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A lot of acronyms. A lot of savings.

Health Reimbursement Arrangements (HRA), Health Savings Accounts (HSA), Flexible Spending Accounts (FSA), Transit/Parking Accounts and Dependent Care Accounts. That’s a mouthful! We are here to help. We provide total administration of all tax advantaged healthcare accounts, handling enrollment, claims processing, and customer service.

Employer advantages:

  • Automated transaction tracking and categorizing, making it easy to comply with government reporting requirements
  • 1099-SA and 5498-SA regulatory reporting
  • Employer support features
  • Promotional and educational materials
  • Automated group or individual enrollment
  • Non-discrimination testing module to help you identify plans that may not be tax-exempt

Member advantages:

  • HSA account access via checks, Master Card® or Visa® Benefits Card, and Member Portal
  • Bill payment capabilities through our software
  • Investment options
  • Self-service online account creation

 

Any questions? Here are some common ones, and their answers.

 

 

 

1. What is a Health Savings Account (HSA)?

A: A Health Savings Account (HSA) is a special tax-advantaged savings account similar to a traditional Individual Retirement Account (IRA) but designated for medical expenses. An HSA allows you to pay for current covered health care expenses and save for future qualified medical and retiree health care expenses on a tax-favored basis. HSAs provide triple-tax advantages: contributions, investment earnings, and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

Unused HSA dollars roll over from year to year, making HSAs a convenient and easy way to save and invest for future medical expenses. You own your HSA at all times and can take it with you when you change medical plans, change jobs or retire. This means the funds in the account [both yours and your employer's, if they contribute] are non-forfeitable and portable.

Funds in the account not needed for near term expenses may be invested, providing the opportunity for funds to grow. Investment options include bank accounts, mutual funds, etc.

To be eligible to set up an HSA and to make annual contributions, you must be covered by a qualified high-deductible health plan (HDHP)

2. How does an HSA work?

A: Basic Overview:
To be eligible to contribute to an HSA you must be covered by a qualified high-deductible health plan (HDHP) and have no other first-dollar coverage.

You can set up an HSA with any financial institution that has been approved by the IRS to offer HSAs. These institutions are referred to as HSA custodians or trustees.

You may use your HSA to help pay the deductible under a high-deductible health plan.

HSA funds unused remain in the account, and can be invested in a choice of investment options, providing the opportunity for funds to grow.

HSAs work in conjunction with a HDHP. All the money you (or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible for federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax. This makes HSA dollars tax free. The insurance company pays covered medical expenses above your deductible and you can pay costs below the deductible with tax free money from the HSA.

You can even use these tax free dollars to pay for expenses not covered by the HDHP, such as dental, vision and alternative medicines. The funds in the account also can be used for non-qualified expenses, but are then subject to ordinary tax, plus a 10% penalty if you are under age 65. The 10% penalty does not apply if the distribution occurs after you reach age 65, become disabled or die; however ordinary income tax may still apply.

Funds remaining in your account at year-end are yours to rollover and accumulate for your future healthcare expenses. You may choose not to spend your HSA dollars on small expenses, instead using after-tax dollars to meet these expenses, and leaving your HSA dollars to grow for future needs. Choosing the expenses on which to spend your HSA dollars and which to pay out-of-pocket with after-tax dollars is entirely up to you.

3. Who is eligible to open an HSA?

A: If you meet all the criteria listed below you are eligible to open and contribute to an HSA. The Medicare Act of 2003, which established HSAs, defines "eligible individuals" as those who:

  • are covered by a qualified HDHP;
  • are not covered by any medical plan that is not a qualified HDHP (dental and vision plans are excluded from this restriction);
  • have no other coverage that pays first-dollar for any benefit that is covered by the HDHP;
  • are not enrolled in Medicare; and
  • cannot be claimed as a dependent on another individual's tax return.

You are eligible to establish an HSA if you are entitled to benefits under an Employee Assistance Plan (EAP), disease management or wellness program or have a discount card for prescriptions.

