HSAs: What’s New? Eric Johnson Regional Sales Manager, First Horizon Msaver 817-366-7536 cell | [email protected]

HSAs: What’s New?

Eric JohnsonRegional Sales Manager, First Horizon Msaver

817-366-7536 cell | [email protected]

HOUSEKEEPING

This course is approved for one hour of continuing education credit by the

Texas Department of Insurance.

Course Name: HSAs: What’s New?

Course Number: 22457

Provider Name: First Horizon Msaver

Provider Number:

Instructor: Eric Johnson

Please be sure to sign in & out and include your email address. You must attend the entire session to receive CE credit.

About Me…

The Art & Science of HSAs | Copyright 2010 Eric Johnson

Regional Sales Manager

HSA AdministratorMy Sales Territory

Do you sell HSAs?


High Deductible Health Plan

Health Savings Account

HumanaOne

Health Plan + Savings Account


Lots of Experience

We’ve been around since the MSA days


Based in Tennessee… and Kansas

First Horizon National Corporation

First Horizon Msaver


Operate Nationwide


Time for a Change


Compound Interest

“The most powerful force in the universe is compound interest.”

-Albert Einstein


Earn Interest

Let it Ride

• $100 x 1.1 = $110 (interest income $10)






Compound Interest:

Good for Investments

Bad for Premiums


Up, Up, and Away

At an average rate increase of just 10% per year, here’s an 8 year projection of a $350 monthly premium.

$350 $385 $424 $466 $512 $564 $620 $682 $750


Where’s Your Breaking Point?

Will this year’s rate increase be

the straw that breaks the

camel’s back?


Health Insurance is Expensive…

…because HEALTH CARE is Expensive

any reform must reduce these long-term costs


Our Solution: Consumerism


There Are Options

• While changes are necessary, you do have options – available today – to lower the amount you’re paying for health insurance.


a)To pay for low cost, common, predictable expenses

Why Do We Buy Insurance?

b) To pay for high cost, infrequent, unpredictable, catastrophic expenses


Other Types of Insurance:



Answer


For Example

Insurance

Budget


http://www.shortterminsurancebrokers.co.za/UserFiles/Image/stolen%20car.jpg

Traditional Health Plans:



c) All of the AboveAnswer


FULL Coverage

Deductible / Coinsurance

Copayments


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The ResultHigh

Fixed Premium

Ignorance, Apathy,and Overutilization

No Refundsfor Unused Services


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A New ApproachBUY INSURANCEfor the Big Stuff

BUDGETfor the Rest


http://images.google.com/imgres?imgurl=http://2.bp.blogspot.com/_5IhZGrFdxuM/SBUCkw-HONI/AAAAAAAAAw4/OMDD6j6H3oc/s400/EmergencySign.jpg&imgrefurl=http://www.pearlseventsblog.com/2008/04/image-source-while-planning-your.html&usg=__BzRo29bKqHtgO6eRvTh6KHNgvjU=&h=400&w=340&sz=30&hl=en&start=1&tbnid=l7xnQ-ppgn2Z6M:&tbnh=124&tbnw=105&prev=/images%3Fq%3Demergency%2Bsign%26gbv%3D2%26hl%3Den

The ResultLower

Fixed PremiumKeep

the Change

More Educated,Engaged Consumers


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http://images.google.com/imgres?imgurl=http://www.wired.com/images_blogs/photos/uncategorized/2008/05/16/diplomacake.jpg&imgrefurl=http://www.wired.com/wiredscience/tag/education/page/2/&usg=__ss34vk_ODxM61rStkd7Ji_f2maQ=&h=401&w=800&sz=80&hl=en&start=37&tbnid=xUia2mhsP2kJlM:&tbnh=72&tbnw=143&prev=/images%3Fq%3Deducated%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN%26start%3D20


Health Plan

Savings Account

(Fixed Premium) (Variable Cost)




(Fixed Premium) (Variable Cost)






Minimum deductible of $1,200 individual / $2,400 family




Maximum OOP of $5,950 individual / $11,900 family





No copays before the deductible





No copays before the deductible

Up-front coverage for preventive care is allowed





Pre-tax contributions for health care expenses




Up to $3,050/yr individual, $6,150/yr family (+$1,000 55+)





Contributions by employer or employee






Individually owned accounts, no employer responsibility






Individually owned accounts, no employer responsibility

Unused funds roll over year to year


Art or Science?


When you lead with science…


Step 1: Get their attention


Art or Science?


Do the Math!


