Health Savings Accounts

A tax-favored savings and investment account for your current

and future health care needs

What is an HSA?A health savings account

(HSA) is a tax-exempt savings vehicle used to accumulate

money for eligible health care expenses. Your HSA may be used to pay for health care expenses as they occur, or

the funds may remain in your account until you need them

later in life.

HDHP & HSATo open or contribute to a health savings account (HSA), you must be covered by a qualifying high-deductible health plan (HDHP). The HDHP is a single or family insurance plan which meets certain minimum deductible and maximum out-of-pocket requirements. The deductible must be satisfied before insurance pays any portion; however, preventive care expenses such as routine physicals and various screenings are covered by the HDHP before the deductible is applied.

An HSA may be funded by your contributions, your employer’s contributions or both. Contributions can easily be made by payroll deduction through your employer.

HSA ADVANTAGESHDHPs combined with the tax advantages of HSAs are providing employers and employees with alternatives to the rising costs of health care by:

• Reducing premium cost.

• Paying out-of-pocket costs with pre-tax dollars.

• Investing money for future needs.

Some of the significant advantages of using an HSA include:• Contributions to the HSA and qualified expenses dispersed from

the HSA are not subject to tax.

• Contributions may be invested in a variety of funds, providing excellent long-term growth potential.

• Interest and investment earnings are tax-free.

• Funds roll over from year to year so there is no “use it or lose it.”

• HSAs are individually owned and portable so they are not forfeited when you change employment, you are no longer covered by a HDHP, or you retire.

• Upon death, the HSA becomes the property of a designated beneficiary. A spousal beneficiary receives it as an HSA and any other beneficiary as a taxable event.

• At age 65, or in the event you become disabled, disbursements for non-qualified health care expenses may be made without penalty but will be subject to income tax.

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Saving for now…

“A recent Fidelity Investments study reports that with no access to an

employer-sponsored health care plan, a couple retiring

in 2013 at age 65 needs $220,000 in savings to

fund out-of-pocket medical expenses in retirement.”

Fidelity, May 2013

TAX SAVINGSThe HSA is a savings vehicle which allows you to avoid paying tax on funds set aside for current and future health care expenses. Contributions made via pre-tax payroll deductions are not subject to Federal, State*, Social Security or Medicare tax. Contributions made outside of payroll are exempt from Federal and State* income tax. *State tax applies to HSA contributions and earnings in AL, NJ and CA.

Without HSA With HSAAnnual Wages $40,000 $40,000Expenses Paid by HSA N/A $3,000Taxable Wages $40,000 $37,000Expenses not paid by HSA $3,000 N/ATake Home Pay $27,000 $27,750Savings from HSA N/A $750

Example: An employee makes $40,000 annually and decides to contribute to an HSA. The employee spends $3,000 a year on medical expenses. The HSA contribution is taken out of the employee’s paycheck before taxes are calculated. The savings is $750 per year (may vary by state and income tax bracket). Additionally, any unused money will stay in the account for future health care expenses.

ELIGIBILITYIn addition to having coverage under a qualifying HDHP, to be eligible for an HSA, you cannot receive benefits under Medicare or be claimed as a dependent on any other person’s tax return.

Additionally, the law prohibits you from opening or contributing to an HSA if you are covered by any other health plan that is not an HDHP. However, this provision excludes specific accident, injury, disability, dental, vision and long- term care insurance as well as limited purpose flexible spending accounts (those which only pay for expenses such as vision, dental, and orthodontia).

ENROLLMENTOnce you have determined you are eligible for an HSA, you must take the necessary steps to establish your account and set up your pre-tax payroll deductions, if applicable. Your employer will provide specific directions for this process. When you enroll, an account will be created for you at Alliance Benefit Group North Central States, Inc. (ABGNCS) and with our Trustee partner, as referenced in the terms and conditions of your HSA agreement. You will also be issued two Benny™ Prepaid Visa® Cards for point-of-sale use to pay for approved health care expenses.

HSAs are individually owned and portable. Funds roll over from year to year.

investing for the future

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ACCOUNT ACCESSOnce you are enrolled, you may access your account online at www.abgaccess.com. This one-stop portal provides you with anytime, anywhere access to your HSA, allowing you to:

• Review your HSA balance, update personal information and request disbursements.

• Access your HSA investment portal including fund performance and prospectus information for the available mutual funds.

• Access monthly account summary reports.

• Upload and store itemized receipts for health care expenses to your Expense Tracker.

TO LOGIN FOR THE FIRST TIME Username: Your last name followed by the last four digits of your SSN

Password: The last four digits of your SSN

Example: smith0101/0101

GO MOBILEYou can also manage your HSA on the go! The BeneFIT access™ mobile app allows you to:

• View your account balance, activity and transaction details.

• Submit new items to the Expense Tracker using your device’s camera.

• Easily contact the ABGNCS Customer Service Team.

