Gold Plan with HSA Rules of the Road

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1 Gold Plan with HSA Rules of the Road Over the past several weeks you have received information about the new STERIS Gold Plan with an HSA which will be offered during the upcoming Open Enrollment. This final update contains Frequently Asked Questions which describe IRS Rules of the Road for Health Savings Accounts. Since an HSA is a tax advantaged savings account, the IRS imposes a number of rules and penalties. For example, you may make tax free contributions to a Health Savings Account (HSA) only if you are enrolled in a High Deductible Health Plan. And, your HSA funds can be withdrawn tax free, but only to pay for qualified medical expenses. If you withdraw funds for non medical expenses, you will pay taxes and a 20% penalty, if you are under age 65. If you are interested in enrolling in the new Gold Plan with an HSA during Open Enrollment, read on to learn more about the IRS requirements. Or, visit the Gold Plan with HSA website to learn more now. Questions? E mail benefits@steris.com or call the Benefits helpline at HSA Eligibility Requirements What are the requirements for opening an HSA? To deposit money into an HSA, you must be enrolled in an HSA compatible health plan. The new STERIS Gold plan is an HSA compatible plan. In addition: You cannot be covered by other health coverage, unless it is also HSA compatible; You cannot be enrolled in Medicare; You cannot be claimed as a dependent on someone else s tax return. Can I cover my children and other dependents under this plan? Yes, children are eligible for coverage under the plan up to age 26. Your child must be a tax dependent to use your HSA. If your child is not a tax dependent but is covered by your plan, he or she may be able to open his or her own HSA. If my spouse is on Medicare, can I open and contribute to an HSA? Yes. If a spouse will be or is already covered by Medicare, you can sign up for the Gold Plan and open and contribute to an HSA. If you file taxes jointly with your spouse, you can use your HSA to help pay for your spouse s qualified expenses, such as his or her Medicare premiums. My spouse has an Flexible Spending Account (FSA) or Health Reimbursement Account (HRA) through his/her employer. Can I also have an HSA? You cannot have an HSA if your spouse s FSA or HRA can pay for any of your medical expenses before you meet your HSA compatible health plan s deductible. What happens if I leave my current employer, or change health plans? The money in your HSA is yours to keep. If you leave your company or change health plans, you take your HSA funds with you. If you switch to a health plan that makes you ineligible to continue depositing money to an HSA, you may continue to use the money in your account for qualified medical expenses, but you cannot make additional HSA deposits.

2 If I m 65 or older and decide to retire, what happens to my HSA? After you turn 65 or start receiving Medicare benefits, you may withdraw money tax free from your HSA for medical expense. When your Medicare coverage starts, you can use your HSA to pay your Medicare premiums, deductibles and co payments. If you withdraw funds from the HSA after age 65 (or if you are disabled) for nonmedical expenses, you will pay income taxes, but you will not pay the 20% penalty. What if I die? Establishing a beneficiary for your account will save your loved ones a lot of difficulty in the event of your death. It is one of the first actions we recommend when you open your HSA. A spouse beneficiary can assume ownership of the account without tax penalties or receive a taxable lump sum distribution. All other beneficiaries would receive a taxable lump sum. Taxes are assessed on the value of the account on the date of death. Penalty taxes do not apply. HSA Contributions When you enroll in the Gold Plan, an HSA is automatically opened for you at HealthEquity. The STERIS contribution, along with any additional pre tax payroll contributions you choose to make, will be deposited into your HSA account each pay period. Is there a limit on how much I can put into my HSA each year? Yes. The IRS limits how much you (and others) can put into an HSA each year. The IRS annual maximum includes STERIS s contributions, so the maximum amount you can contribute must be reduced by the amount STERIS contributes. The 2015 limits for a full year of participation are: $3,350 for Self only coverage $6,650 for Self plus Spouse coverage $6,650 for Self plus Family coverage During the year in which you turn age 55 and every year thereafter an additional $1,000 per year catch up contribution is allowed Any contributions above these limits are subject to income tax and a 6% penalty on the excess amount. What if I have a qualified status change? If you have a qualified status change, such as a marriage, divorce, have a baby or adopt or obtain legal guardianship of a child, and you change your health plan coverage level, the amount STERIS contributes to your HSA will be pro rated. Here is an example of an employee who gets married and adds their spouse and young step child to coverage on July 1. January 1st June 30th: 6 months of self only contribution: $250 July 1st December 31st: 6 months of self and family coverage: $500 In this case, your total annual STERIS HSA contribution would be $750. How do I contribute to my HSA? There are a couple of ways to easily contribute to your HSA. Payroll deduction: Pre tax dollars are taken out of your paycheck and deposited into your HSA. Post tax contributions to your HSA from a personal banking account, which you may be able to deduct when you file your income tax return.

