HRA s and HSA s GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. AJG.COM G-FORMS\GBS Forms\Template - Word - 1 margins.

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1 HRA s and HSA s 1. HRA/HSA What Are They? 2. Can I have ther cverage and still cntribute? 3. Can I cntribute t my FSA if s, full r limited? 4. Can I have bth an HRA and an 5. Can I have bth an HSA and a Pst- Emplyment Savings Plan (HCSP/ICMA-RC)? 6. Hw much can I r my emplyer cntribute t either my HRA r 7. Are HSA cntributins pre-tax? 8. Can I change my HSA cntributins thrughut the year? 9. Hw d I get mney ut f my HRA r 10. Can I take mney ut f my HRA r HSA fr nn-qualified expenses? 11. Can I take mney ut f my HRA r HSA fr anyne ther than myself? 12. What are cnsidered qualified expenses? 13. Can I delay enrllment in Medicare s that I can remain HSA-eligible? 14. Can I transfer funds frm an Individual Retirement Accunt (IRA) t my 15. If I elect the HDHP mid-year, hw much can I cntribute t my 16. If I have a family status change mid-year and drp the HDHP, what is the maximum amunt I can cntribute t my 17. If I have family status change and my HDHP cverage changes frm single t family cverage, what is the maximum amunt I can cntribute t my 18. If I have a family status change that changes my HDHP cverage frm family t single, what is the maximum amunt I can cntribute t my 19. What happens t my HSA if I get a jb at a new cmpany that desn t have an HSA-qualified ptin? 20. What happens t these accunts when I leave my emplyer? G-FORMS\GBS Frms\Template - Wrd - 1 margins.dcx 1

2 1. HRA/HSA What are they? HRA s and HSA s are accunts that are funded by either the emplyer (HRA s) r emplyee r emplyer (HSA s) that are used t reimburse the emplyee fr certain qualified expenses. Think f them as savings r checking accunts Balances rll frm year t year withut the risk f frfeiture (HRAs can if a spend dwn is allwed) N maximum fund balance In rder t be eligible, emplyees must enrll in the emplyer s high deductible health plan (HDHP). 2. Can I have ther health cverage and still cntribute? If yu are in a HRA, yur emplyer can cntribute even if yu have ther cverage. If yu are in an HSA, then yu cannt be: Cvered by ther nn-qualified HDHP including traditinal health plans, FSA, HRA, r spuse s health and/r FSA plans Enrlled in Medicare Claimed as a dependent n anther s tax return Cvered under TRICARE 3. Can I cntribute t my FSA if s, full r limited? If yur emplyer is cntributing t yur HRA, then yu and/r yur spuse can have a full FSA fr medical, dental and visin. If yu and/r yur emplyer is cntributing t yur HSA, then yu and/r yur spuse may nly enrll in a limited FSA (dental and visin nly). Spuse s full FSA is cnsidered ther cverage since the emplyee is eligible fr reimbursement f medical expenses thrugh the spuse s FSA and wuld make the emplyee ineligible fr HSA cntributins. If an emplyee (r emplyer) is nt funding the HSA but the emplyee chses t enrll in the HDHP they wuld be eligible fr full FSA prvided they d nt elect t fund the HSA fr the full calendar year. 4. Can I have bth a HRA and an Yu may have balances in bth accunts, but yu cannt cntribute (nr can yur emplyer cntribute) t bth at the same time. If yu have a balance in yur HRA and are nw enrlled in the HDHP/HSA, remember that yu will be limited t dental and visin in that HRA. If yu have a balance in yur HSA and are nw enrlled in the HDHP/HRA yu may use bth accunts fr all medical, dental and visin expenses. 5. Can I have bth an HSA and a Pst- Emplyment Savings Plan (HCSP/ICMA-RC)? G-FORMS\GBS Frms\Template - Wrd - 1 margins.dcx 2

