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Considering an Considering an HDHP With an HSA?HDHP With an HSA?
2
Part 2: Health Savings Account
Made by: Employer, Employee, and/or other party
Basic HSA Plan Concept
Part 1: High Deductible Health Plan
HSA Concept
Can pay for eligible
expenses not covered by the
health plan
Intended to cover serious
illness or injury
*Contributions do not need to be prorated based on the date coverage began, as long as qualifying coverage is maintained through December 31st of the following year.
For 2008 Single Family
Min. Deductible $1,100 $2,200
Max. Out of Pocket $5,600 $11,200
For 2009 Single Family
Min. Deductible $1,150 $2,300
Max. Out of Pocket $5,800 $11,600
For 2008 Single Family
Max. Contribution
$2,900 $5,800
For 2009 Single Family
Max. Contribution
$3,000 $5,950
3
Why choose an HSA-Compatible health plan?
Premium Savings According to employers surveyed by HSA Bank, over
59% reported saving an average of 10 – 39% Lower future renewal costs
Premium increases in HSA plans averaged under 3% while HMO, PPO and Indemnity plans hovered over 7%. (The Maine View)
Ability to offer health insurance to employees 27% of small group market did not previously offer
insurance coverage to employees (ehealthinsurance)
Employee opportunity to control healthcare spending
Decreased rise of health care costs through lower utilization
4
Advantages of an HSA
For an Employer Tax benefits Employee-owned funds promote increased
motivation for involvement in healthcare decisions resulting in: Healthcare dollars being spent more wisely Employees ‘shopping around’ for healthcare based on
quality of care and price HSAs allow “matching” contribution options by
employers and employees through a cafeteria plan
5
Advantages of an HSA
For an Employee Funds roll over year to year
No need to “use it or lose it” Tax benefits on the contributions, earnings,
and distributions Potential for increased take-home pay
Long-term investment opportunity
6
Additional HSA Funding Options…
IRA funds may be rolled to an HSA on a one-time basis Subject to the annual HSA contribution maximum Only traditional IRAs qualify at this time Individuals must remain covered by a qualifying HDHP until the last
day of the 12th month following the month of rollover to avoid tax penalties
HRA and Health FSA may be rolled to an HSA Employers must amend their plan documents to allow this Rollovers must be made directly from the employer to the
custodian/trustee The IRS can help you determine if this is a possibility
*Always consult a qualified tax advisor, and/or the IRS for details and reporting requirements in regard to taxation, fund rollovers and other
stipulations.
Designing Designing Your HSA Your HSA OfferingOffering
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HSAs, HRAs, FSAs
HSA HRA FSAAccount owner
Employee Employer Employee
FundingEmployee, Employer,
OtherEmployer
Employee,Possible
Employer
Roll over year-to-year
YesGenerally
NoNo
Portable YesGenerally
NoNo
9
How HSAs & FSAs Can Work Together
Limited Purpose FSA (can have with an HSA) Pay for dental and vision expenses without having to use HSA funds
Health FSA (cannot normally have at the same time as an HSA)
Extension provides 2.5 months beyond the end of the plan year to use FSA funds
Recent legislation allows employees to contribute to HSAs during the extension if their FSA balance is zero during that time or the total FSA balance is transferred to an HSA.
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Jan. – Dec. Plan March 15th extension
May –April Plan July 15 extension
$0 bal. May 1-July 15
$0 bal. Jan. 1-March 15
$5 bal. Feb. 6th, $0 bal. Feb 7th
$32 bal. May 2nd
Eligible to contribute to HSA NOT Eligible to contribute to HSA
Example of when HSA contributions can be made if an individual still has a Health FSA. This assumes that the FSA plan is not renewed after the extension.
Plan Year
10
How HSAs & HRAs Can Work Together
Three types of HRAs you can have with an HSAPost deductible HRA—pays for out-of-pocket
expenses after the HDHP deductible has been met
Retirement HRA—Designated for medical expenses after retirement
Suspended HRA—Cannot make contributions or take distributions from the HRA while contributing to the HSA
11
Design Makes a Difference
Business Relations Can Provide Customized HSA Design Ideas Things to consider
How many employees will be offered an HSA-compatible health plan?