Battle of the Century

$3k deductible 100% Copay Plan

$3k deductible 100% HDHP


Plan Design – No Copays

$3,000 Deductible

100% coverage after deductible

Dr: $30

Rx: $10 / $40 / $60

COPAY



$3,000 Deductible


Dr: Negotiated rate / deduct.

Rx: Negotiated rate / deduct.

HDHP


$3,000 Deductible


Dr: $30

Rx: $10 / $40 / $60

COPAY


$3,000 Deductible


Dr: $30

Rx: $10 / $40 / $60

Monthly: $347

Yearly: $4,164

$3,000 Deductible




Monthly: $297

Yearly: $3,564

COPAY HDHP


Premium Savings – Put in HSA

$3,000 Deductible


Dr: $30

Rx: $10 / $40 / $60

Monthly: $347

Yearly: $4,164

$3,000 Deductible




Monthly: $297

Yearly: $3,564

COPAY HDHP

$600/year


What’s the Risk?

$3,000 Deductible

Doctor copays

Prescription copays

(all paid with after tax dollars)

COPAY


What’s the Risk?

$3,000 Deductible

Doctor copays

Prescription copays

(all paid with after tax dollars)

$3,000 Deductible

$600 deposited in HSA

$2,400 Total Risk

(all paid with pre-tax dollars)

COPAY HDHP


Example 1

Low Utilizer


Low Utilizer

Annual physical: $0

No other doctor visits or prescriptions

No refund from insurance company

COPAY


Low Utilizer

Annual physical: $0


$600 in HSA to use for dental, vision, or future

medical expenses

HDHP


Annual physical: $0


No refund from insurance company

COPAY

Qualified Medical Expenses


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http://images.google.com/imgres?imgurl=http://www.miraclemateusa.com/Images/Cobra-Insurance.jpg&imgrefurl=http://www.miraclemateusa.com/Vacuum-Cleaner-Links.htm&usg=__CEpcw3RGy9M1QJngc5s8p7uSNXY=&h=71&w=175&sz=12&hl=en&start=5&tbnid=92g1RJj8KcxyHM:&tbnh=41&tbnw=100&prev=/images%3Fq%3Dcobra%2Binsurance%26gbv%3D2%26hl%3Den

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Great R.O.I. for Employers

Employers will get their money’s worth

Low Utilizers will appreciate their benefits

Employees will be happier


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The Winner and New Champion

HSA

COPAY

HSA


Example 2

Medium Utilizer


Medium Utilizer

Annual physical: $0 Annual physical: $0

COPAY HDHP


Medium Utilizer

Annual physical: $0

2 sick visits: $60

COPAY


Medium Utilizer

Annual physical: $0

2 sick visits: ???

HDHP


Annual physical: $0

2 sick visits: $60

COPAY

Price Transparency Tools

Office Visit, Established Patient, Level 2Minor problem requiring a limited exam and treatment – approximately 10 minutes with the doctor

$70

Office Visit, Established Patient, Level 3Moderate problem requiring counseling and treatment, may require coordination of care with other providers – approximately 15 minutes with the doctor

$114The Art & Science of HSAs | Copyright 2010 Eric Johnson

Medium Utilizer

Annual physical: $0

2 sick visits: $60

Annual physical: $0

COPAY HDHP

2 sick visits: $228


Medium Utilizer

Annual physical: $0

2 sick visits: $60

Lipitor ($60) $720

Atenolol ($5) $60

Synthroid ($10) $120

COPAY


Medium Utilizer

Annual physical: $0

2 sick visits: $228

Lipitor ($85) ?

Atenolol ($5) ?

Synthroid ($13) ?

