Flexible Benefit Service Corporation 888-FLEX1ST HSA 2008 Round-Up Presented by: Mark Lam, CFCI

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HSA 2008 Round-UpHSA 2008 Round-Up

Presented by: Mark Lam, CFCI

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Recent HSA Legislative Changes Tax Relief and Healthcare Act goes into effect Jan 1,

2007 Significantly enhances HSAs

Notice 2007-22 released in February 2007 Short-lived notice for FSA/HRA rollovers to HSAs

Proposed Comparability Regulations released in June 2007 Opens up the nondiscrimination standards for HSAs

New Proposed Cafeteria Plan Regulations released in August 2007 Contains many HSA-related modifications to Cafeteria Plan

rules


Recent HSA Legislative Changes Final Comparability Regulations released in April

2008 No significant changes to proposed regulations

2009 Minimums and Maximums released in May 2008 Adjustments match similar adjustments in past years

Notices 2008-51 and 2008-52 released in June 2008 2008-51 provides details on IRA to HSA transfers 2008-52 provides details on “full contribution” rules

Still to come – the “Grab Bag” of HSA guidance


2008 – A Year of Evolution HSAs are coming into their own

Recent AHIP study shows that over 6.1 million people are covered by an HSA-qualified HDHP

The January 2007 changes and subsequent tweaks are starting to have a significant impact in benefit planning for groups

The final comparability regulations are significantly more open than the original regulations

Much needed guidance has closed up many gaps in the rules

Plan sponsors now have a firm base to build on when implementing HSAs for their groups


2008 HSA/HDHP Limits Minimum Single Deductible: $1,100 Minimum Family Deductible: $2,200

Maximum Single OOP: $5,600 Maximum Family OOP: $11,200

Maximum Single Contribution: $2,900 Maximum Family Contribution: $5,800

Catch-up Contribution: $900


2009 HSA/HDHP Limits Minimum Single Deductible: $1,150 Minimum Family Deductible: $2,300

Maximum Single OOP: $5,800 Maximum Family OOP: $11,600

Maximum Single Contribution: $3,000 Maximum Family Contribution: $5,950

Catch-up Contribution: $1,000


HSA Final Comparability Regulations These regulations deal with employer contributions

to HSAs, a vital ingredient in any successful HSA program

The final regulations allow for three classes of employees:

Part-time Active Full-time Active Former

Within these three classifications, the employer has to treat everyone equally – however, variations in contributions based on tier of coverage elected are allowed


HSA Final Comparability Regulations The rules issued April 2008 also clear up two very

important issues:

What happens if an employee does not open up an HSA as soon as they are eligible?

Can an employer accelerate contributions to an employee?

The comparability regulations require that all employees receive comparable contributions on either a monthly or annual basis…

…but an employee has to open an HSA in order to received contributions – what happens if they don’t?


HSA Final Comparability Regulations If an employee opens an HSA by December 31st of

the year the employer is making contributions, the employer can still meet the Comparability requirements by making a contribution that matches the amount the employee would have received, had they opened the account on time. The contribution must be made by April 15th of the following year.

If an employee does not open an account by December 31, there’s no requirement for the employer to make a contribution


HSA Final Comparability Regulations One common objection to an HSA from employees:

“What if I have a big expense and I don’t have enough money in the account to cover it?”

The new guidance addresses this issue as well, by allowing employers to accelerate contributions to the HSA

The trigger that allows this is if the employee has eligible expenses in excess of the amount the employer has contributed to date

Once the employer does this for one employee, they must have a consistent policy for all employees running into the same situation


HSA Final Comparability Regulations Last word on the Final Comparability Regulations:

If an employer allows employees to salary reduce If an employer allows employees to salary reduce to fund their HSAs through a Cafeteria Plan, to fund their HSAs through a Cafeteria Plan, the Comparability Regulations the Comparability Regulations do not applydo not apply


IRA to HSA Transfers The biggest misconception about this funding

method is that the amount moved from an IRA to an HSA is not a “rollover” – it’s a transfer, and it counts towards the maximum annual contribution

IRA to HSA transfers are allowed from regular and Roth IRAs, not SEP or SIMPLE IRAs

In order to retain the tax-free status of the transfer, the individual making the transfer must remain HSA eligible through the last day of the 12th month following the month of the transfer


New Full Contribution Rules Part of the 2007 guidance eliminated the up-front

pro-ration of contributions previously required – as long as you are eligible by December 1st of the year, you can make a full annual contribution to your HSA for that year

When taking advantage of this rule, you must remain HSA eligible through the testing period – which used to match the IRA -> HSA transfer testing period

Now, in order to retain the tax-free status of the contribution made through this rule, you must remain eligible through December 31st of the following year


What about FSA rollovers to HSAs? One of the most frequent questions we get deal with

rolling unused FSA dollars into an HSA

General requirements to make this happen:

The FSA had to exist on September 21st, 2006, and the employee had to have an available balance on that date

The FSA must have a Grace Period in order to satisfy the requirement that the employee is a participant in the FSA after the end of the FSA Plan Year

The rollover amount is capped by lesser of the 9/21/06 balance, or the balance on the date of the rollover

Implementing the FSA -> HSA rollover takes planning


What about FSA and HSAs in general? Lastly, remember that participation in a normal FSA

makes an employee ineligible to participate in an HSA – even if the employee enrolls in a qualified HDHP

A common mistake is to think that just because the employer is rolling out a qualified HDHP, an employee can drop their FSA election – this is particularly a problem when the health plan year and the FSA plan year are not in sync

Also remember – even if you are not enrolled in an FSA, you can be made ineligible if your spouse is in a normal FSA



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FlexHSA®…the complete HSA

experience

Flexible Benefit Service Flexible Benefit Service CorporationCorporation

888-FLEX1ST • www.flexiblebenefit.com

HSA 2008 RoundupHSA 2008 Roundup

Presented by: Mark Lam, CFCI

Documents

Flexible Benefit Service Corporation 888-FLEX1ST HSA 2008 Round-Up Presented by: Mark Lam, CFCI