How many health plan options are being offered?
What are your objectives for offering the HSA plan?
What is your goal for % enrolled?
12
Plan Design Stats
A 2006 survey of nearly 200 agents and employers regarding plan design indicates thatMore than 83% of employers contribute to their
employees’ HSAsOf those employers, 78% contributed at least 20%
of the deductible in the 1st yearOf those employers, 71% contributed at least 20%
of the deductible beyond the 1st yearNearly 72% of employers pay the set-up feesNearly 25% of employers pay the monthly fees
Employee Employee CommunicatioCommunicatio
nn
14
Benefits of Communication & Education
HSA plan selection--Based on an HSA Bank survey, when an employer spent at least 90 minutes explaining the HSA concept, the number of employees that selected an HSA plan grew by more than 21% Financial gain
Immediate: communication/education leads to employee HDHP acceptance, which will decrease premium costs (supply and demand)
Long-term: Employees are in control of healthcare spending and thus utilization decreases
Consumers paid an average of $348 less in 2005 for HSA-eligible health insurance plans compared to 2004 (ehealthinsurance – July 27,2005)
Overcoming the stigma of an HDHP Pre-enrollment and ongoing communication/education
enables employees to see beyond a higher deductible to the benefits an HSA plan has to offer
15
Employee Communication Tips
Begin education early Combine multiple forms of communication: printed, web,
multi-media, in-person Emphasize the benefits of choice and empowerment
HSAs require employees to approach their healthcare in a new way, which puts them in control of their healthcare dollars
Employees need to: Ask about price Ask if procedures are necessary Discuss with their physician if alternatives exist
Compare current plan design with HSA-compatible plan design
Illustrate the tax benefits and long-term savings potential Involve spouses in the communication process
16
4. OngoingMonthly Employee Communications
2. Pre-enrollmentFact Sheet Brochure
Web Tools Including CalculatorsPowerPoint and Macromedia®
flash presentations
Employer Communication Kit
HSA Bank offers a comprehensive communication kit, which guides employers through the stages of their HSA program and provides important educational materials:
1. ImplementationEmployer Welcome Kit
3. EnrollmentEnrollment Instructions
Outline of what employees will receiveSample Emails
Sample Employee Welcome Kit
17
Are HSAs changing spending behavior?
Increased Consumerism in Healthcare (Research results from McKinsey & Co., June 2005)
Consumer-directed health plan holders were more value conscious and attentive to wellness & prevention and therefore:
50% more likely to ask about costs30% more likely to get an annual exam25% more likely to engage in healthy behaviors20% more likely to comply with treatment
regimens300% more likely to choose less expensive
options
18
Based on HSA Bank’s customer base of over 186,000 accounts as of December 31, 2007 96.5% of all open accounts rolled over funds from 2007 to
2008 On average, accounts rolled $2163 into 2008 Average contribution per month = $214 Average distribution per month = $173 Average monthly savings = $41 Nearly 18% of accountholders saved all contributed funds
and rolled over an average balance of $4013 into 2008. More than a third of accountholders saved at least 50% of
their 2007 contributions.
Account Trends
Tax BenefitsTax Benefits
20
Tax Treatment and Advantages for an Employer
Treated as employer-provided coverage for medical expenses under an accident or health plan
Excludable from gross incomeNot subject to withholding for income taxNot subject to other employment taxes
(i.e., Social Security and Medicare taxes (FICA), federal unemployment tax (FUTA), or the Railroad Retirement Tax Act)
21
Tax Treatment and Advantages for Employees/Accountholders
Contributions are either pre-tax through a cafeteria plan or tax-deductible
Earnings HSAs grow in the same tax-deferred manner as
IRAs Interest and investment income are also tax-free or
tax deferred Distributions
Withdrawals for qualified medical expenses are always tax-free. After age 65, funds may be withdrawn for any reason without penalty, subject to regular income tax.