HDHP


Annual physical: $0

2 sick visits: $60

Lipitor ($60) $720

Atenolol ($5) $60


COPAY

Price Transparency Tools


Medium Utilizer

Annual physical: $0

2 sick visits: $60

Lipitor ($60) $720

Atenolol ($5) $60


Annual physical: $0

2 sick visits: $228

Lipitor ($85) $1020

Atenolol ($5) $60


COPAY HDHP


Medium Utilizer

Annual physical: $0

2 sick visits: $60

Lipitor ($60) $720

Atenolol ($5) $60


Total (after tax) $960

Annual physical: $0

2 sick visits: $228

Lipitor ($85) $1020

Atenolol ($5) $60


Total (pre-tax) $1,464

COPAY HDHP


Medium Utilizer

Total: $960


Total: $1,464

minus HSA $600

COPAY HDHP


Medium Utilizer

Total: $960


Total: $1,464

minus HSA $600

New Total $864

COPAY HDHP


Medium Utilizer

Total: $960


Total: $1,464

minus HSA $600

New Total $864

minus Tax Savings $156

COPAY HDHP


Medium Utilizer

Total: $960


Total: $1,464

minus HSA $600

New Total $864



COPAY HDHP


Medium Utilizer

Total: $960


Total: $1,464

minus HSA $600

New Total $864



Savings: $252

COPAY HDHP


Medium Utilizer

Total: $960


Remaining Risk: $3000 + copays

Total: $1,464

minus HSA $600

New Total $864



Savings: $252

Remaining Risk: $1,536

COPAY HDHP


The Winner and Still Champion

HSA

COPAY

HSA


Example 3

High Utilizer


High Utilizer

Annual physical: $0

COPAY


High Utilizer

Annual physical: $0

4 sick visits: $120

COPAY


High Utilizer

Annual physical: $0

4 sick visits: $120

1 Generic ($10) $120

1 Brand ($40) $480

1 Non-Form. ($60) $720

COPAY


High Utilizer

Annual physical: $0

4 sick visits: $120

1 Generic ($10) $120

1 Brand ($40) $480

1 Non-Form. ($60) $720

1 Hospital Visit $3000

COPAY


High Utilizer

Annual physical: $0

4 sick visits: $120

1 Generic ($10) $120

1 Brand ($40) $480

1 Non-Form. ($60) $720


Total: $4440

COPAY


High Utilizer

Annual physical: $0

4 sick visits: $120

1 Generic ($10) $120

1 Brand ($40) $480

1 Non-Form. ($60) $720


Total: $4440

Deductible: $3000

COPAY HDHP


High Utilizer

Total $4440


Deductible $3000

minus HSA $600

COPAY HDHP


High Utilizer

Total $4440


Deductible $3000

minus HSA $600

New Total $2400

COPAY HDHP


High Utilizer

Total $4440


Deductible $3000

minus HSA $600

minus tax savings $432

COPAY HDHP


High Utilizer

Total $4440


Deductible $3000

minus HSA $600



COPAY HDHP


High Utilizer

Total $4440


Remaining Risk Copays

Deductible $3000

minus HSA $600



COPAY HDHP


High Utilizer

Annual physical: $0

6 sick visits: $180

2 Generic ($10) $240

2 Brand ($40) $960

2 Non-Form. ($60) $1440


Total: $5820

COPAY


High Utilizer

Total $4440


Remaining Risk Copays

Deductible $3000

minus HSA $600



Remaining Risk $0

COPAY HDHP


Knockout!


The Undisputed Champion

HSA

COPAY

HSA


This is the money you could be saving by switching to an HSA


Dual Option

Choice is an important part of consumerism

At renewal, employees will do the selling


Coinsurance Plans

making a comeback?

100% Plans (no coinsurance after deductible) are a no-no.They encourage over-utilization, not consumerism.

When possible, use coinsurance to keep the consumer’s money involved in higher-dollar claims.


But What About the Copays?

When the consumer has a problem, the market delivers a solution.

Removing the copays creates a problem for the consumer.


ER Alternatives

• Extended Hours

• Online Check-in

• More convenient and less expensive than an emergency room

Urgent Care Centers


DR Alternatives

Retail Clinics


DR Alternatives

Retail Clinics

Phone-Based Physicians


Lab Alternatives

Retail Labs


Lab Alternatives

Retail Labs

Diagnostic Testing Websites


Rx Alternatives

Discount Generic Drugs


Rx Alternatives

Discount Generic Drugs

Free Samples


Consumerism it’s about more than plan design

Education &Communication

Wellness Transparency

Account

Plan Design

Consumerism


Benefits Communication


Stay Smart Stay Healthy

www.staysmartstayhealthy.com


Storyworks Media

www.storyworksmedia.com


Family Health Budget

www.familyhealthbudget.com


The Science of HSAs


Your HSA Administrator


“But I just use the local bank”


Why?

Do you really have a relationship with the local bank?

Does the local bank offer expertise in HSA administration? Can they answer your HSA questions?

How far does loyalty go?


An Important Decision

Selecting an HSA administrator is just as important as choosing an insurance carrier. If your employees don’t have a good experience, they’ll blame you.

Don’t let the HSA administrator you recommend be “the weakest link.”