Download the AppThe BeneFIT access™ mobile application is available for iPhone, iPad, iTouch and Andriod devices. To access this free mobile application:

• Search for “BeneFIT™ access” at the Apple App Store or Google Play, or;

• Download the application directly at www.abgaccess.com. Log into your account and select ‘Download Mobile App’ from the message center.

LOGGING IN

1. Upon successful installation, enter your username and password from the ABGNCS website.

2. Create a 4-digit passcode for future access to the app.

3. Use the mobile app to view your balance and account activity, add receipts to the Expense Tracker or contact customer service.

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CONTRIBUTIONSIf you are eligible for an HSA, you may contribute up to the maximum allowed by law. The maximum contribution amounts based on HDHP coverage are:

2014 2015

Self Only (Single) $ 3,300 $ 3,350Family $ 6,550 $ 6,650

This maximum contribution amount is indexed for inflation and will be adjusted annually. If you change your HDHP coverage from single to family or family to single during the tax year, your maximum HSA contribution must be prorated based on the number of months you had each level of coverage.

If you are 55 or older, you are eligible to make an additional catch-up contribution up to $1,000 per year. The catch-up contribution is only available for the HSA owner. If you are married and you and your spouse both want to take advantage of the catch-up contribution, each of you would need to establish your own HSA.

If you are married and each spouse has single HDHP coverage, you can both contribute the single amount into your own HSA. If at least one spouse has family coverage, the family amount can be split any way you choose between both accounts.

If you begin HDHP coverage mid-year, you may contribute the entire annual maximum contribution allowed. However, you must remain HSA-eligible through the following calendar year in order for the entire contribution to be excluded from taxation.

Example: Employee begins coverage on an HDHP on May 1, 2014. The employee puts the entire annual maximum into his/her HSA. In order for the entire amount to be excluded from taxation, the employee must remain on the HDHP through December 31, 2015. If the employee ceases to be covered by an HDHP sometime in 2015, then one-third of the contribution (January through April) in 2014 is ineligible and would need to be withdrawn and taxed.

INVESTING HSA FUNDSThe money contributed to your HSA will be deposited into an interest-bearing, FDIC insured account. Once your HSA balance exceeds $2,000, you will have the option to invest your money in a variety of mutual funds. You will be required to maintain a minimum $2,000 “threshold” or cash balance in order to invest additional money in the mutual fund options. If you elect to invest in the mutual funds, you will be asked to define your investment threshold. This can be the $2,000 minimum or any greater amount.

Your debit card will always be linked to the balance in your cash account. Keep this in mind when deciding the right threshold amount for your HSA. Remember, you can easily transfer your HSA funds from cash to mutual funds, and vice versa, at any time.

DISTRIBUTIONSYou can take a distribution from your HSA at any time. Distributions for eligible health care expenses are tax-free. If you are disabled or reach age 65, you can receive non-health care distributions without penalty, but such distributions are subject to income tax. You may also use your funds for a spouse or dependent not covered under your HDHP.

ELIGIBLE EXPENSESYour HSA covers a wide variety of

health care expenses as defined by Section 213(d) of the Internal Revenue

Code. These expenses must be necessary for the treatment or alleviation of a specific

injury or illness, including:

• Hospital or clinic services, prescription medications and many other health-related expenses.

• Some services that are not covered by the HDHP and therefore do not accumulate towards your deductible, such as dental, orthodontia or vision expenses.

• Eligible expenses incurred by your spouse and qualified tax dependents, even if they are not covered by your HDHP.

• Premiums for COBRA, Medicare, long-term care insurance (federal limits apply) and health plan coverage you have while receiving unemployment compensation.

Eligible HSA expenses do not include services which have been reimbursed by another source or any expense for which you have claimed a tax deduction.For more information about eligible HSA expenses, consult IRS Publications 502 and 969 at www.irs.gov.

To get money out of your HSA, you may:• Swipe your debit card at places where

you and your family members have health care services.

• Request a distribution payment online. Payment can be sent to you or to the service provider.

• Complete and submit a Distribution Request Form and payment is sent to you by check or direct deposit.

To submit a claim online go to www.abgaccess.com and log into your HSA. Upon signing in, select ‘Make HSA Distribution’ from the main page, complete the fields and click Submit. Distribution Request Forms may be accessed online or by calling customer service at 877-661-4727.

Regardless of the method used to request funds, only the amount in your account is available. This amount may fluctuate due to interest earnings, investment returns or appropriate fees.

Auto-Sweep:If you swipe your debit card for $100 or more, it will trigger an auto-sweep, meaning money is transferred from the mutual fund investments back to your cash account to replenish the available cash balance. The sale from the mutual funds will be pro-rata by fund balance. If the swipe is under $100, the auto-sweep will not happen until additional swipes occur, bringing the cumulative total to $100 or more.

