Scott Florsheim, American Fidelity, WASBO May 2016

Transcription

1 Scott Florsheim, American Fidelity, WASBO May 2016 This presentation and the information included herein are the property of the American Fidelity Health Services Administration (AFHSA) and may not be copied, shared or distributed without express permission of AFHSA. Neither AFHSA nor American Fidelity Assurance Company are providing tax advice. Individuals with ESB an interest in HSAs should contact their tax advisor.

2 Checking Account Health Savings Account Savings Account Retirement Accounts ESB

3 Individually owned savings account No maximum on amount that can be accumulated Funds may be used to pay for qualified medical expenses for spouse and tax dependents Health Savings Account Portable Since individual owns the accounts, I does not matter where individual lives, is employed, etc. Contributions, qualified distributions, interest earnings tax free No maximum to the number of HSAs an individual can own, just limits on how much can be contributed each year. ESB

4 Qualified Distributions HSA T A X F R E E Qualified medical expenses spouse & tax dependent children Deductible Co-insurance/Co-pay Over the counter drugs Effective January 1,2011, over the counter drugs are only considered eligible if prescribed by a doctor. Dental Expenses Vision Expenses ESB

5 Qualified Distributions HSA T A X F R E E Qualified medical expenses spouse & dependent children (even if not covered under HDHP) Health plan coverage while receiving federal or state unemployment benefits. COBRA continuation coverage. Medicare premiums: Part A, B & D LTC premiums (portion of) ESB

6 Qualified Distributions Even if account holders have not saved enough in HSA to pay for an expense, can always request a distribution later There is no deadline on reimbursements HSA There is no requirement to use HSA funds for all expenses ESB

7 Any amounts used for other reasons are taxable as income & subject to an additional 20% penalty. 65 and over, no longer subject to 20% tax penalty. Individuals are responsible for keeping supporting documentation as with any other tax deductions.

8 Even if account holders have not saved enough in HSA to pay for an expense, can always withdraw funds later There is no deadline on reimbursements There is not requirement to use HSA funds for all expenses

9 There is no deadline on reimbursement Qualified Distributions HSA HSA HSA HSA HSA

10 Maximum Contribution Per Tax Year Contribution Limits HSA Coverage Individual $3,350 $3,350 Family $6,650 $6,750 Maximums indexed annually by Treasury Department Pro-rate based on eligibility Contributions $1,000 Additional Contribution if you are age 55 and older! ESB

11 Based on a tax year, not a plan year. If QHDHP coverage is less than one year, can make max contributions -- but there are requirements. To avoid the requirements, pro-rate contributions. Can be made as late as April 15 of the following year.

12 Requirements to Contribute to an HSA: 1. Must have a qualified HDHP to contribute to an HSA 2. Cannot have Medicare Part A or B 3. Cannot be claimed as a tax dependent on anyone s else s tax return 4. Cannot have any other coverage that pays first dollar expenses below the deductible Ex: FSAs

13 Traditional Medical 73% of the population spend$500 or less on medical expenses per year.* $ High Deductible Health Plan 100% of Premium Goes to Insurance Company More affordable premiums -- savings can be placed in HSA *AmericanHealthValue.com, 2004

14 Deductible must apply to all medical expenses --- including prescriptions. Exceptions: Preventative Care Individual deductibles must be at least $2,300 to satisfy the family minimum HDHP deductible. High Deductible Health Plan

15 Requirements to Contribute to an HSA: 1. Must be enrolled in a qualified HDHP to contribute to an HSA 2. Cannot have Medicare Parts A, B, or D 3. Cannot be claimed as a tax dependent on anyone s else s tax return 4. Cannot have any other coverage that pays first dollar expenses below the deductible, including General Purpose Health FSAs ESB

16 FSA Tax-exempt trust/custodial account Funds must be deposited before using HSA contributions can be changed throughout the year IRS sets limits indexed every year Balances roll year-to-year. No limit on accumulation. Account holder responsible for keeping receipts and determining eligibility Interest can be applied Account holder dies: Spouse becomes owner. Otherwise, beneficiary claims as income. Account set up by employer Full annual election available first day of plan year No mid-year changes without a qualifying event Employer sets contribution limit today ($2500 limit applies beginning 2013) Must use the annual amount within the plan year Receipts must be submitted and claims adjudication required Cannot accrue interest Unused FSA balances are forfeited ESB

17 HSA Deductible Co-ins/Co-Pay Prescription Drugs Limited Purpose Vision Dental ESB

18 Allows pre-tax contributions Monthly payroll deduction Potentially greater tax advantage due to FICA for both the employee and the employer Eligible employee can receive immediate tax relief on a monthly basis when payroll deducted

