2016 HSA Plan Presentation Sample

HSA Explained

No one accepts liability for the content of this presentation, or forthe consequences of any actions taken on the basis of theinformation provided or any errors, misstatements, nor does it notconstitute legal or tax advice. Please consult tax accountant forbetter clarification.

Prepared by:Manny Manso, RHU, ChHC, CDHC

Make the right turn today……know where you’re headed tomorrow!

Prepared by: Manny Manso, RHU, ChHC, CDHC

Saving or Spending


Motivators

1 ACCOUNTHOLDERS SHOULD CONSULT A TAX ADVISOR2 INVESTMENTS PRODUCTS ARE NOT FDIC INSURED HAVE NO GUARANTEE AND MAY LOSE VALUE

HSA FUNDS BELONG TO THE PARTICPATING MEMBER

TAX-FREE CONTRIBUTIONS TO YOUR HSA 1

TAX-FREE PAYMENTS FROM YOUR HSA FOR QUALIFIED MEDICAL EXPENSES

TAX-FREE EARNINGS FROM INTEREST AND INVESTMENTS 2 IN YOUR HSA WITH NO CAPITAL GAINS TAX


THE AFFLUENT INDIVIDUAL: (TAX SHELTER)TAX ADVANTAGED SAVINGS UP TO $3,350 INDIVIDUAL OR $6,750FAMILY WITH ADDITIONAL $1,000 FOR ANYONE 55 OR OLDER

THE MIDDLE-INCOME INDIVIDUAL: (SAVINGS VEHICLE)HSA AFFORDS AN OPPORTUNITY TO ACCUMULATE FUNDS FORFUTURE HEALTH-CARE NEEDS

THE LOWER-INCOME INDIVIDUAL: (SPENDING/AFFORDABLE HEALTH CARE)HSA LOWER COST WILL ALLOW CATASTROPHIC COVERAGE TO THOSETHAT HAD OPTED OUT ENTIRELY DUE TO PRICE

THE CHRONICALLY ILLPOST-TAX CO-PAYS FROM RECURRENT DOCTOR VISITS ANDPRESCRIPTIONS MAY EQUAL MUCH MORE THAN A SINGLEDEDUCTIBLE

Member benefits


Simple definition

A HEALTH SAVINGS ACCOUNT (HSA) IS A FUNDING VEHICLE TOACCOMPANY A QUALIFIED HIGH DEDUCTIBLE HEALTH PLAN(QHDHP) THAT MEETS THE STATUTORY IRS REGULATIONS

AN INDIVIDUAL CAN PARTICIPATE IN A QUALIFIED HIGHDEDUCTIBLE HEALTH PLAN (QHDHP), TAKE ADVANTAGE OFTHE LOWER PREMIUMS AND MAY OR MAY NOT OPEN ASEPARATE HEALTH SAVINGS ACCOUNT (HSA)

HIGH DEDUCTIBLE HEALTH PLAN PROVIDES INSURANCE PROTECTION

BANK ACCOUNT PAYS FOR QUALIFIED HEALTHCARE AND OTHER QUALIFIED EXPENSES

By taking controlof your health,you’ll gain peaceof mindWe’ll show youthe way

+


2016 contributions

BOTH SPOUSES OVER AGE 55

ONE PLAN (FAMILY) $1,000 CONTRIBUTION

MAX $7.750

TWO SEPARATE (INDIVIDUAL) $1,000 EACH CONTRIBUTION

MAX $8,750

$1,000 $1,000 $1,000

+or

OTHER THAN SELF-ONLY$6,750

$1,000 CATCH-UP CONTRIBUTIONS FOR MEMBERS AGE 55 AND OVER

SELF- ONLY$3,350


2016 contributions

SELF-ONLY DEDUCTIBLE: $1,300


SELF-ONLY MAXIMUM OUT-OF-POCKET: $6,550

OTHER THAN SELF-ONLY DEDUCTIBLE: $2,600OTHER THAN SELF-ONLY MAXIMUM OUT-OF-POCKET: $13,100

THE FEDERAL DEPARTMENTS OVERSEEING THE AFFORDABLE CARE ACT (ACA)CONFIRMED IN MAY 2015 GUIDANCE THAT, EFFECTIVE FOR PLAN YEARS BEGINNINGIN 2016, NONGRANDFATHERED SELF-FUNDED AND LARGE GROUP HEALTH PLANSMUST APPLY AN EMBEDDED SELF-ONLY OUT-OF-POCKET (OOP) MAXIMUM TO EACHINDIVIDUAL ENROLLED IN FAMILY COVERAGE IF THE PLAN’S FAMILY OOP MAXIMUMEXCEEDS THE ACA’S OOP LIMIT FOR SELF-ONLY COVERAGE ($6,850 FOR 2016).