How to Get StartedHow to Get Started
23
Enrollment Options
Group Online Enrollment (generally most efficient method regardless of size) Employer initiates enrollment via our group set-up site
Choose type of approval Choose how fees will be paid
Employee Completes information on customized enrollment site
Electronic Enrollment Originated From Paper (typically used by larger groups when group online enrollment is not chosen) Employee completes paper application Employer creates electronic data files and images of the
paper applications Individual Online Enrollment (used when the employee pays the fees)
Employee completes information on individual online enrollment site
Paper Applications Employee fills out paper application and sends to HSA Bank
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How are Fees collected
If Employers are paying: The employer can pay fees up front for the
remainder of calendar or plan year Employer can be invoiced Per employee pricing available on a monthly or
quarterly basis
If Employees/Accountholders are paying: Set-up fees are paid with the submission of the
application Monthly fees will be deducted from the account
25
Coordinating HSA Contributions
EMPLOYERCONTRIBUTIONS
HSA Contribution
LimitsUp to the IRS determined
maximums
2008:
$2,900 single$5,800 family
2008:$3,000 single$5,950 family
≤INDIVIDUAL / EMPLOYEE
CONTRIBUTIONS
Since both employees and employers can make contributions, it is important to coordinate in order to avoid excess contributions and tax penalties. The maximum can be contributed through a combination of sources or a single source as long as the annual limit is not exceeded.
IRA Transfers
*If an individual has HSA accounts with different administrators, all contributions count toward the annual contribution maximum.
26
Employer Contributions
Online (ACH Pull) Convenient in-house system in Employer Login area Provided list of all employees tied to Federal ID # Columns after each name for ER, EE, EX allows for simple
designation of employer, employee and employee pre-tax contribution amounts
ACH Direct Employer sends ACH direct to employee’s accounts Utilize discretionary data field in ACH file to code contribution sources
Company ACH or Wire Transfer + File Company sends one ACH or Wire Transfer + File The transaction file dictates how the money is distributed to each
account
Submit a Check With Contribution Form
27
Employer’s Comparable Contributions
Comparability testing period based on a calendar year and determined on a monthly basis. Testing based on contributions to employees covered under the employer’s HDHP. There is a 35% penalty for failing to meet comparable contribution requirements. Note: The employer must make comparable contributions
for all employees with HDHPs who open HSAs under the employer’s plan. Contact the IRS to determine the requirements for employees who have an HSA-Compatible health plan but have not opened an HSA by December 31st.
28
Exceptions to the Comparability Rule
Exceptions Due to new legislation, employers may contribute
more for employees who are non-highly-compensated employees (non-HCEs) as long as contributions compare within employment categories. Non-HCEs are defined under Internal Revenue Code §414 (q)
Comparability rules do not apply to employer contributions made through a Section 125 Cafeteria Plan.
Employers may make matching contributions through a Section 125 Cafeteria Plan (Non-Discrimination rules apply)
29
Comparable Contributions Example
Family
Single / Full-Time
Self + One / Full-Time
Self + Two / Full-Time
Self + Three / Full-Time
HCENon-HCE HCE
Non-HCE HCE
Non-HCE HCE
Non-HCE
Deductible
$1200 $1200 $2500
$2500
$2500
$2500 $2500 $2500
Same Dollar $100 $200 $150 $250 $175 $275 $200 $300
% ofDeductibl
e50%$600
75%$900
25%$625
30%$750
50%$125
0
60%$150
075%
$187580%
$2000
*Employer may contribute up to the maximum amount as determined by the IRS. For 2008: $2900 for individual coverage and $5800 for family coverage For 2009: $3000 for individual and $5950 for family.
**Apply the same concept for part-time employees within each category
30
Employee Contributions
Online Contributions (through Internet Banking)Recurring or one-time, as needed
CheckWith Contribution Form tear-off (on each
statement or downloaded from website) With Deposit Ticket
31
Savings Account Option
Interest bearing “bank” accountAccounts are opened as an FDIC-insured
bank account through Webster Bank, N.A.Current interest rate and annual percentage
yield information is available on our website, www.hsabank.com or by calling 800-357-6246.
