Health Savings Account Overview by qlc15660


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Health Savings Account Overview
A Health Savings Account (HSA) is a tax-exempt account in which you accumulate funds to pay for medical expenses that
are not covered by your health plan. Any unused money in your HSA rolls over from year to year, allowing you to save for
future medical and retirement expenses. Both you and your employer may contribute to your HSA; however, the account
is owned entirely by you. When combined with a qualified High Deductible Health Plan (HDHP), an HSA offers a unique
solution to the high cost of health care.

CoPower has partnered with HSA Bank ® as our preferred HSA custodian. HSA Bank is a recognized leader in the HSA
market. HSA Bank is a division of Webster Bank, N.A.

Why should I participate in an HSA?
An HSA can save you money by lowering the amount of taxes you pay. HSA contributions are exempt from federal, social
security, and in most cases, state and local taxes. The more money you contribute, the more you save! (California has not
adopted an HSA law; therefore contributions to HSAs are subject to California state tax.)

Example of Contribution Tax Savings*

                                Individual                                                                         Family
                                                                   Employee Savings
                                Coverage                                                                          Coverage
                                       $ 3,000              Maximum Annual Contribution                                 $ 5,950
                                            $ 840                Federal tax savings*                                       $ 1,666
                                            $ 230                    FICA Savings                                             $ 455
                                          $ 1,070             Total Annual Tax Savings                                      $ 2,121
          * This table is based on a 28% tax bracket and is provided as an example of possible tax savings. Actual tax savings will vary by tax bracket.

In addition to tax savings, participation in an HSA provides you with flexibility and control over your health care spending.
Traditionally, you pay for health insurance premiums whether you use your plan or not. In years when you incur few
health care expenses, you are not rewarded for what you do not spend. An HSA changes all of that. You pay less in
insurance premiums, and unspent money in your HSA earns interest and rolls over from year to year, allowing you to save
for the future.

How the Plan Works
You are eligible to open an HSA if you meet the IRS definition of an eligible individual below:
• You are covered by an HSA-qualified HDHP.
• You are not covered under any other health plan except the HDHP (certain insurance such as dental, vision, cancer, and
  hospital plans are permitted).
• You are not enrolled in Medicare.
• You cannot be claimed as a dependent on another person’s tax return.

                                                                                                                                                           CPF-001 10/08
High Deductible Health Plans
An HDHP provides comprehensive coverage for serious sickness or injury at an affordable price. It has a higher calendar year
deductible than is typical with most medical plans, but sets a limit on out-of-pocket costs you will pay for covered expenses.

The 2009 IRS Guidelines set minimum deductible and maximum out-of-pocket amounts for individuals and families as
• Minimum Deductible: $1,150 Individual / $2,300 Family
• Maximum Out-of-Pocket Amount: $5,800 Individual / $11,600 Family

HSAs and HDHPs Go Hand in Hand
HSAs and HDHPs work together to provide the medical coverage you need and an account to help pay for medical expenses
that are not covered. Your health care budget is divided between your HDHP premiums and contributions to your HSA. At the
end of the year, unspent funds stay in your HSA.

                                  Health Care
                                    Budget               HDHP
                                                                                Unused Dollars
                                                                           roll over year after year

• You may contribute up to the limits set by the IRS each year, regardless of your deductible or when you become eligible for the
  HSA. The maximum limits for 2009 are as follows:
        • $3,000 for individual coverage • $5,950 for family coverage
• If you are eligible for part of the year, you may contribute up to the annual maximum limit. However, you will need to remain
  HSA-eligible for the entire calendar year following the year you became eligible. Otherwise, the excess contribution will be
  subject to income tax and a 10% penalty.
• If you are over 55, you may make an additional catch-up contribution of $1,000 for 2009 and beyond. You may make the full
  contribution regardless of when you turn 55 or become HSA-eligible during the year.
• Contributions may be made by you, a third-party on your behalf, and your employer.
• You may make changes to your contributions on a prospective basis.
• A minimum yearly contribution of $100 is required.

Funds withdrawn from your HSA are tax-free if they are used to pay qualified medical expenses as defined by the IRS. For a sample
list of qualified medical expenses, please refer to the CoPower Eligible/Ineligible Medical Expenses List at under the “Information” link. For a full list of expenses, you can access our Health Care Expenses Table
on the HSA tab of the website.