HSAs and CDHPs in the ACA world

ACA “Affordability Test”HSA best price solution meet9.56% (9.50%) affordability testfor lowest paid employees

ACA “Cadillac Tax” HSAs afford an early opportunityto “wean” employees aboutCDHC programs to avoid thispotential tax in 2018 andescalating premiums

HSA “Damage Control” strategyHSA employer caps on pre-tax contribution allow employee tocontribute remaining funds post-tax and take above-the-linededuction

HSA “Last Resort” solutionEmployer sponsored HSA available without underlying healthplan, while HRAs and FSAs must be tied to employersponsored health coverage

Is the reinsurance protection program keeping premiums

artificially low today?


The advantages of HSAs

MEDICAL EXPENSES FOR YOU, YOUR SPOUSE OR ANY TAX DEPENDED,EVEN IF THEY ARE NOT ON YOUR HEALTH PLAN (AGE LIMITS MAY APPLY)

DENTAL EXPENSES

VISION EXPENSES

COBRA PREMIUMS

HEALTH INSURANCE PREMIUMS – WHILE RECEIVING UNEMPLOYMENTCOMPENSATION

LONG TERM CARE PREMIUMS

MEDICARE PREMIUMS – BUT NOT FOR SUPPLEMENT “MEDIGAP” PLANS

UREIMBURSED FUNDS CAN BE WITHDRAWN TAX-FREE, PENALTY-FREE AT ANY TIME, GREAT FOR RETIREMENT!


Employee tax advantage


Employee tax advantage


Employer tax savings

SOCIAL SECURITY RATE OF 6.2%, PLUS 1.45% FOR MEDICARE FOR ATOTAL OF 7.65%

STATE UNEMPLOYMENT CONTRIBUTIONS VARY BY STATE ANDEMPLOYER CLAIM EXPERIENCE. THE APPROXIMATE AVERAGESTARTING RATE FOR UNEMPLOYMENT CONTRIBUTIONS IS 3%

THE FUTA TAX IS 6% ON THE FIRST $7,000 OF EMPLOYEE PAYROLL. INPRACTICE, THE ACTUAL PERCENTAGE PAID IS USUALLY AROUND 0.80%

WORKERS COMPENSATION INSURANCE RATES VARY BY STATE ANDREGION, AND AFFECTED BY EMPLOYEE CLASS, TYPE OF JOB ANDEMPLOYEE CLAIM EXPERIENCE. THEASSUMED APPROXIMATE AVERAGEINSURANCE RATE FOR WORKERSCOMPENSATION IS 2%

The cost savings example is not tax advice and meant for illustrative purposes only


Employer tax advantages

The cost savings example is not tax advice and meant for illustrative purposes only depending on the state, workers'compensation premiums may be set by size of payroll

PREMIUM CONTRIBUTION CAPPED

HSA CONTRIBUTION UNCAPPED

ADDITIONAL PAYROL SAVINGS


Employer tax advantage


HSA eligibility

AN ELIGIBLE INDIVIDUAL IS DEFINED AS ANY INDIVIDUAL WHO ISCOVERED ONLY BY A HIGH-DEDUCTIBLE HEALTH PLAN (“HDHP”)AS OF THE FIRST DAY OF SUCH MONTH

AN ELIGIBLE INDIVIDUAL IS DEFINED AS ANY INDIVIDUAL WHO ISNOT ALSO COVERED BY ANY OTHER HEALTH PLAN THAT IS NOT AHDHP (WITH CERTAIN EXCEPTIONS FOR PLANS PROVIDINGCERTAIN LIMITED TYPES OF COVERAGE)

AN ELIGIBLE INDIVIDUAL IS DEFINED AS ANY INDIVIDUAL WHO ISNOT ENROLLED IN BENEFITS UNDER MEDICARE

AN ELIGIBLE INDIVIDUAL IS DEFINED AS ANY INDIVIDUAL WHO MAYNOT BE CLAIMED AS A DEPENDENT ON ANOTHER PERSON’S TAXRETURN

NOTE: To be eligible to make or receive HSA contributions for any month, an employee mustmeet all of the requirements, including HDHP coverage as of the first day o the month


HSA eligibility

PARENTS MAY NOT USE MONEY FROM THEIR HEALTHSAVINGS ACCOUNTS FOR THEIR COVERED DEPENDENTS,UNLESS THEIR FEDERAL INCOME TAX RETURNS ALSOLIST THE DEPENDENTS. IF THE ADULT DEPENDENT CHILDCAN’T BE LISTED AS A TAX DEPENDENT, ANY HSADISTRIBUTIONS FOR THE DEPENDENT WOULD BETAXABLE AND SUBJECT TO AN INTERNAL REVENUESERVICE PENALTY. IN THIS SITUATION, THE ADULT CHILDMAY OPEN HIS/HER OWN HEALTH SAVINGS ACCOUNT ANDCONTRIBUTE UP TO THE PLAN’S ALLOWABLE FAMILYMAXIMUM CONTRIBUTION.


