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An employer's guide to choosing the right HSA from Alliant Credit Union. For more information, or to download our white paper, visit http://www.alliantatwork.com.
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Employer’s Guide to
Choosing the Right HSA
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 2
Overview
How HSAs work
Benefits of HSAs for your company and your employees
How to evaluate HSA providers
How to implement your program
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 3
The emergence of HSAs
Healthcare Savings Accounts (HSAs) were introduced in 2003 as a way to control rising health care costs
Way to save premium costs and maintain a competitive health care benefit package
Companies can save 20% to 40% in their premiums. The average savings is around 30%1
Attract and retain valued employees
Today 45% of U.S. companies offer an HSA-eligible High Deductible Health Plan (HDHP)2
Sources: 1. Joe Williams, business development manager for Bay Benefits Insurance Services, 2009. 2. C. William Sharon, AON Consulting/ISCEBS survey, October 2008.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 4
Four HSA statistics of interest
Over 8 million Americans have an HSA3
8% of all U.S. employees in an employee-sponsored health insurance plan are in an HDHP/HSA-eligible plan4
In companies that offer HDHP/HSA as an option, about 15% of employees participate5
By 2012, between 11 and 13 million Americans are expected to have an HSA6
GROWTH OF HSA HDHP ENROLLMENT7
(from March 2005 to January 2009)
Sources: 3.2009 annual census by America’s Health Insurance Plans, published May 13, 2009. 4. Kaiser Family Foundation and Health Research Education Trust, “Employer Health Benefits 2008 Summary of Findings”. 5. Pediatrics, the official journal of the American Academy of Pediatrics, March 1, 2007. 6. Diamond, “Diamond Management & Technology Consultants Issues Updated HSA Estimates,” January 7, 2009. 7. 2009 AHIP HSA/HDHP Census.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 5
The fundamentals of an HSA
Health Savings Accounts: tax-deferred, interest-accumulating accounts that can only be offered in conjunction with an HDHP
Employees must be covered by a qualified HDHP before enrolling in an HSA
Contributions may be made to employees’ accounts by company & employee
2010 contribution limit for individual plans is $3,050; $6,150 for family plans
Employees age 55 or older can also make a $1,000 “catch-up” contribution
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 6
How an HSA Works
Help employees save money to use for their qualified medical expenses
Paid for with pretax or tax-deductible dollars and is fully owned by the employee
Employees and employers can contribute to an HSA
HSA accountholders can withdraw funds at any time, without penalty, if used for qualified medical expenses
Access to funds typically by debit card, check or online banking system
HSA funds earn interest provided by the HSA custodian
The account is portable and unused funds accumulate and rollover year to year
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 7
HSA (Health Saving Account) HRA (Health Reimbursement Account) FSA (Flexible Spending Account)
Eligibility Employees must be covered by an HDHP. (Employees no longer covered by an HDHP keep the HSA, but can no longer make contributions)
Employees in companies that offer this benefit. (Former employees can be included)
Employees in companies that offer this benefit. (Former employees cannot be included)
Qualifying health insurance needed
Employee must be covered by an HDHP Although usually offered in conjunction with an HDHP, there are no health insurance requirements for an employee to participate in an HRA
No health insurance requirements
Contributions Funding can be made by the employer, the employee or any person on behalf of an eligible employee
Funding can be made only by the employer Funding is usually made by employees through a reduction in their salary. Contributions can be made by employer, employee or both
Annual contribution limits
In 2011, the contribution limit to individual plans is $3,050. Limit for family plans is $6,150. Employees aged 55 or older can also make a “catch-up” contribution of $1,000
No contribution limits, although employers typically contribute less than the annual deductible of their health plan offering
No required contribution limit, although employers usually impose one
Qualifying expenses Most unreimbursed medical expenses Note: an employee may qualify for both an HSA and an FSA. However, they cannot “double-dip” – be reimbursed by both accounts for the same expense
Most unreimbursed medical expenses, although employers may impose limitations, such as no payments for long-term care or health insurance premiums
Most unreimbursed medical expenses, although employers may impose limitations. Cannot be used for long-term care or health insurance premiums
Allowable non-medical withdrawals
Permitted, but subject to income tax and 20% penalty. After accountholder reaches age 65, or upon death or disability, funds used for non-medical expenses are subject only to income tax
Not permitted Not permitted
Carryover of unused funds and rollovers
Full amount of funds can be carried over indefinitely
Permitted, although some employers limit the amount that can be carried over. Employees are allowed a limited, one-time rollover to an HSA
Balances left at year’s end (or up to 2 ½ months after year’s end, if employer permits) are forfeited to employer. Employees are allowed a limited, one-time rollover to an HSA
Portability Portable Funds may be portable – it’s at the discretion of the employer. Also, subject to COBRA provisions
No, funds usually forfeited at termination, although COBRA extensions sometimes apply
The Advantages of an HSA vs. an HRA or FSA
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 8
HDHPs and HSAs provide key benefits for employers
Reduced premiums
Tax savings
An enhanced benefit package
An incentive for your employees to make responsible health care spending decisions
An incentive for your employees to focus on maintaining their health
Less administrative hassles
HOW HSAs BENEFIT EMPLOYERS
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 9
HSAs provide your employees tax advantages:
Pre-tax contributions made via payroll deductions will reduce federal tax liability
Contributions and dividends are not taxable if used for qualified medical expenses
Contributions made with after-tax dollars are deductible
Unused funds remain in the HSA year after year, earning tax-deferred interest
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 10
Can move the HSA from one
financial institution to another
There are many reasons for your employees to open an HSA
Control the way funds are spent
and investedSave for future
medical expensesAccount
is portable