10 Minute Break

Department of Treasury

www.treas.gov/offices/public-affairs/hsa/

• “All About HSAs” booklet• HSA Basics Tri-Fold• Frequently Asked Questions

HSA s: Frequently Asked Questions | Copyright 2010 Eric Johnson

Frequently Asked Questions

www.treas.gov/offices/public-affairs/hsa/faq.shtml

(The remaining slides all come from the above link.)


The Basics of HSAsWhat is a Health Savings Account (“HSA”)?

A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.


The Basics of HSAsWhat Is a “High Deductible Health Plan” (HDHP)?

You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover.

For 2009, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,150 (self-only coverage) or $2,300 (family coverage). The annual out-of-pocket (including deductibles and co-pays) for 2009 cannot exceed $5,800 (self-only coverage) or $11,600 (family coverage). HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and copays & coinsurance) for non-network services.


The Basics of HSAsHow can I get a Health Savings Account?

Consumers can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. Your employer may also set up a plan for employees as well.


The Basics of HSAsHow much does an HSA cost?

An HSA is not something you purchase; it’s a savings account into which you can deposit money on a tax-preferred basis. The only product you purchase with an HSA is a High Deductible Health Plan, an inexpensive plan that will cover you should your medical expenses exceed the funds you have in your HSA. However, HSA trustees often will charge fees for their services.


Who Can Have an HSA?Who is eligible for a Health Savings Account?

To be eligible for a Health Savings Account, an individual must be covered by a HSA qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance” and will not jeopardize your eligibility for an HSA.


Who Can Have an HSA?Can I get an HSA even if I have other insurance that pays medical bills?

You are only allowed to have automobile, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.


Who Can Have an HSA?Does the HDHP policy have to be in my name to open an HSA?

No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse’s name.


Who Can Have an HSA?I don’t have health insurance, can I get an HSA?

You cannot establish and contribute to an HSA unless you have coverage under a HDHP.


Who Can Have an HSA?I’m on Medicare, can I have an HSA?

You are not eligible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare.


Who Can Have an HSA?I am a Veteran, can I have an HSA?

If you have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last three months, you are not eligible for an HSA.


Who Can Have an HSA?I’m active-duty military and have Tricare coverage, can I have an HSA?

At this time, Tricare does not offer an HDHP options so you are not eligible for an HSA.


Who Can Have an HSA?My employer offers an FSA, can I have both an FSA and an HSA?

You can have both types of accounts, but only under certain circumstances. General Flexible Spending Arrangements (FSAs) will probably make you ineligible for an HSA. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the plan deductible is met) FSA, then you can still be eligible for an HSA.


Who Can Have an HSA?My employer offers an HRA, can I have both an HRA and an HSA?

You can have both types of accounts, but only under certain circumstances. General Health Reimbursement Arrangements (HRAs) will probably make you ineligible for an HSA. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the plan deductible is met) HRA, then you can still be eligible for an HSA. If your employer contributes to an HRA that can only be used when you retire, you can still be eligible for an HSA.


Who Can Have an HSA?My spouse has an FSA or HRA through their employer, can I have HSA?

You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met.


Who Can Have an HSA?I don’t have a job, can I have an HSA?

Yes, if you have coverage under an HDHP. You do not have to have earned income from employment – in other words, the money can be from your own personal savings, income from dividends, unemployment or welfare benefits, etc.


Who Can Have an HSA?Does my income affect whether I can have an HSA?

There are no income limits that affect HSA eligibility. However, if you do not file a federal income tax return, you may not receive all the tax benefits HSAs offer.


Who Can Have an HSA?Can I start an HSA for my child?

No, you cannot establish separate accounts for your dependent children, includingchildren who can legally be claimed as a dependent on your tax return.


Who Can Have an HSA?I’m a single parent with HDHP coverage but have child/relative that can be claimed as a dependent for tax purposes, and this dependent also has non-HDHP coverage. Am I still eligible for an HSA?

Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP.


Who Can Have an HSA?What do I have to do to “establish” my account?

Your account trustee/custodian will determine what you need to do, which may include completing and processing appropriate paperwork, and making a minimum deposit.


Who Can Have an HSA?Who can help me establish my account?

Insured banks and credit unions are automatically qualified to handle HSAs. Any bank, credit union or any other entity that currently meets the IRS standards for being a trustee or custodian for an IRA or Archer Medical Savings Account (MSA) can be an HSA trustee or custodian. The law also allows insurance companies to be HSA trustees or custodians.


Who Can Have an HSA?My bank/credit union doesn’t offer HSAs, can I be my own trustee or custodian?

