
2019 Combined Employee and Employer Limit
Single Coverage in HDHP = $3,500
Family Coverage in HDHP = $7.000
If between the ages of 55 and 65 you may contribute an additional $1,000
If you lose HSA funding eligibility mid-year the contribution will need to be pro-rated

16. HSA - Exceeding Contribution Limits
If you exceed your contribution limit for the tax year the overage is included in your gross income and an excise tax of 6% is charged on the overage.
5/21/2019

17. HSA Eligible Expenses Out of Pocket Expenses (IRC 213(d) Co-pays
Deductibles
Prescription drugs and medicines
Durable medical equipment
Long Term Care premiums
HSA holders can pay for health insurance premiums for his/her spouse and qualified dependents if the account holder is receiving healthcare continuation through COBRA or is receiving unemployment compensation through a federal or state program.

18. HSA Eligible Expenses
If Age 65 and Older
Medicare Part B and D

19. HSA Ineligible Expenses
Health insurance premiums
Medicare Supplemental or Medigap policy premiums
Expenses for a non-spouse or non-dependent
Definition of dependent child under HSA is not the same as definition of dependent for health insurance coverage
IRC 152

20. Distributions From HSA
Distributions are tax-free when used for eligible medical expenses
Individual’s responsibility to report properly
Distributions not used for medical expenses are included in gross income and an additional 20% tax penalty is imposed
If you are 65 or older, disabled or die no penalty is assessed.
5/21/2019

21. What Happens If You Die?
If account owner dies and the HSA passes to a non-dependent it ceased to be an HSA as of the date of death
The beneficiary must include HSA value as gross income as of the date of the account owner’s death
The benefactor may use the HAS to pay final bills for the decedent for up to one year after death. Those amounts would be tax-free and would not be included as gross income to anyone.
5/21/2019

22. HSA-125 Flex Plan Coordination
Plan Year issues:
If your insurance plan year is not the same as your 125 Flex Plan Year you may have an eligibility issue when you first implement
Why: Remember if you have flexed in the Full-Use Medical FSA you are ineligible to contribute to an HSA
5/21/2019
For Training Purposes Only - EBC Work Product

23. HSA-125 Flex Plan Coordination (continued)
Employees that switch to the HDHP and HSA mid-plan year and flexed in the “Full-Use” Med FSA must wait until the plan year ends before they may fund their HSA
If the plan provides for a grace period that also applies
If participant’s Med FSA account balance is zero by the end of the 12 month plan year he/she may fund HSA
5/21/2019
For Training Purposes Only - EBC Work Product

24. HSAs Offered Through 125 Flex Plans
The following Flex Plan rules DON’T apply to HSA contributions made through your Flexible Benefits Plan
Use-it-or-lose it
Uniform Coverage Rule
Change in status requirements for changing elections or stopping for stopping deductions
Can change or stop anytime, but only prospectively
5/21/2019
For Training Purposes Only - EBC Work Product

25. Questions Educators Benefit Consultants, LLC (EBC)
3125 Airport Parkway NE
Cambridge, MN
Phone:
Fax: