Excess Contributions Death Benefits Spousal Beneficiary
Cannot be deducted on the individual’s tax If the beneficiary of the H.S.A. is the spouse
Excise tax of 6% is imposed for each tax
year the excess remains in the account.
then it is treated as the surviving spouse’s
own H.S.A. Distributions to the surviving
spouse for qualified medical expenses would
To avoid penalty:
Remove excess contribution and any
earnings prior to the tax return
be exempt from federal income tax and
deadline (plus extensions). Death Benefits Non-Spousal Beneficiary
Excess contribution is not taxed when
distributed, but the earnings are
considered income for the tax year in
H.S.A.’s with non-spousal beneficiaries will
cease to be an H.S.A. as of the date of
death, and the non-spouse death beneficiary
which the distribution is withdrawn.
would include the fair market value of the
H.S.A. in his or her income for the year of
If an employer chooses to make H.S.A.
contributions for one employee, the Note: The amount that must be included in the death
employer must generally make comparable beneficiary’s income is reduced by any payments made
contributions on behalf of all eligible by the H.S.A. for the decedent’s qualified medical
individuals with comparable coverage during expenses, if paid within one year after death.
the same period.
Businesses setting up H.S.A.’s should contact Also Note: We urge you to consult your tax
a Richland Banker at any of our 13 advisor concerning issues of deductibility, tax
convenient locations. consequences of contributions and distributions
and covered expenses.
H.S.A. Qualified Distributions
Qualified distributions are exempt from
federal income tax and penalties if used to
pay for qualified medical expenses.
Qualified medical expenses include:
Drugs & medicines
Eye, ear and dental expenses
Laboratory & X-ray fees
Doctor & hospital fees not covered by
H.S.A. Non-Qualified Distributions
Distributions not used for qualified medical
expenses are always includable in the
individual’s gross income.
Non-qualified distributions are subject to an Richland Trust Company
additional 10% IRS penalty, unless the 3 North Main Street
distribution is made after the account owner’s Mansfield, Ohio 44902
death, disability, or attainment of age 65.
Note:When an individual reaches age 65 they can use Equal Housing Lender
the funds for any purpose without penalty, but would Member FDIC Bank with a Leader!
pay taxes on the distribution. 01/2005KJB
The H.S.A. Health Savings Account at Richland Bank
H.S.A. Direct Checking H.S.A. Eligibility Requirements Network Plans: When determining if a plan is
No set up fee You must be covered under a health an HDHP, the out-of-pocket expense limits for
Interest bearing account with tiered insurance plan with a high deductible. services provided outside of a network of
interest rates In most cases, you cannot be covered preferred providers are disregarded. In other
Free variety pack of checks by second plan that is a high deductible words, if a plan otherwise meets the require-
$5 per month maintenance fee plan. ments of an HDHP, but the out-of-pocket
Monthly fee is waived with You may not be eligible for Medicare expense limits allowed for out-of-network
ACH Direct Deposit by employer (over 65 years old). services exceed the maximum annual
30 cents for each check over five You may not be claimed as a dependent on out-of-pocket expense limits allowed for an
checks per month another person’s tax return. HDHP, the plan will still be considered an
Visa Check Card. HDHP.
High Deductible Plans are:
H.S.A. Choice Checking Single Coverage - annual deductible of at Who can contribute to an H.S.A.?
No set up fee least $1,000 and a deductible/out of pocket The eligible individual
Interest bearing account with tiered expense cap of $5,000. His or her employer (if applicable) and
interest rates Family Coverage - annual deductible of at The eligible individual’s family members
Free variety pack of checks least $2,000 and a deductible/out of pocket (anyone).
$5 per month maintenance fee expense cap of $10,000.
Monthly fee is waived with Contribution Deadline
$500 minimum balance or combination These amounts will be indexed for cost-of-living H.S.A. contributions must be made by the eligible
of $1,000 in other Richland Bank increases. individual’s tax return date for the year, not
deposit accounts including extensions (April 15th). Although the
30 cents for each check over five Determining a High Deductible Health Plan annual contribution is determined monthly, the
checks per month (HDHP) maximum contribution can be made in one or
Visa Check Card. Prescription drug benefits are not more payments at the convenience of the indi-
considered as permitted insurance or vidual or employer.
H.S.A. Certificates of Deposit permitted coverage. An individual who is
12, 24, 36, 48 and 60 month terms covered by both an HDHP and by a Contribution Limits
$500 minimum to open prescription drug plan is not an eligible For eligible individual’s covered by the same
Add to your H.S.A. CD at any time, individual unless the prescription drug HDHP for the entire calendar year, the
in $100 increments coverage is also an HDHP. maximum contribution is the deductible
3 month interest penalty for early Transitional relief for months before amount (excluding any out-of-network
withdrawal on 12 month CD, 6 month January 1, 2006 is given to allow individuals deductible) not to exceed $2,650 for those
penalty on all others. No penalty if who are covered by an HDHP and a non- with single coverage, or $5,250 for those
account owner is 65 or older. HDHP prescription drug progam (who with family coverage.
The H.S.A. Certificates pay the same would otherwise be eligible) to contribute to For eligible individuals covered by a HDHP for
rates as our regular CDs of same an H.S.A. This is to give employers and a portion of the year, the maximum
terms. Ask for the current rates. providers time to modify plan benefits to contribution is determined separately for
conform to statutory requirements for an each month, based on eligibility and health
What is an H.S.A.? HDHP. plan coverage as of the first day of the month.
H.S.A.’s were created by the Medicare Prescription Family Coverage with Individual Deductibles:
Drug and Modernization Act of 2003, and became In cases where family coverage has individual Catch-up Contributions
available January 1, 2004. deductibles, the plan is considered an HDHP Eligible individuals who are ages 55 through 64
if no amounts are payable from the health may make an additional H.S.A. contribution (up to
If an individual meets the basic criteria he/she may plan until the family has incurred covered $500 for 2004, with annual increases to the limit
open an H.S.A. which allows for tax deductible medical expenses in excess of the minimum of $100 scheduled until reaching $1,000 in 2009).
contributions and tax-free distributions, if used for annual deductible ($2,000).
qualified medical expenses. In addition the funds NOTE: If an eligible individual will attain age 55 or
deposited to an H.S.A. can be rolled over each older by the end of the calendar year, and he or she is
year. an eligible individual for the entire year, he or she may
make a full catch-up contribution.