No, you must establish your HSA with an approved institution.


Setting Up Your HSAWhat is the difference between an HSA “custodian” and an HSA “trustee”?

The differences between a “custodian” and a “trustee” are minor. A trust is a legal entity under which assets are actually owned and held on behalf of a beneficiary. The trustee has some level of discretionary fiduciary authority over the assets of the fund. The trustee must exercise that authority in the best interests of the beneficiary. A custodial arrangement, on the other hand, is like a trust, but the custodian simply holds the assets on behalf of the owner of the assets. Other than holding the assets and doing as the owner orders, the custodian has no fiduciary obligations to the owner. The determination of what constitutes a trust or custodial arrangement is a determination made under state law.


Setting Up Your HSACan couples establish a “joint” account and both make contributions to theaccount, including “catch-up” contributions?

“Joint” HSA accounts are not permitted. Each spouse should consider establishing an account in their own name. This allows you to both make catch-up contributions when each spouse is 55 or older.


Setting Up Your HSAMust couples open separate accounts?

If both husband and wife are eligible to contribute to an HSA, they are both eligible to establish separate HSAs. However, if both spouses want to make “catch-up” contributions when they are age 55+, they must establish separate accounts.


Setting Up Your HSAHow soon can I open my account?

Your account can be established as early as the effective date of your HDHP coverage. However, if your coverage begins on any day other than the first day of the month, you cannot establish your account until the first day of the following month.


Setting Up Your HSAI want to make sure my HSA is “established” as soon as possible. Can I establish my account before my HDHP coverage begins?

You can complete all the paperwork and make a minimum deposit to your account prior to the effective date of your HDHP coverage. However, your account is not officially “established” until your HDHP coverage begins. But completing the necessary steps before your coverage begins ensures that your HSA will be “established” as early as possible. This is especially important when your HDHP coverage is effective on a non-business day.


Contributing to an HSAHow much can I contribute to my HSA each year?

For 2007 and forward, your maximum annual HSA contribution is based on the statutory limit for your type of coverage. For 2009, if you have self-only HDHP coverage, your contribution is $3,000; $5,950 if family HDHP, no matter what your HDHP deductible is. Before 2007, the contribution could not exceed the deductible of your HDHP. If you are age 55 or older, you can also make additional “catch-up” contributions.


Contributing to an HSAI have a very high deductible, is there a limit on how much I can contribute?

The most you can put into your account for 2009 is $3,000 if you have single HDHPcoverage and $5,950 if you have family HDHP coverage. For 2010, these amountsincrease to $3,050 for single HDHP coverage and $6,150 for family HDHP coverage. These amounts will be increased for inflation in future years.


Contributing to an HSADo my HSA contributions have to be made in equal amounts each month?

No, you can contribute in a lump sum or in any amounts or frequency you wish. However, your account trustee/custodian (bank, credit union, insurer, etc.) can impose minimum deposit and balance requirements.


Contributing to an HSADoes my contribution depend on when I establish my HSA account or when my HDHP coverage begins?

Your eligibility to contribute to an HSA is determined by the effective date of your HDHP coverage. Your annual contribution depends your HDHP coverage. If you are not covered on December 1, your contribution depends on the number of months of HDHP coverage you have during the year (technically, the months where you have HDHP coverage on the first day of the month). For 2007 and forward, if you are covered on December 1, you are treated as an eligible individual for the entire year. However – if you cease to be an eligible individual during the following year, the excess over the pro rated contribution is included in income and subject to a 10 percent additional tax. The amount you can contribute is not determined by the date you establish your account. However, medical expenses incurred before the date your HSA is established cannot be reimbursed from the account.


Contributing to an HSACan my employer contribute to my HSA?

Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated to determine whether you have contributed the maximum allowed. If your employer contributes some of the money, you can make up the difference.


Contributing to an HSADo my contributions provide any tax benefits?

Your personal contributions offer you an “above-the-line” deduction. An "above-the-line“ deduction allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.


Contributing to an HSAIf my employer contributes to my HSA, does that also provide me any tax benefit?

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).


Contributing to an HSACan I make contributions through my employer on a “pre-tax” basis?

If your employer offers a “salary reduction” plan (also known as a “Section 125 plan” or “cafeteria plan”), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the “above-the-line” deduction on your personal income taxes for the amount contributed through the 125 plan.


Contributing to an HSACan I claim both the “above-the-line” deduction for an HSA and the itemizeddeduction for medical expenses?

You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.