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 11
HDHPs/HSAs can be a great investment for your employees
Your company can make contributions to
employees’ HSAsHSAs are a great
retirement savings toolFunds left in HSA will earn interest tax-free
Once deductible is met, many HDHP plans pay 100% of qualified medical expenses
The HDHP deductible is typically less than the HSA
contribution limits
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 12
Employees can use HSA funds for qualified medical expenses including
Dental treatment, such as fillings, braces and extractions
Eye exams, eyeglasses and contact lenses
Out-of-pocket expenses, such as deductibles, coinsurance and co-payments
Prescriptions
Qualified long-term care services and insurance
COBRA insurance
Medicare premiums (if no longer covered by an HDHP) but not Medigap
Retiree health expenses
Hearing Aids
Acupuncture
Qualified medical expenses are subject to change by the IRS. Please visit www.irs.gov for a current list of qualified medical expenses.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 13
Your employees can withdraw HSA funds without penalty
At any time to cover qualified medical expenses
Funds used for non-medical expenses when accountholders reach age 65, or upon death or disability, are subject only to income taxes and will not be assessed a penalty
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 14
How to increase HDHP enrollment by offering the right HSA
EducateEmployees
OfferWellness Programs
FundEmployees’ Accounts
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 15
Fund your employees HSAs
How much should your company contribute to your employees’ HSAs?50% to 70% of the deductible, benefit experts recommend12
72% of the firms that offer an HDHP/HSA fund the account8
72% 61% of consumers are more likely to
participate in an HDHP if their employer contributes to their HSA9
61%
71% 71% of employees who received employer contributions opened an HSA versus 48%
of those who received no contribution11
$898 $1,522 single coverage family coverage/
The average employer contribution is $898 for single coverage; $1,522 for family coverage10
Sources: 8. Kaiser Family Foundation and Health Research Education Trust, “Employer Health Benefits 2008 Summary of Findings”. 9. Guardian Life Insurance, “Benefits & Behavior: Spotlight on Consumer-Driven Health Care,” 2008.10. U.S. Bureau of Labor Statistics, 2008, cited in “Benefits Marketplace 2009,” on Benefitnews.com. 11. Blue Cross & Blue Shield Association study, cited in “Members of CDHPs more engaged,” Business Insurance, October 27, 2008 12. Joe Williams, business development manager for Bay Benefits Insurance Services, 2009.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 16
Be prepared Be prepared to address a learning curve when introducing an HSA
Have materials Have materials to explain how the plan works and the benefits
Communicate Communicate via intranet, newsletters, payroll stuffers, staff meetings, etc.
Communicate early and often
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 17
Choosing the Right HSA Custodian
Although some HDHP insurance companies have a “preferred relationship” with an HSA custodian,
there’s no requirement to choose that custodian
Wider range of investment options and higher interest
rates offered through independent HSA providers
If you change insurance providers, its affiliate HSA
provider will often raise your fees or lower
your interest13
Although large banks are winning HSA market share due to deals with large plan consultants and employers, smaller providers and third-
party administrators may provide the best products and
services for the end user
Source: 13. ehow.com, tips on choosing an HSA provider by Diane Monde Dill, cited in HR Management, July 28, 2009.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 18
In choosing an HSA custodian
Look at the relationship from your employees’ point-of-view
Choose an HSA custodian with a high interest rate
Choose an HSA custodian with a low-fee or no-fee structure
Choose a custodian that provides your employees with easy access to their HSA funds
Choose a custodian with good investment options
Choose a custodian that provides excellent customer service for its HSA
Choose a custodian that works well with its clients
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 19
Employer’s roles and responsibilities
Include your accounting and programming departments for tax purposes and record keeping
Plan to offer HSA contributions? Involve your payroll department or vendor
Make sure the HSA custodian is compatible with your processes and operations
Define which activities are the responsibility of the HSA custodian
You will not be involved with any claim reviews, adjudications or reimbursement checks
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 20
Ensure a Healthy Future with an Alliant HSA
EARN MOREwith one of the industry’s highest dividend rates
24/7Personal and automated member service twenty four hours a day, seven days a week
SAVE MOREwith no fees for account opening, maintenance or transactions
GET MOREwith a Free VISA® HSA Debit Card, Free HSA Checks, and Free online banking
Alliant membership is an exclusive benefit available to employees, retirees and members of qualifying Select Employee Groups, organizations/associations and their family members; and individuals who live or work in qualifying communities and their family members. Applicants must also meet other eligibility requirements for Alliant membership. Please visit www.alliantcreditunion.org for details regarding Alliant membership eligibility.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 21
HSA Investment Option
Experienced advisors with a credit union service
philosophy
Retirement Income Planning, 401k and
Pension Plan Rollovers, IRA Services, College Saving Plans & Wealth
Management
Get the assistance you need, consistent with your risk tolerance,
investment timelines & goals
trustworthy full-service no cost, no obligation
consultations
*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/ SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109. Deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America. FR121002-4F80
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 22
For more information or to download our white paper, Is an HDHP/HSA the right prescription for your company?, visit http://
www.alliantatwork.com/.
Choosing the Right HSA
© 2010 Alliant Credit Union. All rights reserved. 23
This material is prepared for educational purposes only and was developed by Alliant Credit Union. All reasonable efforts were taken to ensure the accuracy of the information provided and to properly attribute sources.
However, consult your plan administrator, tax and legal advisors for advice. Alliant disclaims any liability for your reliance on the information presented.
SEG333-r11/10
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