HEALTH SAVINGS ACCOUNTS (HSA)
A Health Savings Account, or HSA, is a custodial account established to receive
tax-favored contributions on behalf of eligible active employees enrolled only in a
qualified high deductible health plan (as defined below) to pay for qualified
medical expenses. The IRS regulates HSA plans, so many of the plan design
features described below are a result of those regulations.
Amounts are contributed to an HSA on a pre-tax basis, earnings on those
contributions accumulate tax-free and distributions are not subject to tax if they
are used to pay for eligible medical expenses for employees and their
dependents. Contributions made in one year do not have to be used to pay
expenses in that year and may be carried over to pay eligible medical expenses
at anytime in the future. Similarly, expenses in any year do not have to be
reimbursed during the year that they were incurred.
The HSA enables WU employees to have an account that they can own for
health care. The view of HSA supporters is that once employees feel ownership
over their health care dollars, they will make cost-effective decisions that will
control spending increases and benefit not only themselves, but their employer
and other employees. In addition, it provides our employees some opportunity to
save for retiree medical expenses on a tax-favored basis while employed.
Not all employees will be better off with an HSA as compared with traditional low
deductible or co-pay health plans. Those who are currently infrequent users of
health care and/or have higher incomes and are looking for sheltered savings
opportunities are likely to be the first to find HSA’s attractive.
HIGH DEDUCTIBLE HEALTH PLAN (HDHP)
To participate in the HSA, our employees must be enrolled in WU’s high
deductible catastrophic health plan that satisfies the IRS design requirements.
Our high deductible health plan is a PPO with Anthem Blue Cross Blue Shield
and has the following plan design:
• An annual deductible of $1,500 for individual coverage and $3,000 for
• No deductible for qualified preventive care;
• An in-network co-insurance of 10% and out-of-network co-insurance of
30% after the deductible is met;
• An annual out-of-pocket maximum of $1,250 for individuals and $3,750 for
families (does not include the deductible). The out-of-pocket limits may be
higher for non-network coverage.
• There are two major differences between the High Deductible plan and the
other Blue Cross plans offered through the University:
1. The annual family out-of-pocket maximum must be met before co-
2. The plan cost of prescription drugs will apply to the annual
deductible and co-insurance percentages (tiered co-pays do not
The annual HSA contribution limit is the statutory maximum contribution,
regardless of the individual’s deductible under the HDHP. For calendar year
2009, the maximum contribution for an eligible employee with individual coverage
is $3,000, and the maximum contribution for family coverage is $5,950.
Considering the University’s annual contribution of $400 (details below), if an
employee wishes to make the maximum annual contribution to his or her HSA
individual account, the amount will be $2,600 for individual coverage and $5,550
for family coverage.
To increase our employees’ interest in the HSA, the University will make a
contribution of $400 annually to the accounts of those employees who contribute
a minimum annual amount or greater based on their salary. If an employee’s
annual base salary is under $105,000 (indexed), the required minimum
contribution will be $200 annually and if an employee’s annual base salary is
$105,000 or greater, the required minimum contribution will be $400 annually.
The contribution amounts by employees will be made per pay period via payroll
deduction (biweekly or monthly). The University’s contribution will be a one time,
lump sum deposit coincident with the employees’ first paycheck in January.
Unlike the Health Flex Spending Plan, funds have to be available in the account
in order for the participant to be reimbursed for eligible expenses. Participants
will receive a mailing containing checks and a debit card from US Bank, the plan
custodian. These checks and debit card can be used to pay a provider directly
for eligible expenses, or the participant can reimburse himself or herself. All
record keeping for tax purposes is the responsibility of the employee.
Funds will be initially deposited into a FDIC insured interest bearing checking
account. Once the account value is greater than $2,500, the participant will be
given the opportunity to invest the excess in their choice of a variety of funds with
varying degrees of risk offered by US Bank.
If active employees enroll in the HSA, they are not eligible to enroll in the Health
Flex Spending Account (FSA) plan at the same time. Also, employees enrolled
in an HSA may only be reimbursed for out-of-pocket health expenses up to the
current balance in their account and will need to wait until deposits into the
account create a sufficient balance to be fully reimbursed. If active employees
enroll in the HSA, they may also be enrolled in the childcare flex-spending plan.
Enrollment in the HSA will be conducted during the annual health/dental and flex
spending plans open enrollment each November for the following calendar year.
The employee’s annual election to enroll in the HSA is irrevocable and may not
be made outside of this annual open enrollment period. Changes to the election
amount are only allowed due to a family status change. Participation in the
health flex savings plan will prohibit an employee from enrolling in the HSA plan
the following year.
If an employee enrolls in both the HSA and the Retirement Medical Savings
Account, he or she will receive only one $400 University contribution to the
savings account of their choice.
The University will pay the administration fees for all active employees who are
currently participating in the plan. Once the employee terminates, retires, or
discontinues participation in the HSA, the fees will be the responsibility of the
employee. (Bank fees are approximately $40 per year per participant but are
waived once the account balance reaches and remains above $2,500.) Since
the individual owns the HSA account, the balance in the account can be
transferred to another HSA custodian at any time.
POINTS TO REMEMBER
• To be eligible to contribute to an HSA, you must be enrolled in a high
deductible health plan, must not be receiving Medicare benefits, must not
be claimed as a dependent on someone else’s tax return or covered by
other non-high deductible health plan coverage. In addition, if you have
received VA benefits (including prescription drugs) within the last three
months, you cannot enroll in the HSA.
• If you’re enrolled in both the HSA and RMSA, you will receive only one
annual $400 contribution from the University. Those who elect to have the
University contribution in the RMSA can contribute the full $3,000 or
$5,950 to their HSA account.
• You may only enroll in the HSA during the annual open enrollment period.
You will not be able to enroll after November 30.
• You may adjust your annual election amount to the HSA during the year
only if you experience a family status change. You may be required to
change your HSA election if you reduce your coverage level in the HDHP
plan (depending on the amount you are contributing to the HSA).
• You own your HSA account and are responsible for keeping
receipts/documentation in the event of an IRS audit.
• HSA funds can be used for health care expenses for yourself and all
eligible dependents (excludes domestic partners). Dependents do not
have to be enrolled in the HDHP.
• Participants will only be reimbursed for eligible health care expenses up to
the balance in their HSA.
• Balances remaining at the end of the plan year will roll over to the next
year and accumulate to help pay for future health care expenses, even if
you are no longer enrolled in a HDHP. However, you can no longer
contribute to the HSA if you are not enrolled in a HDHP.
• If you over-contribute to your HSA account, you must take a distribution
from the account for the excess contribution amount during the plan year
and pay ordinary income taxes on that amount. If you don’t take a
distribution of the amount plus earnings by the due date, including
extensions, of the year the contributions were made, you will have to pay a
tax penalty in addition to ordinary income taxes.
• You must file form 8889 with your Federal income tax return for each year
you contribute to or withdraw from your HSA account.
• The University will pay the administration/bank fees for active employees
currently contributing to the HSA. If the employee terminates, retires, or
discontinues contributions to the HSA, the employee will be charged for
fees if applicable.
• The balance in your HSA account can be rolled over to another HSA
custodian at any time.
• The University will only contribute to HSA accounts established by US
Bank Institutional Trust & Custody to receive the University’s $400
contribution (if applicable) and payroll deductions from WU employees.