3 Yu may have balances in bth accunts, but yu cannt cntribute (nr can yur emplyer cntribute) t yur HSA if yu are eligible t receive reimbursement frm yur pst-emplyment savings plan. This usually des nt affect active emplyees unless they are eligible fr reimbursement frm a prir emplyer s pst-emplyment savings plan. If yu are terminated r retired and wish t cntinue cntributins t yur HSA, yu will need t waive yur ability t receive reimbursements frm yur pstemplyment savings plan. (MSRS des indicate in their cmmunicatins t retirees that if a cntributin has been made t an HSA at any time during the calendar year reimbursements must be limited t dental and visin nly fr the entirety f the calendar year.) If yu are terminated r retired and n lnger cntributing t yur HSA, yu may use balances in bth accunts t pay eligible expenses. 6. Hw much can I r my emplyer cntribute t either my HRA r The Emplyer establishes the cntributin amunt fr yur HRA. HSA limits are set each year by the federal gvernment Maximum annual cntributins $3,400/$6, Maximum annual cntributins $3,450/$6,900 Maximums include bth emplyer and emplyee s $ s Special HSA catch-up prvisins fr age 55+: Annual cntributins may be increased by $1, Are HSA cntributins pre-tax? Yes, emplyer cntributins are always pre-taxed. Emplyees may cntribute n a pre-tax basis thrugh payrll deductins. Cntributins may be adjusted thrughut the year N status change required Emplyees may als cntribute after-tax mney directly int their HSA frm savings, etc. Dllar fr dllar ffset n their incme tax returns 8. Can I change my HSA cntributins thrughut the year? Yes, yu may change yur cntributins anytime thrughut the year with r withut a life event r status change. 9. Hw d I get mney ut f my HRA r Yu may request a withdrawal fr qualified expenses nly frm yur HRA by either using yur debit card (if applicable) r by submitting a reimbursement request frm. Must prve yu had an eligible expense at time f reimbursement May be limited as t hw lng in the future yu have t submit a request fr reimbursement usually a year. Mney may be withdrawn at any time fr qualified r nn-qualified expenses frm yur HSA by using yur debit card. Yu will nt be asked t prve yu had a qualified expense at the time f withdrawal, but the IRS may ask yu later s keep yur receipts! Yu dn t have t take the mney ut fr qualified expenses in the year the expenses were incurred. 10. Can I take mney ut f my HRA r HSA fr nn-qualified expenses? Yu cannt take mney ut f yur HRA fr any nn-qualified expenses. Yu can take mney ut f yur HSA fr nn-qualified expenses, but if yu are under age 65 and nt disabled yu will pay incme tax and a 20% penalty. Once yu turn 65 r becme disabled, yu can take mney ut fr nn-qualified expenses (yu G-FORMS\GBS Frms\Template - Wrd - 1 margins.dcx 3