Qualified expenses include but are not limited to:
• Fees for office visits, lab procedures, health screenings and medical equipment.
• Prescriptions drugs and most over-the-counter medications.
• Infertility treatment and In Vitro Fertilization.
• Vision services including eyeglasses, contact lenses and Lasik eye surgery.
• Dental services including orthodontia, crowns and gum treatment.
• Qualified long-term care services and long-term care insurance.
• COBRA or other medical insurance premiums during periods of unemployment, or if you are over 65. Medigap premiums are
  not permitted.
Distributions made for any reason other than a qualified medical expense are subject to income tax and a nominal 10%
penalty. The 10% penalty is waived in the case of death or disability, or for distributions made to individuals age 65 and older.

Individuals may make contributions to HSAs only when eligible, but can take distributions at any time.

Convenient Access to HSA Funds
CoPower offers a variety of withdrawal methods to provide you with quick and easy access to your account.
• The HSA Bank VISA® debit card makes it easy and convenient to instantly pay for qualified health care services
  up to the amount available in your account.*
• If you prefer, you may also choose the convenience of checks, for a nominal fee, to access your account.
• If you pay your expenses out of pocket, you also have the option to submit a withdrawal form and HSA Bank
  will send you a distribution check for a nominal fee.
• You also have the option to do an ATM or point-of-sale PIN withdrawal for a nominal fee.
To make sure you receive any network discounts associated with your health plan, wait to pay the provider until you have
received an explanation of benefits (EOB).

Customer Service and Account Information
With CoPower’s HSA, you have access to your account information in various ways.
• Dedicated Personal Bankers are available Monday through Friday (except Holidays) from 5 am to 7 pm PST, to answer any of
  your questions. Dedicated Spanish-speaking representatives are available from 5 am to 5 pm PST. Call 800-357-6246 with your
  HSA questions.
• Internet Banking through provides you access to transaction details, check images, year-to-date account
  information, and so much more 24 hours a day, 7 days a week!
• Call the automated Bank Line at 800-565-3512 to check account balances by phone at any time!

Account Fees
CoPower charges a fee for the administration of the FlexOptions HSA, which may be paid by your employer. HSA Bank
charges certain custodial fees directly to your HSA. You will receive detailed fee information in your Welcome Kit.
The fees include the following:
• Monthly Bank Account Fee (waived for balances >$3000)             $2.25
• Fifty HSA Checks –optional                                        $7.95
• Per PIN withdrawal (ATM or point-of-sale)                         $2.00
• Manual withdrawal request                                         $4.00

What Do I Need to Do?
Enroll in the HSA
1. Complete and Submit the CoPower HSA Contribution Form
      • Determine the maximum contribution you can make to your HSA for the current year using Section A of the CoPower
        HSA Contribution form.
      • Decide how much of the Maximum Employee Contribution you wish to contribute to your account based on anticipated
        health expenses and desired amount of tax-free savings. (You can use the Employee Contribution Worksheet to help
        estimate your expenses.)
      • Enter your annual contribution, including your per pay period contribution and number of pay periods, in Section B.
        Indicate whether your contributions will be made on a pre-tax or post-tax basis. Check with your employer if you are
        uncertain of the tax treatment of your contributions.
2. Complete the CoPower HSA Bank Health Savings Account Application and Eligibility Form. Your application will not be
   complete unless all information is provided.
      • To verify your identity, provide your Social Security Number, Date of Birth, Street Address and Home Telephone Number.
      • If listing a POA (Authorized signer on your account), you must provide the Name, Social Security Number, Date of Birth,
        Street Address and Home Telephone Number.

