Health Savings Account Administrator

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Introduction to Health Savings Accounts (HSA)

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TABLE OF CONTENTS

• What are (Health Savings Accounts (HSA)?– Overview– Eligibility– Contributions– “Catch Up” Provision– Medicare– Death of Account Holder

• How do High Deductible Health Plans (HDHP) work?– HDHPs– Savings

• Usage of HSA Funds– Investment Options and Claims

• “Medical IRA”– Use tax free* money to pay for current medical expenses and

save for retirement– Interest and distributions for qualified expenses are tax free*

• Choice & Flexibility– Tax free* money to pay for medical, dental, vision, long term

care, Medicare and COBRA premiums• 2003 Medicare Modernization Act

– Provides for more affordable coverage– Promotes cost conscious

healthcare consumption

*State taxes apply in AL, CA and NJ

WHAT ARE HSAs?

HOW DOES THE BLUESHIELD 2000 PPO WORK?

Pre Annual Deductible

Insured pays 100% of negotiated costs

(Except preventative care and wellness benefits)

100% Coverage*

(70% Out of Network)

100% Coverage*

Annual Deductible &

Out of Pocket Max

In Network

$2,000/$4,000

Out Of Pocket Max**

Out of Network

$4,000/$8,000

Dental, Vision and COBRA, Long term

Care, Medicare Premiums

HSA

Diagram for illustration purposes only. Please see coverage materials for more details.*100% of negotiated rate In-Network. ** Balance billing may apply Out-of-Network.

ADVANTAGES TO EMPLOYERS

• Reduce actual spend and rate of growth for healthcare costs, now and in the future

• Reduce FICA, FUTA match and Workers Comp base

• Help employees fund retiree medical benefits without recording a liability on the employer’s books

• Support employee involvement to abate escalating cost of health care

ADVANTAGES TO EMPLOYEES

• Reduce healthcare premiums today

• Reduce healthcare premium increases in future

• Pay for medical, dental, vision services, alternative medicine, long term care, Medicare and COBRA premiums

• Contributions and earnings grow tax free* and portable

• Accounts can accumulate over time in tax sheltered investments*

*State taxes apply in AL,CA and NJ

ELIGIBILITY

• Account holder must have HSA compatible HDHP coverage

• Account holder cannot have dual (non HSA compatible) health coverage

• Account holder cannot be on Medicare

• Account holder cannot be claimed as a dependent on someone else’s tax return

• Account holder cannot have a general purpose healthcare FSA or HRA

LIMITED PURPOSE HEALTHCARE FSA

• Employees who enroll in the H.S.A. may participate in a Limited Purpose FSA*

• All medical expenses must be paid from HSA until minimum statutory HDHP deductible has been met ($1,200/$2,400 2011)**

• Limited Purpose FSA can pay for dental and vision prior to minimum statutory HDHP deductible

• Medical expenses may be reimbursed from FSA once minimum statutory HDHP deductible has been satisfied using HSA funds***

• Employee can waive FSA benefits if enrolling in HSA

*Employee cannot have a general purpose FSA with an HSA (includes FSA through a spouse’s employer). Limited purpose provision does not apply to dependent care FSA. ** Minimum statutory deductible set by IRS, see FSA plan administrator. *** Assumes post deductible limited purpose healthcare FSA.

HSA CONTRIBUTIONS

• Federal Maximum Limits 2011

– $3,050– $6,150

– No need to pro-rate based on months enrolled– Must be covered for a full year or pay penalties**

*Defined by IRS as anything more than employee only with the exception of domestic partnerships which are not recognized by the Federal Govt. at this time. ** Account holder must stay on HDHP for “testing period” or “recapture rules” and prorating of contributions will apply.

CATCH-UP CONTRIBUTIONS(FOR INDIVIDUALS AGE 55+)

• Pre-tax* “catch up” contributions

– $1,000 in 2011

– Separate account required for spouse to make a

catch up contribution– No need to pro-rate based on months enrolled**

*State taxes apply in AL, CA, NJ and WI. ** As long as insured has HDHP compatible coverage on 12/1 of any given year. Account holder must stay on HDHP for “testing period” or “recapture rules” and prorating of contributions will apply.

CONTRIBUTION TO HSA (Cont.)

• Why Contribute?– Known medical dental or vision expenses– Higher interest rates– Maximize tax deduction– Retirement

• Contributions may be made:– Pre Federal tax via payroll deduction (if allowed by ER*)– Post tax** online (req. account registration)– Post tax** check (req. contribution form avail. online)

*Requires Section 125 Plan **Account holder can make personal deduction off 1040 tax return

EMPLOYER CONTRIBUTION COMPARABILITY RULES

• Must be the same dollar amount or percentage of deductible for “like employees”

• Full/Part time and Union vs. Non Union distinctions allowed

• “Like employees "can be defined as ee, ee+spouse, ee+child(ren) and ee+family

• May be made at any time in any amount

• Higher HSA contributions may be made for non highly compensated employees

MEDICARE

• No further contributions allowed if receiving Medicare A, B,C or D

• Distributions for qualified medical expenses are tax-free

• Distributions for non-qualified expenses are taxed, but are no longer subject to a penalty. Prior to age 65 distributions for non-qualified expenses are subject to a 20% penalty and are taxed.

QUALIFIED EXPENSES

• Medical, Dental and Vision ( account holder and/or spouse and dependents) Sample expenses include:

• Prescription Drugs• Dental (Orthodontics etc.)• Lasik• Doctors Office Visits• Hospital Bills

• COBRA, long term care and Medicare part B & D premiums

• IRS Code Sec 213(d) Publication 502 (www.irs.gov)

TAX TREATMENT OF HSA UPON DEATH OF ACCOUNT HOLDER

• If surviving spouse is beneficiary—HSA continues with spouse

• If non-spouse is beneficiary—Funds in HSA are taxed to beneficiary

• If no designated beneficiary—Funds are taxed to deceased’s estate

INVESTMENT OPTIONS

• Account holder can choose investments

• Strongly recommend keeping annual (OPM) liquid– Accounts kept at Mechanics Bank (FDIC insured to $250,000) – Balances earn market rate interest (effective 2/1/2011)

• >$15,000 = 1.85%• $10,000-$14,999 = 1.25%• $5,000-$9,999 = 1.00%• $501-$4,999 = 0.50%• < $500 = 0.25%

– Additional funds can be used to buy stocks, bonds, mutual funds, CDs

• IRS prohibits funds from being invested in collectibles, premiums (other than COBRA, long term care or Medicare) or pledged as collateral for real estate

ACCESSING FUNDS

• Signature Based MasterCard Debit Card (Optional)– Received 7-10 days after account set up– One card automatically issued if requested– For additional debit cards, please submit a “Request for

Debit Card” form– Works as credit card, but functions as a debit account– “Looks at” retailer codes, IIAS compliant

• Request For Reimbursement– Sterling will pay service provider OR account holder– Disbursement forms available at www.sterlinghsa.com– Ability to make distributions on-line “eChecking”– Ability to schedule deposits on-line

STERLING HSA SERVICES

• Collect contributions from employee and employer

• Automatic review of medical provider bills to verify network discounts

• 24/7 Online access to account information

• English and Spanish website and customer service

• Provide quarterly activity reports

• Scanning and archiving of all paperwork in case of an IRS audit

• Issue 1099SA (disbursements) and 5498SA (contributions)

• Money back guarantee*

*Up to one year of paid maintenance fees

STERLING HSA PRICING

• Set up fee $15 Online/$25.00 Paper One time - Per Account

• Maintenance fee (Per month – Per Account): Two options– $2.50 Value Plan or $8.75 Standard Plan

Core Services Value Plan(A la Carte)

Standard Plan (All inclusive)

Account Management

$2.50 (per month) $8.75 (per month)

Pay Medical Provider

$5 per transaction Included

Debit Card Issuance

$5 (2 cards) Included (2 cards)

Debit Card Usage $1.50 (per transaction)

included

Online Banking Included included

CONTACT INFORMATION

Sterling HSA®475 14th Street, Suite 650Oakland, CA 94612-1928www.sterlinghsa.comCustomer Service Tel. (800) 617-4729 (7am-6pm PST) 

THANK YOU!