THE IRS DEFINES A QUALIFYING CHILD DEPENDENT ASFOLLOWS:

• DAUGHTER, SON, STEPCHILD, SIBLING ORSTEPSIBLING (OR ANY DESCENDANT OF THESE)

• HAS SAME PRINCIPAL PLACE OF ABODE FOR MORETHAN ONE-HALF OF TAXABLE YEAR

• AND NOT YET AGE 19 (NOT YET AGE 24 IF STUDENT)• OR PERMANENTLY AND TOTALLY DISABLED

1

HSA eligibility


2 THE FOLLOWING REQUIREMENTS MUST BESATISFIED IN ORDER FOR A CHILD TO QUALIFY FORTHIS EXTENDED HEALTH COVERAGE IN FLORIDA:

• THE CHILD MUST BE A FLORIDA RESIDENT OR, IF NOT,THE CHILD MUST BE A FULL-TIME OR PART-TIMESTUDENT WHOSE PARENT RESIDES IN FLORIDA

• THE CHILD MUST NOT BE MARRIED• THE CHILD MUST NOT HAVE A DEPENDENT OF HIS OWN• THE CHILD MUST NOT BE COVERED BY ANOTHER

HEALTH PLAN OR POLICY (GROUP OR INDIVIDUAL) ORBY MEDICARE

• IF THE CHILD WAS COVERED UNDER THE PARENT’SHEALTH INSURANCE POLICY AFTER THE END OF THECALENDAR YEAR IN WHICH THE CHILD ATTAINED AGEAT 25, AND THE CHILD’S COVERAGE WASSUBSEQUENTLY TERMINATED, THE CHILD MUST HAVEBEEN CONTINUOUSLY COVERED BY OTHER HEALTH BYOTHER HEALTH INSURANCE WITHOUT A GAP INCOVERAGE OF MORE THAN 63 DAYS IN ORDER TO RE-ENROLL IN THE PARENT’S HEALTH POLICY.

HSA contributions

INDIVIDUALS ENROLLED IN AN EMPLOYER-SPONSORED HSA FUNDTYPICALLY DECIDE HOW MUCH TO CONTRIBUTE DURING THE“OPEN ENROLLMENT PERIOD” EACH YEAR

- CONTRIBUTION CHANGES ARE GENERALLY ALLOWED ANY TIMEBEFORE THE END OF THE CALENDAR YEAR FOR THATPARTICULAR TAX YEAR

- TAX-DEDUCTIBLE LUMP-SUM PAYMENTS ARE ALLOWED AT ANYTIME AFTERWARDS, BUT NO LATER THAN THE FEDERAL INCOMETAX RETURN FILING DEADLINE (DOES NOT INCLUDE TAXEXTENSIONS)

EMPLOYEE, THE EMPLOYEE'S EMPLOYER, FAMILY MEMBERS ORANY OTHER PERSON MAY MAKE CONTRIBUTIONS ON BEHALF OFAN ELIGIBLE INDIVIDUAL

- CONTRIBUTIONS OF STOCK OR PROPERTY ARE NOT ALLOWED


HSA contributions

• LAST MONTH RULE: THE FULL-CONTRIBUTION RULE (ALSO KNOWN AS THE LAST-

MONTH RULE) ALLOWS INDIVIDUALS WHO ARE ELIGIBLE ON THEFIRST DAY OF THE LAST MONTH OF THEIR TAX-PAYING YEAR(DECEMBER 1 FOR MOST TAX-PAYERS)TO BE CONSIDEREDELIGIBLE FOR THE ENTIRE YEAR

INDIVIDUALS CAN CONTRIBUTE UP TO THE FULL YEARLYMAXIMUM FOR SELF OR FAMILY, PLUS CATCH-UPCONTRIBUTIONS MADE BY ELIGIBLE INDIVIDUALS AGE 55 ANDOLDER

THE FULL-CONTRIBUTION RULE APPLIES REGARDLESS OFWHETHER THE INDIVIDUAL WAS ELIGIBLE FOR THE ENTIREYEAR, HAD HDHP COVERAGE FOR THE ENTIRE YEAR, OR HADDISQUALIFYING NON-HDHP COVERAGE FOR PART OF THE YEAR.


HSA contributions

• TESTING PERIOD: IF HSA CONTRIBUTIONS ARE BASED ON THE ENTIRE YEAR UNDER

THE LAST-MONTH RULE, AN INDIVIDUAL MUST REMAIN ELIGIBLEDURING THE TESTING PERIOD

THE TESTING PERIOD BEGINS WITH THE LAST MONTH OF THE TAXYEAR AND ENDS ON THE LAST DAY OF THE 12TH MONTHFOLLOWING THAT MONTH (I.E. DECEMBER 1, THROUGH THEENTIRE ENSUING YEAR)

FAILURE TO REMAIN AN ELIGIBLE INDIVIDUAL DURING THETESTING PERIOD, OTHER THAN BECAUSE OF DEATH ORBECOMING DISABLED, WILL REQUIRE TAX AND PENALTYOBLIGATIONS FOR THE TOTAL HSA CONTRIBUTIONS THAT WOULDNOT HAVE BEEN MADE EXCEPT FOR THE LAST-MONTH RULE


HSA contributions


HSA roll-overs

YOU CAN MAKE ONE TAX-FREE ROLLOVER FROM YOURTRADITONAL IRA TO AN HSA ONLY ONCE IN YOUR LIFETIME

IT'S USUALLY BETTER TO CONTRIBUTE NEW MONEY DIRECTLY TOTHE HSA RATHER THAN ROLLING OVER THE FULL ANNUALMAXIMUM ALLOWABLE TO TAKE ADVANTAGE OF THE FAVORABLETAX TREATMENT

THE AMOUNT IS LIMITED TO THE MAXIMUM HSA CONTRIBUTIONFOR THE YEAR MINUS ANY CONTRIBUTIONS ALREADY MADE FORTHE YEAR

THE AMOUNT TRANSFERRED IS NOT A TAX DEDUCTION, SINCE ATAX DEDUCTION ALREADY TOOK PLACE WHEN THE MONEY WASDEPOSITED IN THE TRADITIONAL IRA


HSA roll-overs

• TESTING PERIOD:

MEMBER MUST CONTINUE TO BE ENROLLED IN AN HSA-ELIGIBLE HIGH-DEDUCTIBLE HEALTH INSURANCE POLICY FOR12 MONTHS AFTER THE TRANSFER

OTHERWISE, THE MONEY TRANSFERRED WILL BE CONSIDERED ATAXABLE WITHDRAWAL FROM THE IRA, EVEN THOUGH ITREMAINS IN THE HSA

TAXES MAY APPLY ON THE TRADITIONAL IRA WITHDRAWALAND MAY HAVE TO PAY A 10% EARLY-WITHDRAWAL PENALTYIF UNDER AGE 59½.


HSA distributions

DISTRIBUTIONS FROM HSAS FOR QUALIFIED MEDICAL EXPENSESARE NOT INCLUDED IN THE INDIVIDUAL’S GROSS INCOME

DISTRIBUTIONS FOR NON-QUALIFIED MEDICAL EXPENSES AREINCLUDED IN THE INDIVIDUAL’S GROSS INCOME AND SUBJECT TOAN ADDITIONAL 20% PENALTY

THE ADDITIONAL TAX DOES NOT APPLY FOR DISTRIBUTIONS MADEAFTER DEATH, DISABILITY, OR WHEN THE INDIVIDUAL ATTAINS THEAGE OF MEDICARE ELIGIBILITY (I.E., AGE 65)

DISTRIBUTIONS FROM HSA TO PAY OR REIMBURSE QUALIFIEDMEDICAL EXPENSES INCURRED IN THE CURRENT YEAR MAY BEDEFERRED TO LATER TAXABLE YEARS, AS LONG AS THOSEEXPENSES ARE SUBSTANTIATED AND WERE INCURRED AFTER THEHSA WAS ESTABLISHED.


HSA distributions

DISTRIBUTIONS FROM AN HSA ACCOUNT TO PAY OR REIMBURSEQUALIFIED MEDICAL EXPENSES INCURRED IN THE CURRENT YEARMAY BE DEFERRED TO LATER TAXABLE YEARS, AS LONG AS THOSEEXPENSES ARE SUBSTANTIATED AND WERE INCURRED AFTER THEHSA WAS ESTABLISHED

USE OF FUNDS FOR UNQUALIFIED MEDICAL EXPENSES WILL BESUBJECT TO A 20% PENALTY PLUS INCOME TAX ON THE AMOUNTWITHDRAWN

IN CERTAIN CASES THE PENALTY DOESN’T APPLY — SUCH ASQUALIFIED EXPENSES, ONCE YOU REACH AGE 65, OR IN CASE OFDEATH OR DISABILITY


Questions


Documents

2016 HSA Plan Presentation Sample