Contributing to an HSAI’m over 55 and would like to make catch-up contributions to my HSA, like I’ve done with my IRA. Is that possible?

Yes, individuals 55 and older who are covered by an HDHP can make additional catch-up contributions each year until they enroll in Medicare. The additional “catch-up” contributions to HSA allowed are as follows:

2009 and after - $1,000


Contributing to an HSAI turned 55 this year. Can I make the full “catch-up” contribution?

If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must pro-rate your “catch-up” contribution for the number of full months you were “eligible”, i.e., had HDHP coverage. However, if you are covered on December 1, you are treated as an eligible individual for the entire year and get the full contribution.


Contributing to an HSAIf both spouses are 55 and older, can both spouses make “catch-up”contributions?

Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a “catch-up” contribution.


Contributing to an HSAIf each spouse has self-only HDHP coverage (neither spouse has family coverage), how much can we contribute?

For 2007 and forward, each spouse is eligible to contribute to an HSA in their own name, up to the statutory limit ($3,000 for 2009). (The catch up contributions are in addition to these limits.)


Contributing to an HSAIf both spouses have family HDHP coverage but one spouse has other coverage, are both spouses eligible for an HSA? How much can each spouse contribute?

The following examples describe how much can be contributed under varyingcircumstances. Assume that neither spouse qualifies for “catch-up contributions”.

Example 1: For 2008, husband and wife have family HDHP coverage witha $5,000 deductible. Husband has no other coverage. Wife also has self onlycoverage with a $200 deductible. Wife, who has coverage under alow-deductible plan, is not eligible and cannot contribute to an HSA.Husband may contribute $5,950 to an HSA.




Example 2: For 2009, husband and wife have family HDHP coverage witha $5,000 deductible. Husband has no other coverage. Wife also has self onlyHDHP coverage with a $2,300 deductible. Both husband and wife areeligible individuals. Husband and wife are treated as having only familycoverage. The combined HSA contribution by husband and wife cannotexceed $5,950, to be divided between them by agreement.




Example 3: For 2009, husband and wife have family HDHP coverage witha $5,000 deductible. Husband has no other coverage. Wife also has familyHDHP coverage with a $3,000 deductible. Both husband and wife areeligible individuals. The maximum combined HSA contribution by husbandand wife is $5,950, to be divided between them by agreement.




Example 4: For 2009, husband and wife have family HDHP coverage witha $5,000 deductible. Husband has no other coverage. Wife also has familycoverage with a $200 deductible. Husband and wife are treated as havingfamily coverage with the lowest annual deductible ($200). Neither husbandnor wife is an eligible individual and neither may contribute to an HSA.




Example 5: For 2009, husband and wife have family HDHP coverage witha $5,000 deductible. Husband has no other coverage. Wife also is enrolledin Medicare. Wife is not an eligible individual and cannot contribute to anHSA. Husband may contribute $5,950 to an HSA.


Contributing to an HSADoes tax filing status (joint vs. separate) affect my contribution?

Tax filing status does not affect your contribution.


Contributing to an HSAI’m a single parent with HDHP coverage but have child/relative that can be claimed as a dependent for tax purposes, and this dependent also has non-HDHP coverage. Am I still eligible for an HSA?

Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP. You can contribute up to the statutory limit ($5,950) to your HSA.


Contributing to an HSAMay a self-employed person contribute to an HSA on a pre-tax basis?

No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.


Using Your HSADoes an HSA pay for the same things that regular insurance pays for?

HSA funds can pay for any “qualified medical expense”, even if the expense is not covered by your HDHP. For example, most health insurance does not cover the cost of over-the-counter medicines, but HSAs can. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.


Using Your HSAHow do I know what is included as “qualified medical expenses”?

Unfortunately, we cannot provide a definitive list of “qualified medical expenses”. A partial list is provided in IRS Pub 502 (available at www.irs.gov). There have been thousands of cases involving the many nuances of what constitutes "medical care" for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for "medical care" is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word "primarily."


Using Your HSAWho decides whether the money I’m spending from my HSA is for a “qualified medical expense?”

You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.


Using Your HSAWhat happens if I don’t use the money in the HSA for medical expenses?

If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.


Using Your HSAAre dental and vision care qualified medical expenses under a Health Savings Account?

Yes, as long as these are deductible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.


Using Your HSACan I use the money in my HSA to pay for medical care for a family member?

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty. This is one of the great advantages of HSAs.


Using Your HSACan I use my HSA to pay for medical services provided in other countries?

Yes.


