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					Considering a Health Savings Account?

Basic HSA Plan Concept
Part 1: High Deductible Health Plan
For 2008 Min. Deductible Max. Out of Pocket For 2009 Single $1,100 $5,600 Single $1,150 $5,800 Family $2,200 $11,200 Family $2,300 $11,600

Intended to cover serious illness or injury

HSA Concept

Min. Deductible Max. Out of Pocket

Part 2: Health Savings Account
For 2008 Max. Contribution For 2009 Max. Contribution Single $2,900 Single $3,000 Family $5,800 Family $5,950

Can pay for eligible expenses not covered by the health plan

Made by: Employer, Employee, and/or other party

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Why choose a HSACompatible health plan?
 Potential savings on your portion of premiums  Often cover preventive care before the deductible is met  Opportunity to open a tax-favored HSA  They can provide you with increased control over the services you receive and the dollars spent, which can help control healthcare costs.

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HSA Eligibility
 Covered by qualified high-deductible health plan (HDHP)  Not covered by any other non-HDHP  Not claimed as a dependent on another person’s tax return*  Not enrolled in Medicare A or B
*Section 152 of the Internal Revenue Code excludes spouses from the definition of dependent.

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Advantages of an HSA
 Funds roll over from year to year
 Eliminates the “use it or lose it” philosophy  Interest earned on balances (go to www.hsabank.com for rates)

 Tax benefits on contributions, earnings, and distributions  Portability
 Funds go with you if you leave an employer or health plan  Funds are always tax-free when used for qualifying medical expenses even if qualifying HDHP coverage ends

 Long-term investment opportunity  You control your healthcare dollars and decide when to withdraw funds

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What are Qualified Expenses?
A Qualified Expense is generally any expense incurred to maintain an individual’s health or the health of their family, including:
      Doctor and hospital visits Medical equipment Dental care, braces, dentures Vision care, glasses & contacts Medications, including certain over-the-counter versions Transportation costs associated with healthcare
*A definition of Qualified Medical Expense is provided in Section 213(d) of Internal Revenue Code. A list of eligible medical expenses can be found in IRS Publication 502. Check with your tax advisor about expenses not on the list. For more information, visit www.hsabank.com.

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Comparing HSAs, HRAs, FSAs
HSA
Account owner Employee Employee, Employer, Other Yes Yes

HRA
Employer

FSA
Employee Employee, Possible Employer No No

Funding
Rollover yearto-year Portable

Employer
Generally No Generally No

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Maximum Annual Contributions
 Are determined by the IRS
 $2,900 with individual or $5,800 with family coverage for 2008  $3,000 for individual or $5,950 for family coverage for 2009 -- You can contribute the maximum amount regardless of deductible

 Can be made during the calendar year and until the tax return due date of April 15th the following year.  Do not need to be prorated based on the date coverage began as long as qualified coverage is maintained through December 31st of the following year.

Excess contributions will be subject to income tax and a tax penalty.
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Additional HSA Funding Option… IRA funds may be rolled to an HSA on a one-time basis

 Subject to the annual HSA contribution maximum  Only traditional IRAs qualify at this time  Individuals must remain covered by a qualifying HDHP until the last day of the 12th month following the month of rollover to avoid tax penalties
*Always consult your tax advisor, and/or the IRS for details and reporting requirements in regard to taxation, fund rollovers and other stipulations.

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Who can contribute to an HSA?
 Accountholder
Individual Self-Employed Employee

 Third-party
Family Member Beneficiary Friend State Government

 Employer

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How contributions can be made
Contributions to an HSA must be made in “cash”.
(contributions may not be made in the form of stock or other property)

 Through a cafeteria plan (if your employer has one in place)  Online Contributions (through Internet Banking)
 Recurring or one-time, as needed

 Check
 With Contribution Form tear-off  With Deposit Ticket
(with each statement or download from website)

 One-time rollovers to HSAs from IRAs
 Some restrictions apply as previously noted

 Rollovers permitted once every 12 months
 MSA to HSA  HSA to HSA

 Transfers are not limited
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Coordinating HSA Contributions
Since both employees and employers can make contributions, it is important to coordinate in order to avoid excess contributions and tax penalties. The maximum can be contributed through a combination of sources or a single source as long as the annual limit is not exceeded.

EMPLOYER CONTRIBUTIONS INDIVIDUAL / EMPLOYEE CONTRIBUTIONS IRA Transfers

HSA Contribution Limits

≤

Up to the IRS determined maximums
For 2008: $2,900 single $5,800 family For 2009: $3,000 single $5,950 family

*If an individual has HSA accounts with different administrators, all contributions count toward the annual contribution maximum.
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What is the catch-up contribution?
Individuals who have an HSA, are age 55 or older and are not enrolled in Medicare A or B are qualified to make catch-up contributions. Year
2008 2009+

Catch-up Amount
$900 $1,000

-If a husband and wife are both qualified to make catch-up contributions, they can both do so if they each have an HSA. -Contributions need not be prorated based on when in the year a person turns 55. -Catch-up contributions must be prorated if you are not covered by a qualifying HDHP on December 1st or you do not maintain coverage through December 31st of the following year.
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Tax Advantages
 Contributions are either pre-tax through a cafeteria plan (via your paycheck) or tax-deductible  Earnings
 HSAs grow in the same tax-deferred manner as IRAs
 Interest and investment income are tax-free or tax-deferred

 Distributions
 Withdrawals for qualified medical expenses are always taxfree. After age 65, funds may be withdrawn for any reason without penalty, subject to regular income tax.