19 Disability Insurance Cancer Insurance Accident Only Insurance Hospital Indemnity Long Term Care Insurance (portion of premiums reimbursed from HSA plan) Life Insurance

20 Improve employees awareness of the cost of healthcare Provide your employees with up-to-date health care options and solutions Offer them an alternative to paying unneeded premiums for over-coverage from traditional health care. Increase employee job satisfaction

21 HSAs & S125 Health FSA with HSA S125 Enrollment HDHP Expenses incurred between Jan 1-Apr 30 are HSA ineligible. Can use FSA J F M A M J J A S O N D J F M A M J J A S O N D Plan Year - Unreimbursed Medical May 1 April /2 Note: if spouse has FSA, employee ineligible to contribute to HSA. If 0, HSA contribution March If $$, HSA contribution - August 2015 Annual Conference

22 HSAs & S125 Health FSA with HSA S125 Enrollment HDHP J F M A M J J A S O N D J F M A M J J A S O N D ER contributing $100/month: Funds cannot be contributed until employee is eligible. (Remember spouse s FSA) Will ER hold and contribute first month eligible? Needs to be considered when employee is determining how much to contribute through payroll deduction. Maximum Contribution Tax Year Self-only coverage = $3,350 Family coverage = $6, = additional $1,000/year

23 HSAs & S125 Health FSA with HSA S125 Enrollment HDHP J F M A M J J A S O N D J F M A M J J A S O N D Note: HSA application/custodial agreement has to be dated and signed before the effective date of the HSA.

24 Must ensure EE selected correct health plan EE did not select GP-FSA or HRA EE age for catch-up contributions Can select one HSA vendor if using S125. Required to allow employees to increase, decrease, start, stop HSA contributions. Cannot dictate investment options. Must ensure HDHP is an HSA eligible health plan.

25 HSA/HRA/FSA Limited Purpose FSA w/hsa HSA Takeover s Age 26 on health plans may not be HSA eligible expenses What if employee cannot have a bank account? Fees/Setup How does the bank s process work? Adding HDHP mid-plan year how are deductibles from previous year being applied? Employees turning 65 Medicare - HSA

26 Health Savings Accounts Individually owned savings account. Contributions, distributions, and interest earnings are tax-free. Employee and/or employer may contribute up to annual maximum. Must be used with a Qualified High Deductible Health Plan (QHDHP). No maximum on amount that can be accumulated. Portable. Goes with employee if they leave the district. Health Reimbursement Arrangements Only Employer can contribute toward the arrangement. Can be funded or unfunded. No health plan requirements. Contribution limits typically set by Employer. Non-portable, but unused amounts may be carried over for the next year. Employer can allow spend-down option.

27 Health Savings Accounts Pay for qualified medical expenses for spouses and tax dependents. Health Reimbursement Arrangements Pay for qualified medical expenses for spouses, dependents and adult children. To be eligible to contribute, employees cannot have any other first dollar coverage (ie. cannot be covered by health coverage that pays before qualified HDHP deductible is met or participate in a general-purpose Health FSA ). Claims can be reimbursed using a debit card or with a paper claim form. Portable. Goes with employee if they leave the district. Can have other medical coverage or Health FSA along with the HRA. General-purpose HRA would cause participant to be ineligible for HSA. Claims can be reimbursed using a debit card or a paper claim form. Non-portable, but unused amounts may be carried over for the next year. Employer can allow spend-down option.

28 Must have QHDHP to contribute More affordable premiums. Savings can be placed in an HSA. Contribution Limits* Individual: $3,050 Family: $6,150 Qualified Distributions Amounts used for non-medical reasons are taxable as income and subject to an additional 20% penalty *Maximums indexed annually by Treasury Department.

29 Employer-funded program Contribution limits set by the employer Offered outside of Section 125 May also participate in General Purpose Flexible Spending Accounts Qualified Distributions Can reimburse health insurance and long-term care insurance premiums (American Fidelity s will not reimburse for premiums)

30 Rollover of unused funds are permitted for both HSAs and HRAs HRAs will reimburse for medical expenses incurred while HRA coverage is in effect HSAs allow medical expenses to be reimbursed any time after the HSA is established

31 Learn more: Contact us: ESB

32 Thank You Neither Health Services Administration nor American Fidelity Assurance Company are providing tax advice. Individuals with an interest in HSAs should contact their tax advisor. For Employer Use Only. Not for Employee Distribution. ESB