Using Your HSACan I pay my health insurance premiums with an HSA?

You can only use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer.


Using Your HSACan I purchase long-term care insurance with money from my HSA?

Yes, if you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. See IRS Publication 502 for the amounts deductible by age.


Using Your HSAI have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?

Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.


Using Your HSAWhat happens to the money in my HSA if I lose my HDHP coverage?

Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.


Using Your HSADo unused funds in a Health Savings Account roll over year after year?

Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.


Using Your HSAWhat happens to the money in a Health Savings Account after you turn age 65?

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.


Using Your HSACan I use my HSA to pay for medical expenses incurred before I set up my account?

No. You cannot reimburse qualified medical expenses incurred before your account is established. We recommend you establish your account as soon as possible.


Using Your HSAWho will be the “bookkeeper” for my HSA?

It is your responsibility to keep track of your deposits and expenditures and keep all of your receipts. If you run out of HSA funds (and therefore need to use your HDHP), you may need to send those receipts to your insurer.


Using Your HSAHow do I use my HSA to pay my physician when I’m at the physician’s office?

If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit.

If your physician does not ask for payment at the time of service, the physician will probably submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an "Explanation of Benefits" from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician may then send you a bill for payment.


Managing Your HSAWho has control over the money invested in a Health Savings Account?

The account holder controls all decisions over how the money is invested. You can also choose not to invest your funds.


Managing Your HSACan the funds in an HSA be invested?

Yes, you can invest the funds in your HSA. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds, and certificates of deposit.


Managing Your HSAWill my bank notify me if I’ve exceeded my allowable contribution amount?

No, it is your sole responsibility to keep track of the amounts deposited and spent from your account, just like a normal savings or checking account.


Managing Your HSACan I borrow against the money in my HSA?

No. You may not borrow against it or pledge the funds in it. For more information on prohibited activities, see Section 4975 of the Internal Revenue Code.


Managing Your HSACan I roll the money in a Health Savings Account over into an IRA?

You cannot roll the HSA funds over into an IRA. They will stay in the HSA or be rolled into another HSA.


Managing Your HSACan I roll over an IRA, 401(k) or other retirement plan into an HSA?

You cannot directly roll funds in a 401(k) or other retirement plan into an HSA. You can withdraw funds from one of these accounts, pay applicable taxes (and penalties) on the amount you withdraw, and then use the remaining funds to make a contribution to your HSA. However, the amount you contribute to your HSA is still limited by the annual contribution limits.

For 2007 and forward, you may make a one-time transfer for IRA funds to an HSA. The amount of the IRA transfer reduces your HSA contribution for the year. If you fail to remain an eligible individual for 12 months after the month of the transfer, the amount of the transfer is included in income and subject to a 10 percent additional tax.


Managing Your HSACan I roll funds in my Archer MSA into my HSA?

Yes, if you do so within 60 days of withdrawing the funds from the Archer MSA.


Managing Your HSAWhat happens to the money in my HSA when I die?

What happens depends on how the HSA is designed. If your spouse is designated as the beneficiary by you, your spouse becomes the owner of the HSA when you die. If you provide that it goes to your estate or other entity, the value of the HSA at death is income to the estate or other entity.


Employer Participation In HSAAs an employer, do I own my employees’ HSAs? Can I control how they spend the money in them?

No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation.


Employer Participation In HSAMy employees want to contribute to their HSAs but want to make sure they get a tax benefit out of doing so. How does that work?

Employee contributions can be made to HSAs on either after-tax or pre-tax basis. If made on an after-tax basis they should be counted as an above-the-line deduction on their tax return, effectively making their contributions tax-free. If they want to make the contribution pre-tax it can be done through a Section 125 (also called a “salary reduction” or “cafeteria plan”).


Employer Participation In HSAHow much do I have to contribute to my employees’ HSA, as an employer?

As much or as little as you want (while staying below the annual statutory limit on contributions to the account of $3,000 for employees with self-only HDHP coverage or $5,950 for employees with family HDHP coverage in 2009).


Employer Participation In HSADo HSA contributions have to be made in equal amounts each month?

No, you can contribute in a lump sum or in any amounts or frequency you wish. However, keep in mind that the funds belong to the employee after they are deposited.


Employer Participation In HSAAs an employer, do I have to contribute the same amount to every employee’s HSA?