4. Who is eligible to contribute to an HSA?

A: If you meet all the criteria listed below you are eligible to open and contribute to an HSA. The Medicare Act of 2003, which established HSAs, defines "eligible individuals" as those who:

  • are covered by a qualified HDHP;
  • are not covered by any medical plan that is not a qualified HDHP (dental and vision plans are excluded from this restriction);
  • have no other coverage that pays first-dollar for any benefit that is covered by the HDHP;
  • are not enrolled in Medicare; and
  • cannot be claimed as a dependent on another individual's tax return.

5. How is money deposited to my HSA?

A: Money may be deposited to your HSA through payroll deduction, if your employer participates in such a program, or you may make deposits directly to your account. Deposits may be made periodically or in a lump sum. If you make deposits to your account with after-tax dollars, you may take a deduction on your taxes equal to that amount.

6. How do I open an HSA?

A: To open and make tax-deductible contributions to an HSA, you must be covered by a qualified high-deductible health plan (HDHP). The account must be established and maintained by a financial institution (such as a bank) that has been approved by the IRS to offer HSAs. You may open an account at any approved financial institution regardless of which insurance company provides your high-deductible plan or where you live.

7. Why establish an HSA?

A: HSAs are: Tax-advantaged. Contributions, earnings and withdrawals for qualified expenses are excluded from federal income tax, FICA (Social Security and Medicare) tax and state income tax, in most states. Flexible. The money is yours. It grows and remains with you, even when you change medical plans, change employers or retire. There are no "use it or lose it" rules. Even if you are no longer eligible to make contributions, funds in your account may still be used to pay for qualified expenses tax free. The funds in the account can be used for non-qualified expenses, but are then subject to ordinary tax, plus a 10 percent penalty if you are under age 65. The 10% penalty does not apply if the distribution occurs after you reach age 65, become disabled or pass away. Portable. Accounts move with you when you change medical plans, change employers or retire.

Savings Mechanisms. Unused funds can grow through interest and investment earnings and can be "banked" for future medical expenses. Also, contributions can come from multiple sources. As long as you are covered by a qualified HDHP, you, your employer, family members, or anyone else may contribute to your HSA. The total of all contributions to the account are combined and subject to your maximum annual contribution limit. Additional Notes about HSAs: You can deposit after-tax contributions to your HSA using personal check, cash or money order, and take an above the line deduction for the contributions when filing annual income taxes. If your employer offers payroll deductions, your contributions will be pre-tax. If your employer contributes to your account, those funds will be excluded from your total income and are therefore tax free.

If a family member or anyone else makes a contribution to your account, the tax advantages apply to you and not the person making the contribution. You can take an above the line deduction for the contribution amount when filing your annual income taxes, in the same way you would if you had made a post-tax contribution on your own.

8. How do HSAs differ from health care flexible spending accounts (FSAs)?

A: Both HSAs and FSAs allow you to pay for qualified expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year is forfeited. If you have both an HSA and an FSA, you must pay certain expenses, such as those that apply to the HDHP deductible, out of your HSA before you may use your FSA.

9. What can funds in an HSA be used for?

A: HSA funds can be used for either qualified or non-qualified expenses. If funds are used for qualified expenses, then the distribution is tax free. If you use HSA funds for non-qualified expenses and you are not disabled or over age 65, distributions will be subject to ordinary income tax, and a 10 percent penalty.

Dental and vision care expenses are qualified expenses, as long as these are deductible for your income tax under the current IRS rules. For example, cosmetic procedures, like cosmetic dentistry, are generally not deductible and would not be considered qualified expenses.

Qualified expenses, in addition to dental and vision expenses, include over-the-counter medications [OTC], covered expenses applied to the deductible, co-pays above the deductible, payments for continuation of coverage [COBRA], health insurance premiums while receiving federal or state unemployment, Medicare Part A and/or B premiums and qualified long-term care insurance premiums. Premiums for Medigap or Medicare supplemental plans are not qualified distributions.

Only qualified expenses incurred after you have established your HSA meet the requirements for tax free reimbursement.

10. How is my HSA taxed?

A: Your HSA is exempt from federal income tax, and in most states, state income tax, unless or until it is considered to no longer be an HSA. Contributions, investment earnings, and qualified distributions all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

 

 


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