Preparing for a Healthy Future Understanding Health Savings Accounts (HSAs) Presented by: Sam Mitchell and Scott Riordan

Transcription

1 Preparing for a Healthy Future Understanding Health Savings Accounts (HSAs) Presented by: Sam Mitchell and Scott Riordan

2 In % of all U.S. Households will have a Health Savings Account

3 HSA Options are on the rise Individuals eligible for an HSA million 13.5million 10million Source: America s Health Insurance Plans, (AHIP), May 2012

4 HSA-HDHP Enrollees States with the highest enrollment Vermont 19.9% Minnesota 14.3% Montana 12.1% 7.8% Utah 11.5% Connecticut 10.6% Statistics based on: Under 65 population with private insurance Source: America s Health Insurance Plans, (AHIP), May 2012

5 HSA-HDHP Growth 25% of employers offered a HSA-eligible plan and 10% of employees enrolled 48% of employers offered a HSAeligible plan and 25% of employees enrolled % of employers offered a HSA-eligible plan and 15% of employees enrolled Source: Towers Watson, 2012

6 Today s HSA Landscape Offer a HSA-Eligible plan for their individuals (+5%) Offering a HSA-Eligible plan contribute funds to an HSA (+3%) Make the HSA-Eligible plan the default option (+5%) Of employees enrolled in a HSA-eligible plan (+5%) Source: Towers Watson, 2012

7 Background Medicare Prescription Drug, Improvement and Modernization Act of 2003 Effective January 1, 2004 Tax exempt trust owned by the individual Used to pay for qualified medical expenses

8 Benefits of HSA Allows accounts to grow tax-free Tax-free distributions on qualified medical expenses Accounts stay with the individual (similar to IRA). No Use or Lose! HSAs can be invested in mutual funds, bonds, CDs, etc.

9 Who s Eligible? Anyone enrolled in an eligible HSA-HDHP plan may establish an account Minimum Deductibles Maximum OOP $1,250 $6,250 $2,500 $12,500

10 Who Can (or Can t) Contribute? May Contribute Individual Employer Family Members S-Corp Shareholders Cannot Contribute Not enrolled in HDHP Entitled to Medicare Claimed as a dependent Enrolled in another health plan Contributing to FSA or HRA

11 Contribution Limits Coverage Level 2013 Max 2014 Max Individual $3,250 $3,300 Family $6,450 $6,550 Catch-up contributions are allowed if you are over 55 years old and ends at age 65 ($1k per year). The annual maximum cannot be exceeded and is inclusive of all contributions made to the account. Rollovers from another HSA are allowed and don t impact the annual contribution maximum. A one-time rollover from an IRA is allowed but does apply to the annual contribution limit.

12 Spenders, savers and everyone in between Spenders Combo Savers Do not invest their account for the future Significantly more likely to have family coverage than Savers Motivated to establish HSA to pay current medical expenses 67% More likely to invest some of their balance for retirement Want access to their HSA when they have a medical expense Like spenders, combos receive higher employer contributions than savers 27% Invest a majority of their HSA for retirement More likely to have individual coverage than the Spenders Focused on being able to cover deductible and preserve money 6%

13 Profiling the HSA Holder The Facts: Account Balance: $1,736 Annual Contribution Amount: $1,800 Annual Distribution Amount: $1,417 Mr. Joe Saver Annual Tax Savings: $486 Age 45 HSA Account Holder since 2009 Source: JP Morgan Chase, May 2013

14 Contribution Options Fund HSA through Payroll vs. Fund HSA Direct Contributions are deducted through payroll Employer sends contribution funds to bank or custodian Funds are held (and possibly invested) until used Individual send contribution funds directly to bank Funds are held (and possibly invested) until used Individual receives tax benefits through filing Form 8889

15 Reimbursements Qualified medical expenses for account beneficiary, spouse, or dependents Qualified medical expenses as defined in IRS Code Section 213(d) as well as: COBRA premiums Qualified LTC premiums Any health insurance premiums paid, other than Medicare supplemental policies, by individuals age 65 and over Note: An individual does not have to be actively in the HSA-Eligible plan to utilize the account for qualified expenses.

16 Coordinating with FSAs and HRAs HSA contributions prevent individuals from a full-purpose FSA or HRA An alternative is a limited-purpose FSA or HRA Watch out for grace period provisions Dependent Care and Commuter Benefits are not impacted

17 Comparison Chart FSA HRA HSA Uniformed Coverage Rollovers allowed Employee Contributions Employer Contributions COBRA eligible

18 Quiz Time! Which benefit always provides a Uniformed Coverage provision? a.) Health Savings Account b.) Health Flexible Spending Account c.) Health Reimbursement Arrangement True or False? HSA Contributions made by an Employer do not impact the annual maximum. FALSE

19 HSA Building Blocks Phase 3 Communicate Open Enrollment Phase 2 Initiate Update 125 Document HSA funding options Phase 1 Prepare Offer HSAeligible Plan Address FSA Grace Period Add Limited Purpose FSA

20 The Road to Retirement HSAs are an effective tool to offset healthcare costs in retirement Annual Healthcare Costs Retirees Age % 13% 36% 35% $0-3K $3-6k $6-10k $10k+

21 How Can We Help? If you have questions on what you can do to combat some of these key challenges, we would love to help. Please feel free to contact us: Sam Mitchell (781) (Direct) Scott Riordan (781) (Direct)