4 will still pay incme tax, but n penalty). 11. Can I take mney ut f my HRA r HSA fr anyne ther than myself? Generally, yes, yu may take mney ut f yur HRA r HSA fr yu, yur spuse and dependents, even if they are nt n yur HDHP. Hwever, if yu wish t receive reimbursement fr qualified expenses fr a spuse and dependent frm yur HRA and they are nt cvered under yur emplyer HDHP then they must be cvered by anther qualified grup health plan. Be careful with the HSA thugh, since yu can nly take mney ut f yur HSA fr a dependent that is a tax dependent f yurs. 12. What are cnsidered qualified expenses? Fr bth HRAs and HSAs, qualified expenses include medical, dental and visin expenses. Same expenses as yur FSA. See publicatin 502 (available at HRAs can als reimburse yu fr insurance premiums nce yu terminate emplyment. In additin t qualified expenses, HSA funds can be used t pay fr sme insurance premiums: COBRA/Cntinuatin premiums while n the frmer Emplyer s plan Lng-term care Medicare (B & D) Medicare Supplement premiums are nt allwed 13. Can I delay enrllment in Medicare s that I can remain HSA-eligible? Yes. Hwever because f ptential ramificatins, please seek qualified advice. 14. Can I transfer funds frm an Individual Retirement Accunt (IRA) t my Individuals can make a ne-time, tax-free trustee-t-trustee transfer frm an IRA t an HSA. The individual must remain enrlled in an HSA-qualified plan and eligible fr an HSA fr at least the next 12 mnths fllwing the fund transfer. Nte that these transfer amunts d cunt against the statutry cntributin limits utlined abve. 15. If I elect the HDHP mid-year, hw much can I cntribute t my If yu enrll mid-year, in general yur cntributins are limited by the 1/12 rule. Single Cverage: Fr each full calendar mnth f qualified cverage, yu may cntribute up t 1/12 f the $3,450 annual limit. Family Cverage: Fr each full calendar mnth f qualified cverage, yu may cntribute up t 1/12 f the $6,900 annual limit. Hwever, yu can cntribute mre than is permitted by the 1/12 rule if yu stay enrlled fr the next year, which is knwn as the testing perid. The testing perid requires yu t maintain the HDHP thrugh the entire mnth f December f the current tax year and all twelve (12) mnths f the next tax year. The type f HDHP cverage (single r family) yu have n December 1 gverns the amunt that yu can cntribute fr the year. Examples: If enrlled in single cverage n December 1, yu may cntribute up t $3,450. If yu are enrlled in family cverage n December 1, yu may cntribute up t $6,900. In each instance, if yu are at least age 55, yu can als make a $1,000 catch up cntributin. These higher cntributins will be taxed and subject t an additinal 10% penalty tax if yu fail t stay enrlled in the HDHP during the entire testing perid. Please see IRS Publicatin 969 and IRA Frm 8889 at fr examples and fr a testing perid wrksheet. 16. If I have a family status change midyear and drp the HDHP, what is the G-FORMS\GBS Frms\Template - Wrd - 1 margins.dcx 4

5 maximum amunt I can cntribute t my If yu drp the HDHP mid-year, yur cntributins are limited by the 1/12 rule. Single Cverage: Fr each full mnth f cverage, yu may cntribute up t 1/12 f the $3,450 annual limit, plus 1/12 f any catchup cntributin. Family Cverage: Fr each full mnth f cverage, yu may cntribute up t 1/12 f the $6,900 annual limit, plus 1/12 f any catchup cntributin. 17. If I have a family status change and my HDHP cverage changes frm single t family cverage, what is the maximum amunt I can cntribute t my penalties. Yu can als chse t let the mney sit in the accunt until yu need it later n in life. Yu cannt, hwever, cntribute t the accunt r have cntributins made n yur behalf if yu d nt enrll in HSA-qualified HDHP insurance plan. 20. What happens t these accunts when I leave my emplyer? Fr an HRA, the accunt itself remains with the emplyer, hwever emplyees cntinue t have access t the funds thrugh a spend-dwn feature. Fr an HSA, the emplyee wns the accunt and can keep it with the current administratr/bank r mve it t anther administratr/bank. If yur status changes frm single t family n r befre December, yu may make a full family cntributin, including any catch-up cntributin. If yu make yur cntributin fr the full year based n enrllment in family cverage, yu will be subject t the testing perid described in questin If I have a family status change that changes my HDHP cverage frm family t single, what is the maximum amunt I can cntribute t my Yu are permitted t cntribute 1/12 th f the family annual maximum fr each full mnth yu are cvered by a family HDHP, plus 1/12 th f the single annual maximum fr each full mnth yu are cvered by a single HDHP. Yu may als cntribute 1/12 f any catch-up cntributin. 19. What happens t my HSA if I get a jb at a new emplyer that desn t have an HSA-qualified ptin? Yur HSA is yur mney, s it ges with yu frm jb t jb. If yur new emplyer has an HSA qualified HDHP plan and yu enrll in that plan, yu can cntinue cntributing funds t yur existing HSA. If nt, yu can cntinue t spend the mney in yur accunt t meet yur family s expenses tax-free, r use fr ther nnqualified expenses subject t taxes and G-FORMS\GBS Frms\Template - Wrd - 1 margins.dcx 5