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Tax Savings Example
Contribution Annual Medical Expenses $3,000 per year for 25 yrs $500 per year

Tax Bracket
Average Interest Rate

28% (Federal) 5% (State)
4%

TAX SAVINGS ON CONTRIBUTIONS =

$20,625.00

TAX SAVINGS ON DEFERRED GROWTH =

$13,732.87
ACCOUNT BALANCE AT THE END OF 25 YEARS =

$104,114.77

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Calculation Tools
 Is an HSA Right for Me
 Allows you to compare a traditional health plan and an HSA qualified plan to determine potential savings http://www.hsabank.com/calculators/decision_tool.aspx

 Future Value Calculator
 Calculates tax savings on contributions and tax-deferred growth as well as the future value of your Health Savings Account http://www.hsabank.com/calculators/future_value.aspx

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Savings Account Option
 Interest bearing “bank” account
 Accounts are opened as an FDIC-insured bank account through Webster Bank, N.A.


Current interest rate and annual percentage yield information is available on our website, www.hsabank.com or by calling 800-357-6246.
 Interest Rate and APY are subject to change, at our

discretion, at any time. Fees may reduce earnings.

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Investment Option
TD Ameritrade Corporate Services
Access to stocks, bonds and over 11,000 mutual funds Trades are made online or over the phone Transfer funds from your HSA to your investment account:
Online through Internet Banking By calling the Client Assistance Center

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Mutual Fund Selection
 Choose from top-performing no-load mutual funds  Trades are completed online through HSA Bank’s Internet Banking system  No transaction fees. Annual $24 fee is deducted from the investment account.  Integrated online access to investment account history, balance information, contribution elections, trades and more through HSA Bank’s Internet Banking system.  Access to Morningstar and other planning tools.

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Methods of Distribution
 Debit Card from Visa POS with signature
(no transaction fee)

ATM with PIN ($2 fee) POS with PIN ($2 fee)  Checks, $7.95 for 50 + 10 deposit tickets (no transaction fee)  Withdrawal Forms
($10 fee)

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Distribution Design
Scenario A Insurer

Doctor Visit

Submit Claim

Applies network discounts

Sends EOB

Pay doctor

Scenario B

Fill prescription

Pay Pharmacy

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Negotiating Payments
Negotiate Payments With Healthcare Provider

$300

$100

$200

Negotiate Payments

Pay Monthly

$200

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Are HSAs changing spending behavior?
Based on HSA Bank’s customer base of over 186,000 accounts as of December 31, 2007
• • • • • •

96.5% of all open accounts rolled over funds from 2007 to 2008 On average, accounts rolled $2,163 into 2008 Average contribution per month = $214 Average distribution per month = $173 Average monthly savings = $41 Nearly 18% of accountholders saved all contributed funds and rolled over an average balance of $4,013 into 2008. • More than a third of accountholders saved at least 50% of their 2007 contributions.

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Are HSAs changing spending behavior?
Increased Consumerism in Healthcare
(Research results from McKinsey & Co., June 2005)

Consumer-directed health plan consumers were more value conscious and attentive to wellness & prevention and therefore:

50% more likely to ask about costs 30% more likely to get an annual exam 25% more likely to engage in healthy behaviors 20% more likely to comply with treatment regimens 3 times more likely to choose a less expensive option

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Our Expertise
 HSA Bank has nearly ten years of HSAindustry experience
 Medical Savings Accounts beginning in 1997  HSAs beginning in 2004

 Service representatives receive extensive training, surpassing the industry norm

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Internet Banking Advantages
 Online contributions  Year-to-date account summary 24 hours a day, 7 days a week  Online address updates  Transaction history downloads  Electronic statements  Email notifications of account activity  Fund transfers between your HSA and your connected investment account  Real-time transaction viewing  Processed check viewing  Tax document viewing
(anticipated availability prior to February 15 of the current year for the previous tax year)

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Communications
 Account statements  Year-end account summary  IRS reporting  Email confirmation of account opening and ongoing activity

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Account Support
 www.hsabank.com
 Toll-free Bankline
24-hour account access via touch tone phone 24-hour HSA information, self service and Secure Contact Form

1-800-565-3512

 Toll-free Client Assistance Center
7 a.m. – 9 p.m., CST, Monday – Friday

1-800-357-6246

 Toll-free Spanish Language Assistance line 1-866-357-6232

7 a.m. – 7 p.m., CST, Monday – Friday

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Thank you for considering…

*Investment products are not FDIC insured, are not a deposit or other obligation of or guaranteed by the bank, and are subject to investment risks including possible loss of the principal amount invested. 29


				
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