Example: Your cash balance is set to the minimum of $2,000. You swipe your card for $50. Your cash balance will remain at $1,950 until additional swipes happen. Manual disbursement requests cannot exceed the overall balance of your HSA, including cash and mutual fund balance.

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Saving for now…

Saving for now…YOUR RESPONSIBILITIES As the account owner, you are responsible for the following important items pertaining to your HSA:

• Determining that you are eligible to establish and fund an HSA, and that you remain eligible throughout the year.

• Ensuring your contributions do not exceed the annual limit, including the prorated limit if you lose HSA eligibility during the year.

• Maintaining records of all health care documentation.

• Filing Form 8889 with your income taxes.

SAVING RECEIPTSSince the HSA is in an individually owned Trust, it is the account owner’s responsibility to retain records of all health care expenses paid from the account. It is important to retain all receipts and adequate records for expenses paid with HSA funds in the event of an IRS audit, such as:

• Medical plan Explanation of Benefits (EOB)

• Prescription Drug Receipts

• Itemized Provider Statements

Our Expense Tracker assists you with this process by allowing you to securely upload and store your itemized health care documentation on our website. This secure storage solution means no shoebox full of receipts sitting on your shelf! Plus, you are able to flag expenses for reimbursement whenever you choose. Documentation can be added to the Expense Tracker online or via our mobile app.

Additionally, it may be prudent to keep a copy of your HDHP coverage since such coverage is required to open or contribute to an HSA. If HSA funds are used for non-qualified healthcare expenses, income tax and excise tax will apply.

TAX FORMSBecause the HSA is a pre-tax benefit, certain tax forms must be filed each year. HSA owners are responsible for filing IRS Form 8889; the HSA Trustee is responsible for filing IRS Forms 1099-SA and 5498-SA.

IRS Form 8889Any individual who contributed to, or withdrew money from, an HSA during a tax year is required to file Form 8889 with their income tax return. Form 8889 verifies an HSA owner’s eligibility, contributions and disbursements for the given tax year. Form 8889 also calculates the tax deduction for any after-tax contributions made to the HSA during the tax year. This form is filed with Form 1040 and is supported by online tax filing services.

IRS Form 1099-SAThe HSA Trustee will file Form 1099-SA on behalf of any HSA owner who withdrew funds from their HSA during the tax year. This form is filed by January 31st for the preceding tax year and the HSA the owner receives a duplicate copy for their records.

IRS Form 5498-SAThe HSA Trustee will file Form 5498-SA on behalf of all HSA owners who contributed to an HSA and/or maintained an HSA balance during the tax year. This form reports the total contributions made to the HSA, as well as the fair market value of the HSA as of the end of the tax year. Since account owners have until April 15th of the following year to make contributions, the 5498-SA is not filed until May. Account owners receive a duplicate copy for their records.

investing for the future

Alliance Benefit Group North Central States, Inc. (ABGNCS) has been providing employee benefit services for over 30 years. With over 100,000 participant accounts, ABGNCS is a leader in delivering high-quality, high-touch, and high-tech services to its clients.

Alliance Benefit Group North Central States, Inc.201 East Clark StreetP.O. Box 1226Albert Lea, MN 56007-1226(877) 661-4727www.abgncs.com

Examples of eligible medical expenses:

For more information...Visit www.abgaccess.com for additional HSA information and resources, including:

• Access to your personal HSA website portal.

• HSA videos, forms and frequently asked questions.

• Links to other important websites.

Your HSA covers a wide variety of medical expenses.

AcupunctureAlcoholism TreatmentAmbulanceArtificial Limbs/TeethBandagesBirth Control PillsBlood Pressure Monitoring

DevicesBlood Sugar Test KitBody ScanChelation (EDTA) TherapyChiropractorsCircumcisionCopays/DeductiblesContact Lenses/Related

MaterialCounseling (excludes

marriage)CrutchesDental TreatmentDenturesDiabetic SuppliesDiagnostic ServicesDrug TreatmentEgg Donor FeesEye Exams/GlassesFertility TreatmentFlu ShotsGlucose Monitoring

DevicesGuide DogHearing AidsHome CareHormone Replacement

TherapyHospital ServicesImmunizationsInclinatorInsulinLaboratory FeesLaser Eye Surgery

Learning Disability

Medical Records Charge

Medical ServicesNursing ServicesObstetrical ExpensesOcclusal GuardsOperationsOptometristOrgan DonorsOrthodontiaOsteopathOxygenPhysical ExamsPhysical TherapyPrescription DrugsProsthesisPsychiatric CarePsychoanalysisPsychologistReading GlassesScreening TestsSleep Deprivation

TreatmentSmoking Cessation

ProgramsSterilization ProceduresSupplies for Medical

ConditionSurgeryTherapyTransplantsVaccinesVasectomyVision Correction

ProceduresWheelchairX-Ray Fees

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