* Please note that this card may not be used at all merchants who accept VISA debit cards.
       When the Plan Starts

1. Once CoPower has processed your enrollment applications, you will receive an Election Confirmation letter. Review the
   information and contact CoPower within 10 business days if any corrections are required.
2. Once account is established at HSA Bank, you will receive
     • Notification of account opening – if you provide your e-mail address at enrollment, you will receive an e-mail notification
       that your account has been opened;
     • An Account Welcome Kit providing you with your account number, important account information, and additional
       disclosure information;
     • Debit card(s) and PIN mailer(s) will arrive separately in plain white envelopes 8-10 business days from account opening
       (Please note that if you have another account with CoPower, such as LHFSA, you will receive a separate card for that plan);
     • Checks (if requested) will arrive 8-10 business days from account opening if the $7.95 check fee is included, or once
       there are available funds in your HSA account.
3. Based on your election, funds will be deducted from your paycheck each pay period.
4. You are able to use up to the amount available in your account. As the account holder, you are responsible for reporting
   medical and non-medical expenses from your HSA to the IRS. Remember to save your receipts.

Frequently Asked Questions
Who can spend the money in my HSA?                                              Are employer contributions to HSAs considered taxable income?
HSA qualifying health care expenses include out-of-pocket expenses for          Employer contributions to HSAs are not considered taxable income by
IRC 213 medical care for you, your spouse and your dependents.                  the Federal government and most states. However, in states that have not
                                                                                adopted HSA law, such as California, employee and employer contributions
When can my HSA funds be used?                                                  are considered taxable income. Employees should contact their tax advisor or
Although you are required to be enrolled in an HDHP in order to make            local tax agency for more information on state filing instructions.
contributions to your HSA, you may withdraw funds from your account any time.
                                                                                Who is responsible for substantiating expenses for an HSA?
Who is the custodian of my HSA?                                                 Substantiation of eligible expenses is between the account holder and the IRS.
HSA Bank, a division of Webster Bank, N.A., acts as the custodian of your       Neither your employer nor CoPower is required to verify that expenses are
HSA. HSA Bank is CoPower’s preferred HSA trustee and is a recognized            eligible. It is recommended that you keep receipts of qualified expenses.
leader in the HSA market. All funds are FDIC insured through Webster Bank
to ensure your HSA funds are safe and secure.                                   Can I contribute the maximum annual amount if my plan did not
                                                                                start at the beginning of the calendar year?
How do I know how much money I have in my account?                              Yes. If you became eligible for the HSA in the middle of the year, you may still
You will receive a quarterly bank statement from HSA Bank. You can also         contribute up to the annual maximum limit. However, you will need to remain
access your account activity online at for real-time            eligible for the following calendar year to avoid income tax and a 10% penalty
balances and transactions, or call the HSA Bank automated bank line at          on the excess contribution. The excess contribution is the amount that is above
800.565.3512.                                                                   the IRS annual limit prorated by the number of months you were HSA-eligible.
                                                                                If you are not sure whether you will be HSA-eligible for the following calendar
Are rollover contributions to HSAs permitted?                                   year, you should consider making prorated contributions to your HSA.
Rollover contributions from Archer MSAs and other HSAs into a HSA
are permitted. Rollover contributions need not be in cash and are not           Do I need to submit receipts when I use my CoPower HSA Bank Visa?
subject to the annual contribution limits. Rollovers from an HRA (Health        No. CoPower is not required to substantiate eligible expenses; therefore you
Reimbursement Arrangement) to an HSA are not permitted. Rollovers from          do not need to submit receipts. You should, however, retain all receipts for
an IRA or an HFSA are permitted under special conditions.                       your records.

Are investment options available?                                               Will participation in a Health Flexible Spending Account (HFSA)
Yes. You can put your HSA funds to work for you and earning on the              make me ineligible for an HSA?
investments are tax free. To learn more about the investment options            Participation in an FSA, yours or your spouse’s, may make you ineligible for an
available, call 800-357-6246, or visit                         HSA unless it is either “limited purpose” (limited to dental, vision, child care
                                                                                or preventive care) or “post-deductible” (pay for medical expenses after the
What tax reporting is required?                                                 plan deductible is met).
The IRS requires you to report your total HSA deposits and withdrawals
by completing IRS form 8889 with your income tax return each year. HSA
Bank will use Form 5498-SA to report contributions to your HSA and Form
1099-SA to report distributions from your HSA. HSA Bank is required to
file both of these forms with the IRS and provide you with copies.

                    CoPower • 1600 W. Hillsdale Blvd. • San Mateo, CA 94402 • Tel: 888.920.2322 •

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