Interest rates are subject to change. Fees may reduce earnings.
32
Self-Directed Investment Option
TD Ameritrade Corporate ServicesAccess to stocks, bonds and over 11,000
mutual fundsTrades are made online or over the
phoneTransfer funds from your HSA to your
investment account:Online through Internet BankingBy calling the Client Assistance Center
HSA Bank does not charge a fee; however, trading fees may apply
33
Mutual Fund Selection
Devenir Investment AdvisorsSelection Options
Employer can choose to offer our standard selection of historically top-performing mutual funds
For an additional fee, employers can choose to select mutual funds similar to their 401(k) offering
Trades are completed online through HSA Bank’s Internet Banking system
HSA Bank does not charge a fee. An annual fee of $24 is charged by the Mutual Fund Selection vendor; however, no trading fees apply
34
Methods of Distribution
Debit Card from Visa POS with signature
(no transaction fee)ATM with PIN ($2 fee)POS with PIN ($2 fee)
Checks, $7.95 for 50 + 10 deposit tickets (no transaction fee)
Withdrawal Forms ($10 fee)
35
Communication & Reporting
Accountholder Account statements IRS reporting Email confirmation of account opening and
ongoing activity
Employer Email confirmation of deposits Employer newsletter Email updates on consumer-driven health
care and HSA account features Aggregate reporting available upon request
36
Calculation Tools
Is an HSA Right for Me Compares a traditional health plan with an HSA-compatible
plan to determine potential savings http://www.hsabank.com/calculators/decision_tool.aspx
Future Value Calculator Calculates tax savings on contributions and tax-deferred
growth as well as the future value of your Health Savings Account http://www.hsabank.com/calculators/future_value.aspx
37
www.hsabank.com
HSA Bank has created a website to serve the specific needs of and provide relevant information to: Prospective accountholders
Calculation Tools HSA Information Enrollment
Accountholders Internet Banking Self Service (forms, check/debit card orders, secure contact form)
Employers Employer Administration Area Group Online Enrollment Group Online Contributions Communication Kit
38
Employer Login Area
Online access for employers to:View and manage their list of employees with
HSAsUpload contribution data and census filesSign-up for updatesSign-up for Group Online EnrollmentMake online contributions to employee HSAs
(separate sign-up required)
Download the communication kit
39
Application materialsBrochure InsertsWelcome letterCustom toll-free number
Customization Options
40
Expertise & Commitment
Industry leadershipHave over $500 million in FDIC insured
deposits and over $65 million additional dollars in non-FDIC insured investment accounts
Administer more than 210,000 accounts in all 50 states
41
Experience
Ten years in the HSA-industry Began with Medical Savings Accounts in
1997 Continued with HSAs in 2004
Maintain relationships with over 300 health plans/TPAs
Work with more than 15,000 employer groups
42
Service & Support
Business Relations Department: Exclusively assists our employer, agent, broker, broker/dealer, health plan & TPA clients. (866) 357-5232 Monday-Friday 7 a.m. – 7 p.m. CST
Regional Vice President & Assistant Vice President: Provide local assistance for our employer, agent, broker, broker/dealer, health plan & TPA clients.
Client Assistance Center:Provides dedicated customer service to individual and prospective accountholders.
Spanish Language Support:Our Client Assistance Center and Business Relations teams provide Spanish language support for employer relationships, accountholders and prospective accountholders.
Experience:Our Business Relations Coordinators and Client Assistance Center receive the most comprehensive and up-to-date HSA training in the industry. Our representatives have a strong customer service background and many have worked in finance, insurance, and benefits administration.
Thank you for considering…
*Investment products are not FDIC insured, are not a deposit or other obligation of or guaranteed by the bank, and are subject to investment risks including possible loss of the principal amount invested.
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