3 If my spouse has her/his own health plan with an HSA, can I also contribute to it? Yes. But the IRS says the two of you together can only contribute up to the family limit. Both of you can contribute to just one of your HSAs, or you can contribute to both HSAs as long as the total amount doesn t go above the annual family limit of $6,650 in You must also count STERIS s contribution toward this annual limit. A $1,000 additional annual contribution per account is permitted for those ages 55 and older. Can other people put money into my HSA? Anyone can make a deposit to your account (you, your spouse, your employer, etc.) but as the account owner, you are the only one who benefits from the contributions as a deduction on your personal tax return. You don t need to claim contributions to your HSA made by your employer or others as income on your federal tax return. I have an HSA with another bank. Can I keep it? Do I have to open an account with HealthEquity? You can keep the HSA account you have. But, all contributions from your paycheck, as well as STERIS contributions, will only go to your Health Equity HSA. Also, you will have to pay any bank charges for your other HSA. You can also transfer your HealthEquity HSA to another financial institution if you choose to do so. If I have multiple HSAs can I consolidate them? Yes. You can initiate a tax free transfer from one HSA to another. HSA Eligible Expenses You can use your HSA to pay for qualified medical expenses. A qualified medical expense is a health care service, treatment or item that the IRS says can be purchased without having to pay taxes. A complete list can be viewed in IRS Publication 502 located at Do I really have to pay the full cost of medical and pharmacy services before I meet the deductible? Yes. You will pay for all covered health care services until you reach your deductible. Remember, you can use an HSA to help pay the deductible, or you can save it for future expenses. Be sure to use network providers to help lower your cost. For what medical expenses may the HSA be used? Once your HSA is established, you can use it to pay for subsequent qualified medical expenses incurred by you or an eligible dependent. Payments, also referred to as distributions, are tax free as long as they are used for qualified medical expenses incurred after the establishment of your HSA. You can pay a provider from your HSA directly, or you can pay some other way and reimburse yourself later. There is no deadline to reimburse yourself for a medical expense you have paid out of pocket. You can do it next week, next year or several years after the expense is incurred. Simply keep the documentation (receipt/explanation of Benefits, or EOB) of the expense, or upload it to the HealthEquity member portal Documentation Library. You will need to be able to provide documentation if you are audited by the IRS. Do I really need to keep all my receipts? Yes, you should keep all records of your purchases in case you need to show the IRS that your HSA was used for qualified medical expenses. You can store your receipts by uploading them to your HealthEquity document library.

4 What if I use my HSA to pay for non qualified expenses? If an HSA is used to pay for care or services that are not qualified medical expenses, you will have to pay a 20 percent penalty, plus taxes on the money spent. For example, if the non qualified medical expense was $100, the penalty would be another $20, plus taxes. This penalty does not apply if you are 65 or older, die or are disabled, but income tax would apply. HSA and FSAs Can I have an HSA and an FSA? If you participate in an HSA, you may not also participate in a Flexible Spending Account (FSA) for medical expenses. You may however, establish a limited purpose FSA but only to pay for eligible unreimbursed dental and vision expenses. Also, if you have a FSA in 2014, you must spend all of the funds in that account before December 31, 2014, in order to participate in or receive STERIS s HSA contributions beginning January 1, If you do not spend down your 2014 FSA by December 31, 2014, your 2015 HSA contributions will begin April, 1, Tax Reporting Because your HSA is a tax advantaged account, the IRS requires you to report account deposits and withdrawals on your annual federal income tax return. HealthEquity will send to your home two tax forms, as applicable, each year: 1099 SA and 5498 SA. IRS Form 1099 SA If you had distributions from your account, they will be reported on the IRS Form 1099 SA. Unlike other 1099 forms, you are not required to include the amounts reported on this form as income unless they were used for non qualified expenses. The form is mailed (or made available to you electronically) by the end of January each year, and is needed to properly file your personal income tax return. IRS Form 5498 SA Form 5498 SA is used to report contributions and rollovers to your account, and the account s fair market value (FMV). This form is not delivered until the tax filing deadline has passed, and is not needed to file your taxes. The form is delivered in May each year. This is because you are allowed to contribute to your account up until the filing deadline, and the form captures all contributions for the tax year. HSA contributions are reported in boxes 2, 3 and 4. IRS Filing Form 8889 Form 1099 SA and Form 5498 SA can be used, as necessary, to complete and submit IRS Form 8889 with your annual tax return. Form 8889 is used to calculate your HSA deduction amount and report HSA distributions. HSA Qualified Medical Expenses A Health Savings Account (HSA) can be used to pay for many covered health care services for yourself, your spouse and your tax dependents. It can also be used to pay for many other health care services and items that may not be covered by your health plan, like hearing aids and contact lenses, as long as they qualify.

5 Listed below are examples of qualified expenses. The Internal Revenue Service (IRS) decides which expenses can be paid from an HSA and can change the list at any time. Visit to view IRS Publication 502 for an up to date list of all qualified expenses. Acupuncture Alcoholism treatment Ambulance Artificial limbs Artificial teeth Blood sugar test kits for diabetics Breast pumps and lactation aids Chiropractor Contact lenses and solutions Crutches Dental treatments including X rays, cleanings, fillings, braces and tooth removals Doctor s office visits and procedures Drug addiction treatment Drug prescriptions Eyeglasses and vision exams Fertility treatment Health plan deductibles and copayments Health plan premiums for COBRA plans, long term care insurance and health continuation insurance while receiving unemployment benefits Hearing aids and batteries Hospital services Insulin Laboratory fees Laser eye surgery Long term care services (limited) Physical therapy Psychiatric care if the expense is for mental health care provided by a psychiatrist, psychologist or other licensed professional Special education for learning disabilities Speech therapy Stop smoking programs including nicotine gum or patches Surgery, excluding cosmetic surgery Vasectomy Walker Weight loss program if it is a treatment for a specific disease diagnosed by a physician Wheelchair You cannot use an HSA to buy the following health care services and items: Cosmetic surgery Costs or expenses reimbursed from another source, such as health coverage or a flexible spending account Diaper service Electrolysis or hair removal Health club dues Household help Maternity clothes Nutritional supplements, such as multivitamins general good health Over the counter medicines not prescribed by a doctor Personal use items, such as toothbrush, toothpaste, etc. Swimming lessons Teeth whitening