Employer contributions must be “comparable”, that is they must be in the same dollar amount or same percentage of the employee’s deductible for all employees with the same category of coverage -- for this purpose, generally categories of coverage are either “self-only” or “family”, although consult the comparability regulations regarding the ability to subdivide the family category. You can also vary the level of contributions for “full-time” vs. “part-time” employees, and employees covered by a collective bargaining agreement are not covered by the comparability rules if health benefits were part of the agreement. You do not need to consider employees who do not have HDHP coverage as they are not eligible for HSA contributions.


Employer Participation In HSAOur company offers benefits through a Section 125 plan, do contributions have to be comparable under these plans as well?

Section 125 plans (also known as “salary reduction” or “cafeteria” plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet “non-discrimination” rules. These rules require the employer to ensure that contributions do not favor higher compensated employees.


Employer Participation In HSAOur company wants to offer “matching” contributions, can we do that?

Yes, but your company can only offer “matching” contributions through a Section 125 plan. Remember that the non-discrimination rules still apply.


Employer Participation In HSAI don’t offer health insurance, but some of my employees have opened HSAs and I’d like to help them out, what can I do?

Your company can make pre-tax contributions to your employees’ HSAs as long as you do so for all eligible employees. However, the comparability rules apply. If you have a Section 125 plan, then the non-discrimination rules apply.


Employer Participation In HSAHow are contributions treated for owners and shareholders of S corps?

Owners and officers with greater than 2% share of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.


Employer Participation In HSAHow are contributions treated for partners in a partnership or limited liability company (LLC)?

Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.


Employer Participation In HSAMay a self-employed person contribute to an HSA on a pre-tax basis?

No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.


HSA Trustees / CustodiansWe are a bank/credit union, do we have to seek approval to offer HSAs?

Banks and credit unions are automatically approved to offer HSAs to their customers as either a trust or a custodial account.


HSA Trustees / CustodiansWe are not a bank or a credit union, who else is allowed to offer HSAs?

Insurance companies and other entities who are approved trustees/custodians of IRAs are approved to offer HSAs. Additional entities wishing to become approved trustees/custodians of HSAs can apply to the IRS to do so.


HSA Trustees / CustodiansWhat is the difference between an HSA “custodian” and an HSA “trustee”?

The differences between a “custodian” and a “trustee” are minor. A trust is a legal entity under which assets are actually owned and held on behalf of a beneficiary. The trustee has some level of discretionary fiduciary authority over the assets of the fund. The trustee must exercise that authority in the best interests of the beneficiary. A custodial arrangement, on the other hand, is like a trust, but the custodian simply holds the assets on behalf of the owner of the assets. Other than holding the assets and doing as the owner orders, the custodian has no fiduciary obligations to the owner. The determination of what constitutes a trust or custodial arrangement is a determination made under state law.


HSA Trustees / CustodiansDo we have to use specific forms to establish these accounts?

Banks or credit unions can modify their existing IRA enrollment forms to reflect HSAs, or use the model IRS forms. These model forms are available from the IRS or can be downloaded from the Treasury & IRS web sites.


HSA Trustees / CustodiansWhat information must be reported?

Reporting requirements are straightforward. Form 5498 is used to report total contributions made to the account during the year and the value of the account at the end of the year. Form 1099-SA reports the total distributions taken from the account during the year. Both forms must be sent to the account owner and the IRS. Both forms and instructions for completing the forms are available from the IRS or can be downloaded from the Treasury and IRS web sites.


HSA Trustees / CustodiansWhat rules can we set regarding account administration?

Minimum deposit, minimum balance requirements, minimum distribution requirements, distribution timing requirements, and account fees can be set by the trustee/custodian (i.e., the HSA rules do not apply any additional conditions on an HSA trustee or custodian).


HSA Trustees / CustodiansCan HSA accounts be invested?

HSA funds can be invested in the same types of investments as IRAs. You do not have to offer all investment options to account holders.


HSA Trustees / CustodiansDo we have to verify that distributions from an HSA were used only for “qualified medical expenses”?

Substantiation that distributions were used for qualified medical expenses is not required.


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Why Msaver?

Because we don’t just give you an account – we also give you the tools that make it an HSA.


It’s EasyComplete the one-page Employer Registration Form

When you send this to us, we’ll set up the employer group in our system and assign a group number. You’ll then receive a welcome email with an enrollment link for your employees.


Relax

Relax. We’ll do the rest.

Rest assured that you’ve made a good decision. We’ll take care of your employees.


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877-949-6727 broker support

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HSAs: What’s New? Eric Johnson Regional Sales Manager, First Horizon Msaver 817-366-7536 cell | [email protected]