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Compliance Briefing Center

Healthcare

{Making it Easier for You
to Manage Benefits}

HSA - Smartest Benefit for Employers and Employees

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Background
Health Savings Accounts (HSAs) are individually owned healthcare reimbursement accounts that allow tax-free dollars to fund the account. Interest or dividends accumulate tax free, and payment of qualified medical expenses are tax free. And, to make it the grand slam of all benefits, there is no limit on the amount of money that may accumulate in the HSA. That’s why an HSA is a healthcare benefit that can be used now and for future medical needs.

Requirements for setting up and contributing to an HSA

  • Must be covered by a qualified high-deductible health plan (HDHP). The HDHP must satisfy minimum deductible amounts and certain out-of-pocket maximums.
  • May not have coverage under any non-HDHP that provides coverage for any benefit covered by the HDHP
  • May not be covered by any health plan that provides coverage below the statutory minimum HDHP deductible. For example, participating in a health reimbursement arrangement (HRA) or health flexible spending account (FSA) that provides benefits without regard to whether the HDHP deductible is met would disqualify an individual, unless, for example, the HRA or health FSA is limited to reimbursing only dental and vision expenses.
  • May obtain “permitted insurance” or “permitted coverage” products such as policies that provide dental, vision, accident, disability, and long-term care benefits.
  • The HDHP may also provide preventive care that is below the minimum deductible amount or with a deductible.
  • Cannot be covered by health plans that provide co-payments or first dollar coverage for prescriptions.

An individual setting up an HSA must be eligible to establish the account on the first day of any month. For instance, if she is covered by an HDHP on June 15, the HSA could be established on or after July 1. She also does not have to decide before the beginning of the plan year what to contribute for the entire plan year. Generally, changes to HSA elections do not require a change in status and may be changed at least monthly or more often if the plan document allows.

Easy set up and pre-tax contributions transferred to the HSA makes saving money easy.

Reimbursements/payments from an HSA
Individuals do not have to be covered by an HDHP for any month. In other words, although participants may not be able to contribute to their HSA, the funds are still available to pay for qualified medical expenses; including COBRA continuation premiums.

Add a debit card for accessing the funds, and here’s a benefit that everyone will want.

Putting HSA money to work
HSAs are personally owned savings vehicles. They earn interest and can be invested. Just like a 401(k) plan, investment options are available. Remember, interest and earnings are not taxed and the HSA balance is not limited.

HSAs are powerful retirement planning tools. A financial adviser can illustrate how funds from an HSA, when used for eligible medical expenses, will go a lot further than from a 401(k) plan. That’s because the HSA money is not taxed if withdrawn for eligible medical expenses.

Medical expenses continue to rise. It is estimated that couples retiring right now might expect to spend about $250,000 on medical expense during their retirement. Funding in an HSA now can be there to pay medical expenses in the future. In fact, contributing the maximum limits every year to an HSA may reap more benefits at retirement. Qualified medical bills paid from an HSA are not taxable and preserves money in the 401(k) account. And HSAs do not require any obligatory withdrawals.

Young or Old, large or small medical bills – everyone benefits.

This is a brief overview of HSAs. If you would like further information, please contact your Relationship Management team.