Health Savings Accounts (HSA)...
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Health coverage with advantages for your company and your employees...
Helping your company hold down the rising cost of health benefits has never been more important than now. Equally important is giving employees incentives to become more actively involved in their health care decisions. A High Deductible Health Plan (HDHP), packaged with a Health Savings Account (HSA), accomplishes both.
Medical Plan Coverage
HDHP's combine a high deductible medical plan with an innovative new savings account feature. The plan complies with Treasury Code 223 regulations regarding:
- Minimum deductibles
- Combined medical and prescription drug deductibles
- Out-of-pocket maximums
To help foster a wellness attitude among employees, first-dollar preventive care (routine physical, well-child care and immunizations) up to a pre-determined maximum may be provided. You select the plan deductible, coinsurance and out-of-pocket limits right for your company.
HSA's help employees pay for qualified medical and prescription drug expenses and build funds for future needs, and it has tax and other advantages.
The HSA is a tax-exempt trust fund set up for each employee's personal use to pay for qualified current medical and prescription drug expenses and build funds tax-free for future qualified medical expenses. Some of the features of an HSA are:
- Funding flexibility – employees and employers can contribute pre- or after-tax dollars.
- Incentive to save for health needs – earnings accumulate tax-deferred; distributions for qualified expenses tax free.
- Flexible use – funds can also be used for health care expenses and some insurance premiums on a tax-free basis and for non-qualified expenses (subject to tax and penalty)
- Balances roll over – funds can be carried over for future health care needs
- Portability – the account is owned by the employee even after leaving employment
- Empowers employees – more ownership of personal health care decisions
Qualified High Deductible Health Plans and Health Savings Accounts are part of our full range of employee benefits plans, an innovative health benefit option employers can use to attract and retain quality employees. HDHP's can help employers hold down health benefit costs with innovative plan design options and decision support tools. For employees, HDHP's respond to employee demand for more choice, and empowerment to take charge of their care while encouraging more cost-conscious personal healthcare decisions.
What is an HSA?
An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to the HSA, is covered under a high-deductible health plan (HDHP). Funds roll over from year to year, earn interest and accumulate for future health care needs.
Who can establish an HSA?
Generally, any individual covered by a HDHP who is not eligible for and enrolled in Medicare, not covered by another health plan, and not claimed as a dependent on another person’s tax return.
What can HSA funds be used for?
HSA funds can be used for eligible medical expenses. Eligible medical expenses are those defined by the Internal Revenue Code 213(d) and include things like copayments, coinsurance, deductible, vision, dental and many other services.
When do I have to submit requests for reimbursement from my HSA account?
There is no time limit for when you can reimburse yourself for your health care expenses; you just need to keep legible receipts and records in case you do reimburse yourself, or in case you are audited.
How do employees benefit from HSA's?
Contributions, earnings and eligible distributions are all tax-free. HSA's provide a tax-advantaged way to save for future health care expenses. HSA's are also portable through employment changes because they belong to the individual, not their employer.
Is there a limit to how much money can be put into an HSA?
Yes – For 2011, individuals can contribute $3,050 and families can contribute $6,150. Individuals who are age 55 or older can make an additional catch-up contribution of $1,000. Contributions to an HSA account are tax-free, and distributions are not taxed as long as they are used to pay for qualified medical expenses.
*For 2012, individuals can contribute $3,100 **Families can contribute $6,250
HSA contributions are federally tax deductible, but what about state taxes?
Assuring that state law conformed to Federal tax law regarding HSA tax deductibility Minnesota passed legislation to mirror federal law. The only states that do not allow a deduction for state income taxes for HSA contributions are: Alabama, California, New Jersey, and Wisconsin.
Can individuals have both an HSA and a health FSA?
Yes, but only within limits set forth by the IRS. Generally, to be eligible to contribute to an HSA an individual cannot be covered by another health plan that is not an HDHP. Because an FSA is considered a health plan, only "limited use" FSA's may be combined with an HSA. A limited use FSA allows for reimbursement of dental, vision and preventive care services. These are permitted coverage's allowed outside of the minimum deductible requirement on the HSA qualified HDHP. Employers may need to change health FSA plan documents to accommodate this.
Are employers required to make HSA contributions?
No – even if employers choose to offer a qualified HDHP to their employees, no contribution is required.
Do employers 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 in the same “class”. You can vary the level of contributions for “full-time” vs. “part-time” employees, and employees with “self-only” coverage vs. “family coverage”. You do not need to consider employees who do not have HDHP coverage, as they are not eligible for HSA contributions.
How do employers benefit by offering High Deductible Health Plans with HSA's?
- Engage employees in their health care and health care spending – employees spend their own dollars prudently.
- HSA-HDHP's typically cost less than most traditional plans and the tax advantages of the HSA benefit both employer and employee.
- Employers may choose to contribute to an HSA on behalf of their employees or simply offer the plan and allow employees to contribute their own money.
Health Savings Account Deductible and
Out-of-Pocket Maximums
Health Saving Accounts Min. to Max. Deductable Range Out-of-Pocket Maximum Maximum HSA Deposit Deductible Range for Singles in 2010 and 2011 $1,200.00
to
$5,950.00$5,950.00 $3,050.00 *Deductible Range for Singles in 2012 $1,200.00
to
$6,050.00$6,050.00 $3,100.00 Deductible Range for Families, Husband & Wife or Parent & Children in 2010 and 2011 $2,400.00
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$11,900.00$11,900.00 $6,150.00 **Deductible Range for Families, Husband & Wife or Parent & Children in 2012 $2,400.00
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$12,100.00$12,100.00 $6,250.00 For those individuals 55 years old or older, the law allows an additional "catch up" deposit which is $1,000. If both the husband and wife are 55 or older, they could both use the catch up provision.